Micro Quiz #1: Homework #4

Suppose the government imposes a price ceiling of $P3 in the market above. What area on the graph represents producer surplus?

F

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

a + b.

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:

a consumer surplus of $9 and Nathan experiences a producer surplus of $3.

Consumer surplus

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

Producer surplus

is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price

Refer to the above diagram. A government-set price ceiling is best illustrated by

price A.

Refer to the above diagram. A government-set price floor is best illustrated by

price C.

In which of the following cases will total revenue increase?

price rises and demand is inelastic

An effective ceiling price will

result in a product shortage.

An effective price floor will:

result in a product surplus

Suppose the government imposes a price floor of $P1 in the market above. What area on the graph represents consumer surplus?

A

Suppose the government imposes a price ceiling of $P3 in the market above. What area on the graph represents consumer surplus?

A+B+D

Suppose the government imposes a price ceiling of $P3 in the market above. What area on the graph represents the deadweight loss?

C+E

If an effective ceiling price is placed on hamburgers then:

All of these are likely outcomes.

Suppose the government imposes a price floor of $P1 in the market above. What area on the graph represents producer surplus?

B+D+F

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of:

W and Y

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

c + d.

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be:

inelastic for price declines that increase quantity demanded from 6 units to 7 units.

The more time consumers have to adjust to a change in price:

the greater will be the price elasticity of demand.

The narrower the definition of a product:

the larger the number of substitutes and the greater the price elasticity of demand