Global Compet/Mkt Dominance Chap 3

9. Which of the following statements is not correct? a. A seller would be eager to sell her product at a price higher than her cost. b. A seller would refuse to sell her product at a price lower than her cost. c. A seller would be indifferent about selling her product at a price equal to her cost. d. Since sellers cannot set the price for their product, they must be willing to sell their product at any price.

d. Since sellers cannot set the price for their product, they must be willing to sell their product at any price.

5. 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. increase.

4. 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. the marginal buyer's willingness to pay for the 100th unit of the good is $25.

7. Allen tutors in his spare time for extra income. Buyers of his service are willing to pay $40 per hour for as many hours Allen is willing to tutor. On a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. Assume Allen is rational in deciding how many hours to tutor. His producer surplus is a. $40. b. $64. c. $12. d. $56.

b. $64.

15. Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm A produces a monitor that Cassie buys but David does not, then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay. (ii) Free markets allocate the demand for goods to the sellers who can produce them at the least cost. a. (i) only b. (ii) only c. both (i) and (ii) d. neither (i) nor (ii)

b. (ii) only

6. Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then a. Dallas's consumer surplus would be unaffected. b. Dallas's consumer surplus would increase. c. Dallas's consumer surplus would decrease. d. Dallas would be wise to buy fewer strawberries than before.

b. Dallas's consumer surplus would increase.

14. Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. Which of the following market outcomes is efficient? a. Firm A produces a monitor that Cassie buys. David does not purchase a monitor. b. Firm A produces a monitor that David buys. c. Firm B produces a monitor that Cassie buys. David does not purchase a monitor. d. Firm B produces a monitor that David buys

b. Firm A produces a monitor that David buys.

13. Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound, a. any possible increase in consumer surplus would be larger than the loss of producer surplus. b. any possible increase in consumer surplus would be smaller than the loss of producer surplus. c. the resulting increase in producer surplus would be larger than any possible loss of consumer surplus. d. the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus.

b. any possible increase in consumer surplus would be smaller than the loss of producer surplus.

12. If the government allowed a free market for transplant organs such as kidneys to exist, critics argue that such a market would a. not reduce the shortage of organs. b. benefit rich people but not poor people. c. be inefficient because markets are not good at allocating scarce resources. d. be inferior to a plan imposed by a benevolent dictator.

b. benefit rich people but not poor people.

1. 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. maximizes the combined welfare of buyers and sellers.

10. Total surplus is equal to a. value to buyers - profit to sellers. b. value to buyers - cost to sellers. c. consumer surplus x producer surplus. d. (consumer surplus + producer surplus) x equilibrium quantity

b. value to buyers - cost to sellers.

8. The marginal seller is the seller who a. cannot compete with the other sellers in the market. b. would leave the market first if the price were any lower. c. can produce at the lowest cost. d. has the largest producer surplus.

b. would leave the market first if the price were any lower.

11. Which of the following is correct? a. Consumer surplus refers to a situation in which there are more buyers than sellers in a market. b. Producer surplus refers to a situation in which there are more sellers than buyers in a market. c. Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. d. All of the above are correct.

c. Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity.

3. Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound, a. Henry experiences an increase in consumer surplus, but Janine does not. b. Janine experiences an increase in consumer surplus, but Henry does not. c. both Janine and Henry experience an increase in consumer surplus. d. neither Janine nor Henry experiences an increase in consumer surplus

c. both Janine and Henry experience an increase in consumer surplus.

2. 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. All of the above are correct.