Chapter 7 ECON midterm

Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 Who experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75? a. Allison b. Bob c. Charisse d. Allison and Bob experience the same gain in consumer surplus, and Charisse's gain is zero.

a

If the cost of producing sofas decreases, then consumer surplus in the sofa market will a. increase. b. decrease. c. remain constant. d. increase for some buyers and decrease for other buyers.

a

When there is a technological advance in the pork industry, consumer surplus in that market will a. increase. b. decrease. c. not change, since technology affects producers and not consumers. d. not change, since consumers' willingness to pay is unaffected by the technological advance.

a

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

Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 If the market price of an orange increases from $0.80 to $1.05, then consumer surplus a. increases by $0.75. b. decreases by $0.95. c. decreases by $0.75. d. decreases by $1.00.

b

Calvin-150 Sam-135 Andrew-120 Laurie- 100 If the market price is $105, a. Calvin's consumer surplus is $45 and total consumer surplus is $85. b. Sam's consumer surplus is $30 and total consumer surplus is $90. c. Andrew's consumer surplus is $15 and total consumer surplus is $67.50. d. Lori's consumer surplus is -$2 and total consumer surplus is $100.

b

Calvin-150 Sam-135 Andrew-120 Laurie- 100 If the price of the product is $122, then the total consumer surplus is a. $28. b. $41. c. $43. d. $405.

b

Consumer surplus a. is the amount of a good that a consumer can buy at a price below equilibrium price. b. is the amount a consumer is willing to pay minus the amount the consumer actually pays. c. is the number of consumers who are excluded from a market because of scarcity. d. measures how much a seller values a good.

b

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the a. consumer has consumer surplus of $2 if he or she buys the good. b. consumer does not purchase the good. c. market is not a competitive market. d. price of the good will fall due to market forces.

b

If a consumer places a value of $20 on a particular good and if the price of the good is $25, then the a. consumer has consumer surplus of $5 if he buys the good. b. consumer does not purchase the good. c. price of the good will rise due to market forces. d. market is out of equilibrium.

b

If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets? a. Consumer surplus increases. b. Consumer surplus decreases. c. Consumer surplus will not change consumer surplus; only producer surplus changes. d. Consumer surplus depends on what event led to the increase in the price of oak lumber.

b

Kelly is willing to pay $5.20 for a gallon of gasoline. The price of gasoline at her local gas station is $3.80. If she purchases ten gallons of gasoline, then Kelly's consumer surplus is a. $1.40. b. $14. c. $3.80. d. $52.

b

On a graph, the area below a demand curve and above the price measures a. producer surplus. b. consumer surplus. c. deadweight loss. d. willingness to pay.

b

Refer to Table 7-1. Calvin-150 Sam-135 Andrew-120 Laurie- 100 If the price of the product is $130, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Lori

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

Which of the Ten Principles of Economics does welfare economics explain more fully? a. The cost of something is what you give up to get it. b. Markets are usually a good way to organize economic activity. c. Trade can make everyone better off. d. A country's standard of living depends on its ability to produce goods and services.

b

Which of the following will cause an increase in consumer surplus? a. an increase in the production cost of the good b. a technological improvement in the production of the good c. a decrease in the number of sellers of the good d. the imposition of a binding price floor in the market

b

A consumer's willingness to pay directly measures 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

Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 If the market price of an orange increases from $0.70 to $1.40, then consumer surplus a. increases by $2.60. b. decreases by $0.70. c. decreases by $2.50. d. decreases by $2.60.

c

Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 If the market price of an orange is $0.40, then a. 6 oranges are demanded per day, and consumer surplus amounts to $4.95. b. 6 oranges are demanded per day, and consumer surplus amounts to $5.10. c. 7 oranges are demanded per day, and consumer surplus amounts to $5.30. d. 7 oranges are demanded per day, and consumer surplus amounts to $5.15.

c

Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 If the market price of an orange is $0.65, then consumer surplus amounts to a. $3.90. b. $6.75. c. $3.60. d. $7.50.

c

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. $8. d. $4.

c

Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at a. $20. b. $30. c. $50. d. $80.

c

Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 The market quantity of oranges demanded per day is exactly 7 if the price of an orange, P, satisfies a. $0.60 < P < $0.75. b. $0.60 < P < $2.00. c. $0.25 < P < $0.75. d. $0.25 < P < $0.60.

d

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

Consumer surplus is a. a concept that helps us make normative statements about the desirability of market outcomes. b. represented on a graph by the area below the demand curve and above the price. c. a good measure of economic welfare if buyers' preferences are the primary concern. d. All of the above are correct.

d

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market a. decreases. b. is unchanged. c. increases. d. may increase, decrease, or remain unchanged.

d

Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is a. $650. b. $150. c. $250. d. $400.

b

Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 If the market price of an orange is $0.70, then the market quantity of oranges demanded per day is a. 5. b. 6. c. 4. d. 7.

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

Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at a. $5. b. $15. c. $20. d. $35.

c

The study of how the allocation of resources affects economic well-being is called a. consumer economics. b. macroeconomics. c. willingness-to-pay economics. d. welfare economics.

d

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

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

All else equal, what happens to consumer surplus if the price of a good decreases? a. Consumer surplus increases. b. Consumer surplus decreases. c. Consumer surplus is unchanged. d. Consumer surplus may increase, decrease, or remain unchanged.

a

Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 Which of the following statements is correct? a. Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange. b. All three individuals will buy at least one orange only if the price of an orange is less than $0.25. c. If the price of an orange is $0.60, then consumer surplus is $4.90. d. All of the above are correct.

a

Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40? a. Allison b. Bob c. Charisse d. All three individuals experience the same loss of consumer surplus.

a

An example of positive analysis is studying a. how market forces produce equilibrium. b. whether equilibrium outcomes are fair. c. whether equilibrium outcomes are socially desirable. d. if income distributions are fair.

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.

a

Consumer surplus is equal to the a. Value to buyers - Amount paid by buyers. b. Amount paid by buyers - Costs of sellers. c. Value to buyers - Costs of sellers. d. Value to buyers - Willingness to pay of buyers.

a

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then a. the marginal buyer's willingness to pay for the 100th unit of the good is $25. b. the sum of the five buyers' willingness to pay for the 100th unit of the good is $25. c. the average of the five buyers' willingness to pay for the 100th unit of the good is $25. d. all of the five buyers are willing to pay at least $25 for the 100th unit of the good.

a

Welfare economics is the study of how a. the allocation of resources affects economic well-being. b. a price ceiling compares to a price floor. c. the government helps poor people. d. a consumer's optimal choice affects her demand curve.

a

Which of the following statements is correct? a. Buyers always want to pay less and sellers always want to be paid more. b. Buyers always want to pay less and sellers always want to be paid less. c. Buyers always want to pay more and sellers always want to be paid more. d. Buyers always want to pay more and sellers always want to be paid less.

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

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

You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game? a. $0 b. $10 c. $40 d. $50

b

. 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

An example of normative analysis is studying a. how market forces produce equilibrium. b. surpluses and shortages. c. whether equilibrium outcomes are socially desirable. d. income distributions.

c

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be a. $3. b. $8. c. $5. d. $11.

c

Calvin-150 Sam-135 Andrew-120 Laurie- 100 If price of the product is $135, then the total consumer surplus is a. $-50. b. $-35. c. $15. d. $150.

c

Refer to Table 7-1. Calvin-150 Sam-135 Andrew-120 Laurie- 100 If the price of the product is $110, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Lori

c

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

c

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it a. maximizes costs of the seller. b. maximizes tax revenue for the government. c. maximizes the combined welfare of buyers and sellers. d. minimizes the expenditure of buyers.

c

Welfare economics explains which of the following in the market for televisions? a. The government sets the price of televisions; firms respond to the price by producing a specific level of output. b. The government sets the quantity of televisions; firms respond to the quantity by charging a specific price. c. The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers. d. The market equilibrium price for televisions maximizes consumer welfare and minimizes producer profit.

c

Welfare economics is the study of a. the well-being of less fortunate people. b. welfare programs in the United States. c. how the allocation of resources affects economic well-being. d. the effect of income redistribution on work effort.

c

Which of the Ten Principles of Economics does welfare economics explain more fully? a. The cost of something is what you give up to get it. b. Rational people think at the margin. c. Markets are usually a good way to organize economic activity. d. People respond to incentives.

c

A demand curve reflects each of the following except the a. willingness to pay of all buyers in the market. b. value each buyer in the market places on the good. c. highest price buyers are willing to pay for each quantity. d. ability of buyers to obtain the quantity they desire.

d

A drought in California destroys many red grapes. As a result of the drought, 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

Calvin-150 Sam-135 Andrew-120 Laurie- 100 If the price of the product is $90, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Lori

d

In a market, the marginal buyer is the buyer a. whose willingness to pay is higher than that of all other buyers and potential buyers. b. whose willingness to pay is lower than that of all other buyers and potential buyers. c. who is willing to buy exactly one unit of the good. d. who would be the first to leave the market if the price were any higher.

d

In which of the following circumstances would a buyer be indifferent about buying a good? a. The amount of consumer surplus the buyer would experience as a result of buying the good is zero. b. The price of the good is equal to the buyer's willingness to pay for the good. c. The price of the good is equal to the value the buyer places on the good. d. All of the above are correct.

d

Table 7-5For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 If the market price of an orange is $0.90, then the market quantity of oranges demanded per day is a. 5. b. 2. c. 3. d. 4.

d

Welfare economics is the study of a. taxes and subsidies. b. how technology is best put to use in the production of goods and services. c. government welfare programs for needy people. d. how the allocation of resources affects economic well-being.

d

When a buyer's willingness to pay for a good is equal to the price of the good, the a. buyer's consumer surplus for that good is maximized. b. buyer will buy as much of the good as the buyer's budget allows. c. price of the good exceeds the value that the buyer places on the good. d. buyer is indifferent between buying the good and not buying it.

d

When policymakers are considering a particular action, they can use consumer surplus as a(n) a. objective measure of the benefits to buyers as determined by policymakers. b. measure of the benefits to buyers as the buyers perceive them. c. potentially flawed measure of the benefits to buyers if the buyers are not rational. d. Both b) and c) are correct.

d

When the demand for a good increases and the supply of the good remains unchanged, consumer surplus a. decreases. b. is unchanged. c. increases. d. may increase, decrease, or remain unchanged.

d

Which of the following will cause a decrease in consumer surplus? a. an increase in the number of sellers of the good b. a decrease in the production cost of the good c. sellers expect the price of the good to be lower next month d. the imposition of a binding price floor in the market

d