Week 5 GAP
Refer to Figure 4-7. Equilibrium price and quantity are, respectively,
$25 and 400 units.
Refer to Figure 7-2. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by
$600.
Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers entering the market?
$625
If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase.
False
Refer to Table 7-3. If you have two (essentially) identical tickets that you sell to the group in an auction, assuming that each person can only buy one ticket, which of the following is closest to the selling price for each ticket?
$26
At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling 10 danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for
$3.50 each.
Refer to Figure 4-7. At what price would there be an excess supply of 200 units of the good?
$30
Refer to Table 7-2. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for
$35 or slightly more.
Refer to Table 4-5. If the four suppliers listed are the only suppliers in this market and the market demand schedule is:
$6.00 and 600 cases.
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
$64
Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?
$8
Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase if number two grade potatoes are an inferior good?
A decrease in consumer income
Refer to Figure 7-4. Which area represents producer surplus when the price is P1?
ACH
Refer to Table 7-2. Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22?
All three buyers experience the same loss of consumer surplus.
Suppose there is a flood in St. Louis, Missouri, that destroys several beer bottling facilities. Which of the following would not be a direct result of this event?
Buyers would not be willing to buy as much as before at each relevant price.
Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product?
Calvin, Sam, and Andrew
Refer to Table 7-7. If the price is $1,150, who would be willing to supply the product?
Carlos, Dianne, and Evaline
Refer to Figure 4-8. All else equal, an increase in the income of buyers who consider turkey to be an inferior good would cause a move from
Da to Db.
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
Dallas's consumer surplus would increase.
The distinction between efficiency and equality can be described as follows:
Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.
Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?
Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Refer to Figure 7-8. Total surplus can be measured as the area
JNL
Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?
New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.
Refer to Figure 4-10. Which of the following movements would illustrate the effect in the market for bullet-proof vests of an increase in the price of Kevlar, the material used to make the vests?
Point C to Point D
What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?
Price would fall, and the effect on quantity would be ambiguous.
Refer to Figure 7-5. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus?
Producer surplus increases by $625.
Refer to Table 7-3. If you have a ticket that you sell to the group in an auction, what will be the selling price?
Slightly more than $50
What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce them?
The equilibrium price would decrease, and the equilibrium quantity would increase.
If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would happen to the equilibrium price and quantity of lattés?
The equilibrium price would increase, and the equilibrium quantity would decrease.
What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?
The equilibrium price would increase, and the equilibrium quantity would decrease.
Which of the following events would cause the price of oranges to fall?
The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.
A newspaper's classified ads are an example of a market.
True
In a competitive market, the quantity of each good produced and the price at which it is sold are not determined by any single buyer or seller.
True
In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold.
True
In a perfectly competitive market, the goods offered for sale are all exactly the same.
True
In order to calculate consumer surplus in a market, we need to know willingness to pay and price.
True
The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.
True
Welfare economics is the study of the welfare system.
True
If the demand for a product increases, then we would expect equilibrium price
and equilibrium quantity both to increase.
If the supply of a product increases, then we would expect equilibrium price
and equilibrium quantity to both decrease.
On a graph, consumer surplus is represented by the area
below the demand curve and above the price.
Refer to Figure 7-6. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be
between P1 and P2.
Refer to Figure 4-6. The shift from S to S' could be caused by an
improvement in production technology.
The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate
increases, and producer surplus increases.
A supply curve can be used to measure producer surplus because it reflects
quantity supplied.
Refer to Figure 4-7. At a price of $35, there would be a
surplus of 400 units.
A demand curve reflects each of the following except the
willingness to pay of all buyers in the market.
Refer to Figure 4-8. All else equal, the premature deaths of thousands of turkeys would cause a move from
x to y.
