Economics Chapter 7

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay but would refuse to buy a product at a price less than his willingness to pay. A) True B) False

b.

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it A) maximizes both the total revenue for firms and the quantity supplied of the product. B) maximizes the combined welfare of buyers and sellers. C) minimizes costs and maximizes output. D) minimizes the level of welfare payments.

b.

All else equal, what happens to consumer surplus if the price of a good increases? A) Consumer surplus increases B) Consumer surplus decreases C) Consumer surplus is unchanged D) Consumer surplus may increase, decrease, or remain unchanged

b.

A drought in California destroys many red grapes causing the prices of both red grapes and red wine to rise. As a result, the consumer surplus in the market for red grapes A) increases, and the consumer surplus in the market for red wine increases. B) increases, and the consumer surplus in the market for red wine decreases. C) decreases, and the consumer surplus in the market for red wine increases. D) decreases, and the consumer surplus in the market for red wine decreases.

d.

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book? A) 6 B) 2 C) 4 D) 8

d.

All else equal, an increase in supply will cause an increase in consumer surplus. True False

true