Chapter 7
If a buyer's willing to pay for a new Honda is $30,000 and she is able to get it for $28,000, her consumer surplus is: a. $2,000 b. $30,000 c. 58,000 d. $28,000
a. $2,000
If a market is efficient, then: a. the market allocates output to the buyers who value it the most b. the market allocates buyers to the sellers who can produce the good at the least cost c. the quantity produced in the market maximizes the sum of consumer and producer surplus d. All the above are true
d. all the above are true
Total surplus is the area: a. below the supply curve and above the price b. above the demand curve and below the price c. above the supply curve and below the price d. below the demand curve ad above the supply curve
d. below the demand curve and above the supply curve
Producing quantity larger then the equilibrium of supply and demand is inefficient because the marginal buyers willingness to pay is: a. positive and greater then the marginal seller's cost b. zero. c. negative d. positive but less then the marginal seller's cost
d. positive but less then the marginal seller's cost
Medical care clearly enhances people's lives. Therefore, we should consume medical care until: a. everyone has as much as they would like b. we must cut back on the consumption of other goods c. buyers receive no benefit from another unit of medical care d. the benefit buyers place on medical care is equal to the cost of producing it
d. the benefit buyers place on medical care is equal to the cost of producing it
The seller cost of production is: a. the seller's consumer surplus b. the seller's producer surplus c. the maximum amount the seller is willing to accept for a good d. the minimum amount the seller is willing to accept for a good
d. the minimum amount the seller is willing to accept for a good
An efficient allocation of resources maximizes: a. consumer surplus plus producer surplus b. producer surplus c. consumer surplus d. consumer surplus minus producer surplus
a. consumer surplus plus producer surplus
An increase in the price of a good along a stationary demand curve: a. decreases consumer surplus b. improves market efficiency c. Increases consume surplus d improves the material welfare of the buyers
a. decreases consumer surplus
When a market is in equilibrium, the buyer are those with the ________ willing to pay and the sellers are those with the ________ costs. a. highest; lowest b. lowest; lowest c. lowest; highest d. highest; highest
a. highest; lowest
An increase in the price of a good along a stationary supply curve: a. increases producer surplus b. decreases producer surplus c. improves market quality d. all the above
a. increases producer surplus
Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay $30 for one. Buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price of the vases in $25, how many vases will be sold, and what is the value of consume surplus in this market? a. two vases; $5 b. three vases; $80 c. one vase; $0 d. three vase; $0
a. two vases; $5
If a market generates a side effect or externality, then free market solutions: a. are efficient b. are inefficient c. maximize producer surplus d. generate equality
b. are inefficient
Adam Smith's "Invisible Hand" concept suggests that a competitive market outcome: a. minimizes total surplus b. maximizes total surplus c. generates equality among the members of society d. b and c
b. maximizes total surplus
If a benevolent social planner chooses to produce less than equilibrium quantity of a good, then: a. consumer surplus is maximized b. the value placed on the last unit of production by buyers exceeds the costs of production c. the cost of production on the last unit produced exceeds the value placed on it by buyers d. total surplus is maximized
b. the value placed on the last unit of production by buyers exceeds the costs of production
Producer surplus is the area: a. above the remand curve and below the price b. Below the supply curve and above the price c. above the supply curve and below the price d. below the demand curve and above the supply curve
c. above the supply curve and below the price
In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should: a. choose a price above market equilibrium price b. choose a price below market equilibrium price c. allow the market to seek equilibrium price on its own d. choose a price the planner wants because the losses to the sellers from any change in the price are exactly offset by the gains to the buyers
c. allow the market to seek equilibrium on its own
If a producer had market power (can influence the price of the product in the market), the free market solutions: a. maximize consumer surplus b. generate equality c. are inefficient d. are efficient
c. are inefficient
Consumer surplus is the area: a. above the supply curve and below the price b. below the supply curve and above the price c. below the demand curve and above the price d. below the demand curve and above the supply curve
c. below the demand curve and above the price
a buyer's willingness to pay is: a. that buyer's consumer's surplus b. that buyer's producer's surplus c. that buyer's maximum amount he is willing to pay for a good d. that buyer's minimum amount he is willing to pay for a good
c. that buyer's maximum amount he is willing to pay for a good
If a benevolent social planner chooses to produce more than equilibrium quantity of a good, then: a. consumer surplus is maximized b. the value placed on the last unit of production by buyers exceeds the costs of production c. the cost of production on the last unit produced exceeds the value placed on it by buyers d. total surplus is maximized
c. the cost of production on the last unit produced exceeds the value placed on it by buyers
If buyers are rational and there is no market failure: a. free market solutions are efficient b. free market solutions generate equality c. free market solutions maximize total surplus d. a and c are both correct
d. a and c are both correct