MicroEcon Quiz 4

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)

Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11, a. Alex experiences a decrease in consumer surplus, but Bella does not. b. Bella experiences a decrease in consumer surplus, but Alex does not. c. both Bella and Alex experience a decrease in consumer surplus. d. neither Bella nor Alex experiences a decrease in consumer surplus.

a)

Consumer surplus is a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. b. the amount a buyer is willing to pay for a good minus the cost of producing the good. c. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. d. a buyer's willingness to pay for a good plus the price of the good. Correct!

a)

Refer to Figure 1. If the price were P1, producer surplus would be represented by the area a. F. b. F+G. c. D+H+F. d. D+H+F+G+I.

a)

Refer to Figure 1. If the price were P3, consumer surplus would be represented by the area a. A. b. A+B+C. c. D+H+F. d. A+B+C+D+H+F.

a)

Seller Cost ($) Quentin 10 Ruby 30 Sandra 60 Thomas 100 Ursula 150 Refer to Table 2. If each producer has one unit available for sale, and if the market equilibrium price is $70, how much is the combined total cost of all participating sellers in the market? a. $100 b. $150 c. $250 d. $350

a)

Table 1 First Apple Second Apple Third Apple -Xavier 1st Apple: $1.75 2nd Apple: $1.55 3rd Apple: $1.15 -Yadier 1st: $1.50 2nd: $1.25 3rd: $0.75 -Zavi 1st: $1.30 2nd: $1.10 3rd: $0.70 Refer to Table 1. If the market price of an apple is $1.40, then consumer surplus amounts to a. $0.60. b. $1.20. c. $1.40. d. $3.40

a)

The "invisible hand" refers to a. the marketplace guiding the self-interests of market participants into promoting general economic well-being. b. the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. c. the equality that results from market forces allocating the goods produced in the market. d. the automatic maximization of consumer surplus in free markets.

a)

Willingness to pay a. measures the value that a buyer places on a good. b. is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept. c. is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept. d. is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

a)

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)

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)

If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that a. producer surplus equals consumer surplus in the market for wallpaper. b. the market for wallpaper is in equilibrium. c. on the last unit of wallpaper that was produced and sold, the value to buyers exceeded the cost to sellers. d. All of the above are correct.

b)

If the demand for leather decreases, producer surplus in the leather market a. increases. b. decreases. c. remains the same. d. may increase, decrease, or remain the same.

b)

Jeff decides that he would pay as much as $2,000 for a new laptop computer. He buys the computer and realizes a consumer surplus of $300. How much did Jeff pay for his computer? a. $300. b. $1,700. c. $2,000. d. $2,300.

b)

Producer surplus is a. represented on a graph by the area below the demand curve and above the supply curve. b. the amount a seller is paid minus the cost of production. c. also referred to as excess supply. d. All of the above are correct.

b)

Refer to Figure 1. At equilibrium, consumer surplus is represented by the area a. A. b. A+B+C. c. D+H+F. d. A+B+C+D+H+F.

b)

Refer to Figure 1. The efficient price-quantity combination is a. P1 and Q1. b. P2 and Q2. c. P3 and Q1. d. P4 and 0.

b)

For each of three potential buyers of apples, the table displays the willingness to pay for the first three apples of the day. Assume Xavier, Yadier, and Zavi are the only three buyers of apples, and only three apples can be supplied per day. Table 1 First Apple Second Apple Third Apple -Xavier 1st Apple: $1.75 2nd Apple: $1.55 3rd Apple: $1.15 -Yadier 1st: $1.50 2nd: $1.25 3rd: $0.75 -Zavi 1st: $1.30 2nd: $1.10 3rd: $0.70 Refer to Table 1. If the market price of an apple is $1.40, then the market quantity of apples demanded per day is a. 1. b. 2. c. 3. d. 4.

c)

Refer to Figure 1. At equilibrium, producer surplus is represented by the area a. F. b. F+G. c. D+H+F. d. D+H+F+G+I.

c)

Refer to Figure 1. At equilibrium, total surplus is represented by the area a. A+B+C. b. A+B+D+F. c. A+B+C+D+H+F. d. A+B+C+D+H+F+G+I.

c)

Seller Cost ($) Quentin 10 Ruby 30 Sandra 60 Thomas 100 Ursula 150 Refer to Table 2. 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)

Table 1 First Apple Second Apple Third Apple -Xavier 1st Apple: $1.75 2nd Apple: $1.55 3rd Apple: $1.15 -Yadier 1st: $1.50 2nd: $1.25 3rd: $0.75 -Zavi 1st: $1.30 2nd: $1.10 3rd: $0.70 Refer to Table 1. If the market price of an apple increases from $1.40 to $1.60, then consumer surplus a. decreases by $0.15. b. decreases by $0.30. c. decreases by $0.45. d. increases by $0.15.

c)

Table 2 The following table represents the costs of five possible sellers. Seller Cost ($) Quentin 10 Ruby 30 Sandra 60 Thomas 100 Ursula 150 Refer to Table 2. If each producer has one unit available for sale, and if the market equilibrium price is $80 per unit, how much is the total producer surplus in this market? a. $90 b. $110 c. $130 d. $140

d)

Total surplus is represented by the area a. under the demand curve and above the price. b. above the supply curve and up to the price. c. under the supply curve and up to the price. d. between the demand and supply curves up to the point of equilibrium.

d)

Which of the following statements is not correct? a. A seller would be eager to sell her product at a price higher than her cost. b. A seller would refuse to sell her product at a price lower than her cost. c. A seller would be indifferent about selling her product at a price equal to her cost. d. Since sellers cannot set the price for their product, they must be willing to sell their product at any price.

d)