micro chapter 7

10. Refer to Figure 7-8. At the equilibrium price, consumer surplus is a. $1,050. b. $1,225. c. $1,575. d. $2,450.

b. $1,225.

16. Refer to Table 7-12. The equilibrium market price for 10 piano lessons is $300. What is the total producer surplus in the market? a. $50 b. $150 c. $1,050 d. $1,500

b. $150

8. Refer to Figure 7-1. If the price of the good is $150, then consumer surplus amounts to a. $150. b. $200. c. $250. d. $300.

c. $250.

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate a. increases, and producer surplus increases. b. increases, and producer surplus decreases. c. decreases, and producer surplus increases. d. decreases, and producer surplus decreases

d. decreases, and producer surplus decreases

15. Refer to Table 7-10. If the market price is $1,100, the combined total cost of all participating sellers is a. $2,800. b. $2,900. c. $1,700. d. $4,000.

a. $2,800.

Producer surplus measures the a. benefits to sellers of participating in a market. b. costs to sellers of participating in a market. c. price that buyers are willing to pay for sellers' output of a good or service. d. benefit to sellers of producing a greater quantity of a good or service than buyers demand.

a. benefits to sellers of participating in a market.

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would a. increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. b. increase consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. c. decrease consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. d. decrease consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips.

a. increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips.

Welfare economics is the study of how a. the allocation of resources affects economic well-being. b. a price ceiling compares to a price floor. c. the government helps poor people. d. a consumer's optimal choice affects her demand curve.

a. the allocation of resources affects economic well-being.

A seller's opportunity cost measures the a. value of everything she must give up to produce a good. b. amount she is paid for a good minus her cost of providing it. c. consumer surplus. d. out of pocket expenses to produce a good but not the value of her time

a. value of everything she must give up to produce a good.

If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must have been a. $48. b. $32. c. $8. d. $40.

b. $32.

11. Refer to Figure 7-8. If the government imposes a price floor of $100 in this market, then consumer surplus will decrease by a. $150. b. $325. c. $650. d. $675.

b. $325.

5. Refer to Table 7-1. If the price of the product is $122, then the total consumer surplus is a. $28. b. $41. c. $43. d. $405.

b. $41.

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

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

Abraham drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.55 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Abraham is rational in deciding how many cans to buy. His consumer surplus is a. $0.50. b. $0.60. c. $0.70. d. $1.00.

c. $0.70.

25. Refer to Figure 7-25. Suppose the government imposes a price ceiling of $16 in this market. If the buyers with the highest willingness to pay purchase the good, then total surplus will be a. $256. b. $768. c. $1,024. d. $1,280.

c. $1,024.

24. Refer to Figure 7-25. At the equilibrium price, total surplus is a. $288. b. $576. c. $1,152. d. $2,304.

c. $1,152.

23. Refer to Figure 7-19. At the equilibrium price, total surplus is a. $125. b. $450. c. $250. d. $500.

c. $250.

If an allocation of resources is efficient, then a. consumer surplus is maximized. b. producer surplus is maximized. c. all potential gains from trade among buyers are sellers are being realized. d. the allocation achieves equality as well.

c. all potential gains from trade among buyers are sellers are being realized.

Consumer surplus is the a. amount of a good consumers get without paying anything. b. amount a consumer pays minus the amount the consumer is willing to pay. c. amount a consumer is willing to pay minus the amount the consumer actually pays. d. value of a good to a consumer.

c. amount a consumer is willing to pay minus the amount the consumer actually pays.

Economists typically measure efficiency using a. the price paid by buyers. b. the quantity supplied by sellers. c. total surplus. d. profits to firms.

c. total surplus.

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur? a. The price of kidneys would rise to balance supply and demand. b. The gains from trade would make both buyers and sellers better off. c. Thousands of lives would be saved. d. All of the above are correct.

d. All of the above are correct.

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

d. ability of buyers to obtain the quantity they desire.

26. Refer to Figure 7-26. If the government imposes a price floor of $90 in this market, then consumer surplus will be a. $225. b. $450. c. $975. d. $1,350

a. $225.

17. Refer to Figure 7-10. Which area represents producer surplus when the price is P1? a. BCG b. ACH c. ABGD d. DGH

a. BCG

9. Refer to Figure 7-4. Which area represents consumer surplus at a price of P1? a. BDF b. AFG c. ABDG d. ABC

a. BDF

18. Refer to Figure 7-11. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus? a. Producer surplus increases by $625. b. Producer surplus increases by $1,875. c. Producer surplus decreases by $625. d. Producer surplus decreases by $1,875.

b. Producer surplus increases by $1,875.

6. Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus in the market? a. $25 b. $35 c. $60 d. $110

c. $60

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

c. how much a buyer values a good.