E201 Microeconomics CS and PS

According to the table, if the market price is $1,000, the producer surplus in the market would be a. $750 b. $2,250 c. $3,700 d. $700

a. $750

t the market-clearing equilibrium, total surplus is represented by the area a. A + B + C + D + E + F b. A + B + C + D + E + F + G + H c. A + B + D + F d. A + B + C

a. A + B + C + D + E + F

Which area represents consumer surplus at a price of P1? a. ABD b. DFG c. BCDF d. ACG

a. ABD

When a market is in equilibrium, which of the following would not be correct? a. Consumer surplus will be equal to producer surplus b. Those buyers who value the good more than the price choose to buy the good c. Those sellers whose costs are less than the price choose to produce and sell the good d. The price determines which buyers and sellers participate in the market

a. Consumer surplus will be equal to producer surplus

Refer to Table 4.1. If the market price is $6.90, who will purchase the good? a. David and Laura b. David, Laura and Megan c. All five would purchase Vanilla Coke, just in different amounts d. Megan, Mallory and Audrey

a. David and Laura

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

a. ability of buyers to obtain the quantity they desire

Producer surplus is the area a. below the price and above the supply curve b. under the supply curve c. between the supply and demand curves d. under the demand curve, and above the price

a. below the price and above the supply curve

A consumer's willingness to pay measures a. how much a buyer values a good b. how much a seller receives from the sale of a good c. how much a buyer has to pay to receive a good d. the cost of a good to the buyer

a. how much a buyer values a good

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 by which the quantity supplied of a good exceeds the quantity demanded of the good c. the amount a buyer is willing to pay for a good minus the cost of producing the good d. a buyer's willingness to pay for a good plus the price of the good

a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

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

a. the marketplace guiding the self-interests of market participants into promoting general economic well-being

If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? a. $625 b. $2,500 c. $5,000 d. $1,250

b. $2,500

Refer to Figure 4.2. Which area represents the increase in producer surplus when the price rises from P1 to P2? a. ABGD b. AHGB c. BCG d. ACH

b. AHGB

Refer to Figure 4.4. If the supply curve is S and the demand curve shifts from D to D', what is the change in producer surplus? a. Producer surplus increases by $5,625 b. Producer surplus increases by $3,125 c. Producer surplus decreases by $3,125 d. Producer surplus decreases by $5,625

b. Producer surplus increases by $3,125

In a pure market economy, the "for whom" or distribution question is largely answered a. by a democratic vote b. according to the needs of individuals and groups in society c. by existing patterns of income and wealth d. by the extent to which government decides to redistribute purchasing power e. by the preferences of central planners

b. according to the needs of individuals and groups in society

On a graph, consumer surplus is represented by the area a. below the demand curve and to the right of equilibrium price b. below the demand curve and above price c. between the demand and supply curves d. below the price and above the supply curve

b. below the demand curve and above price

The equilibrium of supply and demand in a market a. produces both an efficient and equitable market outcome b. maximizes the total benefits received by buyers and sellers c. can only be achieved with government intervention d. maximizes the profits of producers

b. maximizes the total benefits received by buyers and sellers

Suppose Chris and Laura attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called a. deadweight loss b. willingness to pay c. producer surplus d. consumer surplus

b. willingness to pay

Refer to Figure 4.1. Which area represents consumer surplus at a price of P2 a. ABD b. BCDF c. ACG d. DFG

c. ACG

Refer to Figure 4.1. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers? a. ABD b. ACG c. BCFD d. DFG

c. BCFD

If the market price is $5.50, the consumer surplus in the market will be a. $3.00 b. $15.50 c. $21.00 d. $4.50

d. $4.50

Which area represents producer surplus when the price is P1? a. ABGD b. DGH c. ACH d. BCG

d. BCG

Inefficiency exists in any economy when a good is a. being produced with more than all available resources b. not being produced by the highest-cost producer c. not distributed fairly among buyers d. not being consumed by buyers who value it most highly

d. not being consumed by buyers who value it most highly