Macroeconomics quiz 2

9) Refer to the diagram. Assuming equilibrium price P1, consumer surplus is represented by areas

B) a + b.

7) Consumer surplus

A) is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price

2) The law of demand states that, other things equal

A) price and quantity demanded are inversely related

8) Jennifer buys a piece of costume jewelry for $33, for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences

B) a consumer surplus of $9, and Nathan experiences a producer surplus of $3

5) College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are

B) inferior goods

1) A market

B) is an institution that brings together buyers and sellers.

4) According to the concept of diminishing marginal utility, consumers will purchase more of a good when the price falls because

C) the marginal benefit of additional units of the good now outweigh the marginal cost.

10) Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas

C) c + d

3) When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes

C) the income effect.

6) Market failure is said to occur whenever

D) private markets do not allocate resources in the most economically desirable way.