ECON Exam 2 Chapter 7

Sam produces bracelets. His production cost is $12 per bracelet. He sells the bracelets for $28 each. His producer surplus per bracelet is $28. $12. $16. $32.

$16.

Which of the following would not be considered a cost of Sheryl's Sweeties cupcake business? the cost of sugar, flour, and other baking materials the cost of pans, utensils, and other baking equipment the $15 per hour wage Sheryl could earn working at a different job if she didn't have her cupcake business the price buyers are willing to pay for Sheryl's cupcakes

the price buyers are willing to pay for Sheryl's cupcakes

If Imelda sells a pair of shoes for $85, and her producer surplus from the sale is $41, her cost must have been $126. $41. $44. We would have to know the consumer surplus in order to make this determination.

$44.

Harvey mows lawns in his spare time for extra income. Buyers of his service are willing to pay $50 per lawn for as many lawns as Harvey is willing to mow. On a particular day, he is willing to mow the first lawn for $25, the second lawn for $30, the third lawn for $45, and the fourth lawn for $60. Assuming Harvey is rational in deciding how many lawns to mow, his producer surplus is $40. $10. $25. $50.

$50

Clarence would be willing to pay $50 to attend an opera, but he buys a ticket for $45. Clarence values the opera at $45. $5. $15. $50.

$50.

The value of everything a seller must give up to produce a good is called producer surplus. T/F

False

Which of the following will cause an increase in producer surplus? income decreases and buyers consider the good to be normal the imposition of a non-binding price floor in the market the price of a complement increases the number of buyers in the market increases

the number of buyers in the market increases

Total surplus is represented by the area under the demand curve and above the price. to the right of the supply curve and to the left of the demand curve below the price. to the right of the demand curve and to the left of the supply curve above the price. between the demand and supply curves up to the point of equilibrium.

between the demand and supply curves up to the point of equilibrium.

Suppose Aila and Vika attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that she will bid for a spa weekend at a resort. This maximum is called consumer surplus. social benefit. willingness to pay. social welfare.

willingness to pay.

Suppose your own demand curve for sweaters slopes downward. Suppose also that, for the last sweater you bought this week, you paid a price exactly equal to your willingness to pay. Then your consumer surplus on the last sweater you bought is zero. you should buy more sweaters before the end of the week. you already have bought too many sweaters this week. your consumer surplus on all of the sweaters you have bought this week is zero.

your consumer surplus on the last sweater you bought is zero.

Consumer surplus is the difference between the price buyers are willing to pay and the price which sellers are willing to sell. True False

False

If a consumer places a value of $37 on a particular good and if the price of the good is $40, then the market is not in equilibrium. consumer has consumer surplus of $3 if (s)he buys the good. consumer does not purchase the good. demand for the good will fall.

consumer does not purchase the good.

If the production technology for smart televisions improves, what happens to consumer surplus in the market for smart televisions? Consumer surplus will not change; only producer surplus changes. Consumer surplus increases. Consumer surplus decreases. Consumer surplus depends on what event led to the improvement in production technology.

Consumer surplus increases.

The distinction between efficiency and equality can be described as follows: Efficiency refers to distributing the pie uniformly among members of society; equality refers to maximizing the size of the pie. Efficiency refers to maximizing the equilibrium quantity; equality refers to minimizing the equilibrium price. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie uniformly among members of society. Efficiency refers to the benevolent social planner; equality refers to individual buyers and sellers.

Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie uniformly among members of society.

The value of everything a seller must give up to produce a good is called producer surplus. T/F

False

Suppose the demand for tea increases. What will happen to producer surplus in the market for tea? It remains unchanged. It increases. It decreases. It may increase, decrease, or remain unchanged.

It increases.

Celia manufactures backpacks for a living. Celia's out-of-pocket expenses (for fabric, zippers, etc.) plus the value that she places on her own time amount to her producer surplus. cost of producing backpacks. efficiency level. profit.

cost of producing backpacks.

Consumer surplus is a good measure of economic welfare for those who only enter the market when the price of a substitute increases. if policymakers want to respect the preferences of buyers. if policymakers are concerned about equity, but not efficiency. because it accounts for the effects of price changes on buyers and sellers.

if policymakers want to respect the preferences of buyers.

Consumer surplus is a good measure of economic welfare if policymakers are concerned about equity, but not efficiency. because it accounts for the effects of price changes on buyers and sellers. for those who only enter the market when the price of a substitute increases. if policymakers want to respect the preferences of buyers.

if policymakers want to respect the preferences of buyers.

Suppose consumer income decreases. If carnations are an inferior good, the equilibrium price of carnations will decrease, and producer surplus in the industry will increase. decrease, and producer surplus in the industry will decrease. increase, and producer surplus in the industry will increase. increase, and producer surplus in the industry will decrease.

increase, and producer surplus in the industry will increase.

If the cost of producing flip-flops decreases, then consumer surplus in the flip-flop market will remain constant. increase. decrease. increase for some buyers and decrease for other buyers.

increase.

A major university study finds that drinking green tea has many health benefits. As a result, the equilibrium price of green tea increases, and producer surplus decreases. decreases, and producer surplus decreases. decreases, and producer surplus increases. increases, and producer surplus increases.

increases, and producer surplus increases.

Which of the following will cause a decrease in consumer surplus? sellers expect the price of the good to be higher next month. an improvement in production technology for the good a decrease in the price of one of the inputs for the good the imposition of a binding price ceiling in the market

sellers expect the price of the good to be higher next month.

Suppose policymakers are considering a particular action in the market for heroin that would reduce consumer surplus. They may choose not to care about consumer surplus because willingness to pay does not ever reflect economic well-being. they do not respect consumers' preferences in any market. they do not respect the preferences that drive buyer behavior for that good. consumers are not the best judges of how much benefit they receive from the goods they buy.

they do not respect the preferences that drive buyer behavior for that good.

Economists typically measure efficiency using total surplus. the equilibrium price. binding price floors. consumer surplus only.

total surplus.