Global Econ - Chapter 7: Consumers, Producers, and the efficiency - Concordia College

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is a. $175. b. $575. c. $750. d. $1,325.

a. $175.

Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers entering the market? a. $625 b. $2,500 c. $3,125 d. $5,625

a. $625

Refer to Figure 7-23. If the price were P3, consumer surplus would be represented by the area Select one: a. A. b. A+B+C. c. D+H+F. d. A+B+C+D+H+F.

a. A.

Refer to Figure 7-10. Which area represents producer surplus a. BCG b. ACH c. ABGD d. DGH

a. BCG

Consumer surplus in a market can be represented by the a. area below the demand curve and above the price. b. distance from the demand curve to the horizontal axis. c. distance from the demand curve to the vertical axis. d. area below the demand curve and above the horizontal axis.

a. area below the demand curve and above the price.

As a result of a decrease in price, a. new buyers enter the market, increasing consumer surplus b. new buyers enter the market, decreasing consumer surplus. c. existing buyers exit the market, increasing consumer surplus. d. existing buyers exit the market, decreasing consumer surplus.

a. new buyers enter the market, increasing consumer surplus

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. Consumer surplus decreases.

Refer to Figure 7-28. At the quantity Q2, the marginal value to buyers a. and the marginal cost to sellers are both P2. b. is P2, and the marginal cost to sellers is P3. c. and the marginal cost to sellers are both P3. d. is P3, and the marginal cost to sellers is P2.

b. is P2, and the marginal cost to sellers is P3.

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. seller's cost of production.

Efficiency in a market is achieved when a. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. b. the sum of producer surplus and consumer surplus is maximized. c. all firms are producing the good at the same low cost per unit. d. no buyer is willing to pay more than the equilibrium price for any unit of the good.

b. the sum of producer surplus and consumer surplus is maximized.

Refer to Figure 7-15. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be a. lower than P1. b. P1. c. between P1 and P2. d. higher than P2.

c. between P1 and P2.

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to a. only existing customers who now get lower prices on the gowns they were already planning to purchase. b. only new customers who enter the market because of the lower prices. c. both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices. d. Consumer surplus does not increase; it decreases.

c. both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.

A consumer's willingness to pay directly measures Select one: a. the extent to which advertising and other external forces have influenced the consumer's preferences. b. the cost of a good to the buyer. c. how much a buyer values a good. d. consumer surplus.

c. how much a buyer values a good.

Consumer surplus a. is closely related to the supply curve for a product. b. is represented by a rectangle on a supply-demand graph when the demand curve is a straight, downward-sloping line. c. is measured using the demand curve for a product. d. does not reflect economic well-being in most markets.

c. is measured using the demand curve for a product.

One of the basic principles of economics is that markets are usually a good way to organize economic activity. This principle is explained by the study of a. factor markets. b. energy markets. c. welfare economics. d. labor economics.

c. welfare economics.

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software? a. $50. b. $150. c. $200. d. $350.

d. $350.