ECON CH 7

2.13 At the equilibrium price of a good, the good will be purchased by those buyers who A. value the good more than price. B. value the good less than price. C. have the money to buy the good. D. consider the good a necessity.

A

2.12 Producer surplus directly measures A. the well-being of sellers. B. production costs. C. excess demand. D. unsold inventories.

A

The marginal seller is the seller who A.cannot compete with the other sellers in the market. B.would leave the market first if the price were any lower. C.can produce at the lowest cost. D.has the largest producer surplus.

B

The maximum price that a buyer will pay for a good is called A.consumer surplus. B.willingness to pay. C.equilibrium. D.efficiency.

B

George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is A.$6. B.$10. C.$16. D.$26.

A

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's consumer surplus is A.$500. B.$3,000. C.$3,500. D.$6,500.

A

The French expression used by free-market advocates, which literally translates as "allow them to do," is A. laissez-faire. B. je ne sais pas. C. si'l vous plait. D. tête-à-tête.

A

2.24 Which tools allow economists to determine if the allocation of resources determined by free markets is desirable? A. profits and costs to firms B. consumer and producer surplus C. the equilibrium price and quantity D. incomes of and prices paid by buyers

B

At the equilibrium price of a good, the good will be sold by those sellers A.whose cost is more than price. B.whose cost is less than price. C.that can produce the good. D.enter the market first.

B

If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must have been A.$48. B.$32. C.$8. D.$40.

B

2.5 Producer surplus equals the A. value to buyers minus the amount paid by buyers. B. value to buyers minus the cost to sellers. C. amount received by sellers minus the cost to sellers. D. amount received by sellers minus the amount paid by buyers.

C

2.8 When the price is P1, consumer surplus is A.A. B. A+B. C. A+B+C. D. A+B+D.

C

If an allocation of resources is efficient, then A.consumer surplus is maximized. B.producer surplus is maximized. C. all potential gains from trade among buyers are sellers are being realized. D. the allocation achieves equality as well.

C

Suppose each of the five sellers can supply at most one unit of the good. At which of the following prices would the market quantity supplied be exactly three units? A. $20 B.$50 C.$90 D.$120

C

Laissez-faire is a French expression which literally means A.to make do. B.to get involved. C.whatever works. D.allow them to do.

D

When the price is P1, area A represents A.total benefit. B.producer surplus. C. consumer surplus. D. None of the above is correct.

D

You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. You hire Kevin for a price of $500. What is his producer surplus? A.$500 B. $150 C. $100 D. $50

D

2.6 Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is A. $150. B.$200. C. $350. D.$550.

A

2.16 If the government imposes a price ceiling at $12, then producer surplus is A. CDI. B. BDF. C. BCIF. D. HGCD.

A

2.11 The decisions of buyers and sellers that affect people who are not participants in the market create A. market power. B. externalities. C. profiteering. D. market equilibrium.

B

2.17 At equilibrium, producer surplus is A. $36. B. $72. C. $54. D. $18.

A

2.18 If 10 units of the good are produced and sold, then A. the marginal cost to sellers exceeds the marginal value to buyers. B. producer surplus is maximized. C. total surplus is minimized. D. the marginal value to buyers exceeds the marginal cost to sellers.

A

2.19 Cost is a measure of the A. seller's willingness to sell. B. seller's producer surplus. C. producer shortage. D. seller's willingness to buy.

A

2.22 If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that consumer, consumer surplus amounts to A. $4. B. $16. C. $20. D. $36.

A

2.3 Externalities are A. side effects passed on to a party other than the buyers and sellers in the market. B. side effects of government intervention in markets. C. external forces that cause the price of a good to be higher than it otherwise would be. D. external forces that help establish equilibrium price.

A

2.4 If the demand for light bulbs increases, producer surplus in the market for light bulbs A. increases. B. decreases. C. remains the same. D. may increase, decrease, or remain the same.

A

2.9 Which of the following events would increase producer surplus? A. Sellers' costs stay the same and the price of the good increases. B. Sellers' costs increase and the price of the good stays the same. C. Sellers' costs increase and the price of the good decreases. D. All of the above are correct.

A

A seller's opportunity cost measures the A. value of everything she must give up to produce a good. B. amount she is paid for a good minus her cost of providing it. C. consumer surplus. D. out of pocket expenses to produce a good but not the value of her time.

A

Consumer surplus equals the A. value to buyers minus the amount paid by buyers. B. value to buyers minus the cost to sellers. C. amount received by sellers minus the cost to sellers. D. amount received by sellers minus the amount paid by buyers.

A

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is A.$150. B.$350. C.$500. D.$850.

A

2.10 A seller is willing to sell a product only if the seller receives a price that is at least as great as the A. seller's producer surplus. B. seller's cost of production. C. seller's profit. D. average willingness to pay of buyers of the product.

B

2.20 If the market price is $3.80, A. David's consumer surplus is $4.70 and total consumer surplus for the five individuals is $9.50. B. Megan's consumer surplus is $1.70 and total consumer surplus for the five individuals is $9.80. C. David, Laura, and Megan will be the only buyers of Vanilla Coke. D. the demand curve for Vanilla Coke, taking the five individuals into account, is horizontal.

B

2.21 On a graph, consumer surplus is represented by the area A. between the demand and supply curves. B. below the demand curve and above price. C. below the price and above the supply curve. D. below the demand curve and to the right of equilibrium price.

B

2.23 If 40 units of the good are bought and sold, then A. the marginal cost to sellers is equal to the marginal value to buyers. B. the marginal value to buyers is greater than the marginal cost to sellers. C. the marginal cost to sellers is greater than the marginal value to buyers. D. producer surplus would be greater than consumer surplus.

B

Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie. Each has in mind a maximum amount that he will bid. This maximum is called A. a resistance price. B. willingness to pay. C. consumer surplus. D. producer surplus.

B

Total surplus is A. :equal to consumer surplus minus producer surplus. B. equal to the total value to buyers minus the total cost to sellers. C. equal to consumers' willingness to pay plus producers' cost. D. greater than the sum of consumer surplus plus producer surplus.

B

If the equilibrium price is $60, what is the producer surplus? A.$600 B.$1,200 C.$2,400 D.$4,800

C

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his A.producer surplus. B.producer deficit. C.cost of building fences. D.profit.

C

2.14 Consumer surplus A. is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it. B. is represented on a supply-demand graph by the area below the price and above the demand curve. C. measures the benefit sellers receive from participating in a market. D. measures the benefit buyers receive from participating in a market.

D

2.2 At the quantity Q3, A.the market is in equilibrium. B. consumer surplus is maximized. C. the sum of consumer surplus and producer surplus is maximized. D. the marginal value to buyers is less than the marginal cost to sellers.

D

2.7 Sellers whose costs are greater than the equilibrium price are represented by segment A. AC. B. CK. C. BC. D. CH.

D

Consumer surplus is a good measure of economic welfare if policymakers want to A. maximize total benefit. B. minimize deadweight loss. C. respect the preferences of sellers. D. respect the preferences of buyers.

D

2.15 At equilibrium, total surplus is A.$36. B. $54. C. $18. D. $108.

B

The welfare of sellers is measured by A.consumer surplus. B.producer surplus. C.total surplus. D.price.

B

Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her purchase if her willingness to pay is A.$15. B.$90. C.$105. D.$75.

C

If the equilibrium price is $350, what is the producer surplus? A.$60,000 B.$15,000 C.$30,000 D.$70,000

C

We can say that the allocation of resources is efficient if A.producer surplus is maximized. B.consumer surplus is maximized. C.total surplus is maximized. D. sellers' costs are minimized.

C

At equilibrium, consumer surplus is A.$18. B.$36. C.$54. D.$72.

A

2.1 Producer surplus directly measures A. the well-being of society as a whole. B. the well-being of buyers and sellers. C. the well-being of sellers. D.sellers' willingness to sell.

C

2.25 Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is A. $150. B. $425. C. $500. D. $850.

C