Exam 1

The table shows four individuals' maximum willingness to pay for one pound of bananas. If the market price of bananas is $0.50/lb, what is the total consumer surplus in the market?

$2.50

(Figure: Potatoes) Refer to the figure. If the price of potatoes is $8 a pound, what is the consumer surplus received?

$240,000

There are 100 consumers, each of whom values a concert ticket at a unique whole number dollar amount between $1 and $100. One customer is willing to pay $1, a second is willing to pay $2, a third is willing to pay $3, and so on. An unlimited number of concert tickets are on sale for $15 each. What is the total consumer surplus in this market?

$3,612.50

(Figure: Producer Surplus) In the diagram, if the market price of coffee is $6, how much producer surplus do suppliers earn?

$62.50

Which of the following choices correctly illustrates how changes in opportunity costs affect supply?

A farmer produces corn and wheat. The price of wheat rises, so he shifts his resources toward wheat and the supply of wheat rises.

Recall the discussion in your textbook about the supply curve for oil. What explains why the supply curve for oil is positively sloped?

As the price of oil rises, more producers enter the market.

If prices rise, what happens to producer surplus (all the other things being equal)?

It rises, because each producer is getting more surplus per good sold.

Anonymity on the Internet has lowered the cost of rudely confronting people. What has happened to the supply of rude confrontations?

The supply has increased, shifting down and to the right.

Peoples' expectation of the price of gasoline going up tomorrow may increase the demand for gasoline today. If so, what does this imply about the relationship between gasoline tomorrow and gasoline today?

They are substitutes.

Which factor would cause the change in the figure?

a decrease in the price of a complement good

In the week before Hurricane Katrina, the price of flashlights rose in New Orleans because of:

an increase in demand

Recall the discussion about the demand for oil in your textbook. Which of the following correctly explains why the demand curve for oil is negatively sloped? As the price of oil rises:

consumers increasingly use oil only for those purposes without good substitutes.

If the price of shotguns ______, the demand for shotgun shells will _______.

increase; decrease

Consider the (world) market supply curve for oil. Saudi oil production inhabits the _ part of the curve, and Canadian oil production inhabits the _ part of the curve.

lower;upper

In the diagram, the current demand curve for chicken legs is represented by D1. If the price of chicken thighs, a substitute for chicken legs, decreases, the demand curve for chicken legs will:

shift to D2

(Figure: Supply Shift) In the figure, the initial supply curve is S1. If producers form expectations that the price will be lower in the near future, S1 will:

shift to S3 now.

If producers form expectations that copper prices will be higher in the future, then this will shift the:

supply curve of copper to the left.

(Figure: Supply Shifts) In the figure, the initial supply curve is S1. Producers engage in market speculation with the belief that the price of the good will increase in the near future. This would be represented in the figure by shifting the:

supply curve to S2, resulting in a lower quantity supplied at each price.

Coke and Pepsi are substitute soft drinks. Which of the following would cause the demand curve for Pepsi to shift to the left?

the price of coke decreases

If the government decided to heavily regulate small farmers who grow organic and free-range food, the supply of that food:

would decrease because the regulations are like a tax on the food; they make it more expensive to produce.