ECON FINAL CHAPTER 6 AND 7

If the price of the good is $9.50, then producer surplus is A. $10.00. B. $6.50 C. $2.50. D. $8.00.

A. $10.00.

If the price of the good is $250, then consumer surplus amounts to A. $50. B. $100 C. $150. D. $200.

A. $50.

Which of the following price ceilings would be binding in this market? A. $8 B. $10 C. $12 D. $14

A. $8

Which area represents producer surplus when the price is P2? A. ACH B. AHGB C. BCG D. ABGD

A. ACH

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 $3,125. B. Producer surplus decreases by $3,125. C. Producer surplus decreases by $5,625. D. Producer surplus increases by $5,625.

A. Producer surplus increases by $3,125.

In panel (b), there will be A. a surplus of wheat. B. lines of people waiting to buy wheat. C. a shortage of wheat. D. equilibrium in the market.

A. a surplus of wheat.

A price floor will be binding only if it is set A. above the equilibrium price B. equal to the equilibrium price. C. either above or below the equilibrium price. D. below the equilibrium price

A. above the equilibrium price

In a competitive market free of government regulation, A. price adjusts until quantity demanded equals quantity supplied. B. price adjusts until quantity demanded is greater than quantity supplied. C. price adjusts until quantity demanded is less than quantity supplied. D. supply adjusts to meet demand at every price.

A. price adjusts until quantity demanded equals quantity supplied.

If a nonbinding price ceiling is imposed on a market, then the A. quantity sold in the market will stay the same. B. price in the market will increase. C. quantity sold in the market will decrease. D. price in the market will decrease.

A. quantity sold in the market will stay the same.

If 4 units of the good are produced and sold, then A. the allocation of resources is inefficient. B. total surplus is minimized. C. the cost to sellers exceeds the value to buyers. D. producer surplus is maximized.

A. the allocation of resources is inefficient.

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

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

If 10 units of the good are produced and sold, then A. the marginal cost to sellers exceeds the marginal value to buyers. B. producer surplus is maximized. C. total surplus is minimized. D. the marginal value to buyers exceeds the marginal cost to sellers.

A. the marginal cost to sellers exceeds the marginal value to buyers.

Producer surplus directly measures A. the well-being of sellers. B. production costs. C. excess demand. D. unsold inventories.

A. the well-being of sellers.

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is A. zero. B. negative, and the consumer would not purchase the product. C. positive, and the consumer would purchase the product. D. There is not enough information given to answer this question.

A. zero.

At equilibrium, total surplus is A. $36. B. $108. C. $72. D. $144.

B. $108.

Which of the following statements is not correct? A. A price ceiling set at $8 would be binding, but a price ceiling set at $12 would not be binding. B. A price ceiling set at $9 would result in a surplus. C. A price floor set at $11 would result in a surplus. D. A price floor set at $14 would be binding, but a price floor set at $8 would not be binding.

B. A price ceiling set at $9 would result in a surplus.

Which area represents the increase in producer surplus when the price rises from P1 to P2? A. ACH B. AHGB C. ABGD D. BCG

B. AHGB

Which area represents producer surplus when the price is P1? A. ABGD B. BCG C. ACH D. DGH

B. BCG

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. consumer does not purchase the good.

Area C represents the A. decrease in consumer surplus that results from a downward-sloping demand curve. B. consumer surplus to new consumers who enter the market when the price falls from P2 to P1. C. increase in producer surplus when quantity sold increases from Q2 to Q1. D. decrease in consumer surplus to each consumer in the market when the price increases from P1 to P2.

B. consumer surplus to new consumers who enter the market when the price falls from P2 to P1.

Over time, housing shortages caused by rent control A. increase, because the demand for and supply of housing are less elastic in the long run. B. increase, because the demand for and supply of housing are more elastic in the long run. C. decrease, because the demand for and supply of housing are more elastic in the long run. D. decrease, because the demand for and supply of housing are less elastic in the long run.

B. increase, because the demand for and supply of housing are more elastic in the long run.

f the government imposes a price floor of $6 on this market, then there will be A. a surplus of 40 units. B. no surplus. C. a surplus of 20 units. D. a surplus of 30 units.

B. no surplus.

The price ceiling causes a A. B. shortage of 85 units. C. surplus of 85 units. D. surplus of 40 units.

B. shortage of 85 units.

If a price ceiling is not binding, then A. the equilibrium price is above the price ceiling. B. the equilibrium price is below the price ceiling. C. it has no legal enforcement mechanism. D. None of the above is correct because all price ceilings must be binding

B. the equilibrium price is below the price ceiling.

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. no buyer is willing to pay more than the equilibrium price for any unit of the good D. all firms are producing the good at the same low cost per unit.

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

Economists typically measure efficiency using A. the quantity supplied by sellers. B. total surplus. C. the price paid by buyers. D. profits to firms.

B. total surplus.

Under the binding price ceiling of $4, what would be the black market price? A. $14 B. $10 C. $16 D. $12

C. $16

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. $1,250 C. $2,500 D. $5,000

C. $2,500

If the price of the product is $18, then the total consumer surplus is A. $42. B. $72. C. $46. D. $38.

C. $46.

If the price of the good is $50, then consumer surplus amounts to A. $400. B. $500. C. $600. D. $750.

C. $600.

If Gina sells a shirt for $40, and her producer surplus from the sale is $32, her cost must have been A. $32. B. $72. C. $8. D. We would have to know the consumer surplus in order to make this determination.

C. $8.

When the price is P1, consumer surplus is A. A+B+D. B. A. C. A+B+C. D. A+B.

C. A+B+C.

When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers? A. ACH B. BCG C. ABGD D. DGH

C. ABGD

Total surplus Selected Answer: CorrectC. All of the above are correct. Answers: A. can be used to measure a market's efficiency. B. is the sum of consumer and producer surplus. C. All of the above are correct. D. is the to value to buyers minus the cost to sellers.

C. All of the above are correct.

All else equal, what happens to consumer surplus if the price of a good increases? A. Consumer surplus may increase, decrease, or remain unchanged. B. Consumer surplus is unchanged. C. Consumer surplus decreases. D. Consumer surplus increases.

C. Consumer surplus decreases.

Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market? A. BCG B. AHGB C. DGH D. ACH

C. DGH

If the price of the product is $15, then who would be willing to purchase the product? A. Lori and Audrey B. Lori, Audrey, Zach, and Calvin C. Lori, Audrey, and Zach D. Lori

C. Lori, Audrey, and Zach

Total surplus in a market is equal to A. producer surplus - consumer surplus. B. value to buyers - amount paid by buyers. C. consumer surplus + producer surplus. D. amount received by sellers - costs of sellers.

C. consumer surplus + producer surplus.

If the government removes a binding price floor from a market, then the price paid by buyers will A. increase, and the quantity sold in the market will decrease. B. decrease, and the quantity sold in the market will decrease. C. decrease, and the quantity sold in the market will increase. D. increase, and the quantity sold in the market will increase.

C. decrease, and the quantity sold in the market will increase.

The equilibrium allocation of resources is A. inefficient because consumer surplus is larger than producer surplus at the equilibrium. B. inefficient because total surplus is maximized when 10 units of output are produced and sold. C. efficient because total surplus is maximized at the equilibrium. D. efficient because consumer surplus is maximized at the equilibrium.

C. efficient because total surplus is maximized at the equilibrium.

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 profit. C. seller's cost of production. D. average willingness to pay of buyers of the product.

C. seller's cost of production.

If the minimum wage exceeds the equilibrium wage, then A. the quantity demanded of labor will exceed the quantity supplied. B. there will be no unemployment. C. the quantity supplied of labor will exceed the quantity demanded. D. the minimum wage will not be binding.

C. the quantity supplied of labor will exceed the quantity demanded.

If the government imposes a price floor of $120 in this market, then consumer surplus will decrease by A. $125. B. $75. C. $300. D. $225.

D. $225.

At the equilibrium price, consumer surplus is A. $500. B. $600. C. $200. D. $300.

D. $300.

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's consumer surplus is A. $3,500. B. $3,000. C. $6,500. D. $500.

D. $500.

At equilibrium, total surplus is measured by the area A. KBG. B. CFG. C. AFG. D. ACG.

D. ACG.

If 6 units of the good are produced and sold, then A. efficiency is achieved in this market. B. the marginal value to buyers equals the marginal cost to sellers. C. the sum of consumer surplus and producer surplus is maximized. D. All of the above are correct.

D. All of the above are correct.

The price ceiling A. is binding. B. causes a shortage. C. causes the quantity demanded to exceed the quantity supplied. D. All of the above are correct.

D. All of the above are correct.

When the price rises from P1 to P2, which of the following statements is not true? A. Consumer surplus in the market falls. B. The buyers who still buy the good are worse off because they now pay more. C. Some buyers leave the market because they are not willing to buy the good at the higher price. D. Buyers place a higher value on the good after the price increase.

D. Buyers place a higher value on the good after the price increase.

At equilibrium, producer surplus is measured by the area A. AFG. B. ACG. C. KBG D. CFG.

D. CFG.

Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons? A. Consumer surplus increases. B. Consumer surplus is not affected by this change in market forces. C. We would have to know whether the demand for lemons is elastic or inelastic to make this determination. D. Consumer surplus decreases.

D. Consumer surplus decreases.

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts? A. It may increase, decrease, or remain unchanged. B. It decreases. C. It remains unchanged. D. It increases.

D. It increases.

If the price of the product is $22, then who would be willing to purchase the product? A. Lori, Audrey, and Zach B. Lori, Audrey, Zach, and Calvin C. Lori D. Lori and Audrey

D. Lori and Audrey

A shortage results when a A. nonbinding price ceiling is removed from a market. B. nonbinding price ceiling is imposed on a market. C. binding price ceiling is removed from a market. D. binding price ceiling is imposed on a market.

D. binding price ceiling is imposed on a market.

On a graph, the area below a demand curve and above the price measures A. producer surplus. B. willingness to pay. C. deadweight loss. D. consumer surplus.

D. consumer surplus.

When the price rises from P1 to P2, consumer surplus A. decreases by an amount equal to C. B. increases by an amount equal to B+C. C. increases by an amount equal to A. D. decreases by an amount equal to B+C.

D. decreases by an amount equal to B+C.

A consumer's willingness to pay directly measures A. consumer surplus. B. the cost of a good to the buyer. C. the extent to which advertising and other external forces have influenced the consumer's preferences. D. how much a buyer values a good.

D. how much a buyer values a good.

binding price floor is shown in A. both panel (a) and panel (b). B. neither panel (a) nor panel (b). C. panel (a) only. D. panel (b) only.

D. panel (b) only.

Cost is a measure of the A. seller's producer surplus. B. producer shortage. C. seller's willingness to buy. D. seller's willingness to sell.

D. seller's willingness to sell.

A supply curve can be used to measure producer surplus because it reflects A. the actions of sellers. B. the amount that will be purchased by consumers in the market. C. quantity supplied. D. sellers' costs.

D. sellers' costs.

At the equilibrium price of a good, the good will be purchased by those buyers who A. have the money to buy the good. B. consider the good a necessity. C. value the good less than price. D. value the good more than price.

D. value the good more than price.

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

D. who would be the first to leave the market if the price were any higher.

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

between the demand and supply curves up to the point of equilibrium.