chap 7

(Figure: Market 4) Use the watermelon market graph to answer the question. What is the value of the total surplus at the quantity of melons with economic efficiency?

$12.50

(Figure: Supply Curve 2) Use the supply curve for bottles of dish soap in the graph to answer the question.

$45

Bae is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. Which of the following is TRUE regarding the economic surplus associated with her purchase of the boots?

Consumer surplus is $40, and producer surplus is $50.

Sookie advertises her bicycle for sale on Craigslist for $1,000 but is willing to accept $700. The best offer she receives is $500. Why does she not sell her bicycle?

Her marginal cost is more than the best offer she received.

Which statement(s) reflect(s) a normative analysis? I. The United States should increase spending on education to 15% of gross domestic product. II. There is a federal minimum wage in the United States. III. The minimum wage in Washington state is $12 per hour.

I

If raising taxes through Policy A yields more economic surplus than raising taxes through Policy B, then:

Policy A is more efficient than Policy B but may not be more equitable than Policy B.

How does government regulation affect market efficiency?

Some regulations correct for market failure; other regulations cause inefficient outcomes.

Which statement makes use of normative analysis?

The federal government is too large and wasteful and should play a smaller role in the economy.

Which statement makes use of positive analysis?

The rate of inflation is 4%.

Which statement makes use of normative analysis?

To become more economically independent, we should reduce our dependence on foreign oil.

On a market graph, producer surplus is the area that is:

above the supply curve and below the price.

When market forces lead to efficient production, each producer is _____, and the product is produced _____.

acting in self-interest; at the lowest possible marginal cost

The total producer surplus for a good can be calculated as the:

area above the supply curve and below the price that sellers receive for the good being sold.

Ariana bought a new pair of shoes at Nordstrom. When she walked out of the store, she thought, "I got such a great deal; I would have paid $40 more for these shoes!" This BEST represents the concept of:

consumer surplus.

If the cost to download a movie from the internet falls from $7.99 to $5.49 along an upward-sloping supply curve, producer surplus in the market for movie downloads is likely to:

decrease

Suppose the market for mini-scooters faces an upward-sloping supply curve. If there is a decrease in price, we would expect producer surplus to:

decrease

The economic term for "who gets what" is:

distributional consequences.

Rebecca is willing to sell her used Ford Focus but not for less than $2,300. For Rebecca, the value of this used car is _____ $2,300.

equal to

Which of the following is NOT a source of market failure?

excessive information

A factor that is NOT a possible reason for market failure is:

extremely high prices for prescription drugs

If the price of a good exceeds the competitive equilibrium price, then:

firms produce more than the efficient quantity.

Markets allocate goods to those with the:

highest marginal benefit.

Efficient outcomes:

may not make everyone happy.

Statements about what option should be chosen are _____ statements.

normative

"Unemployment decreased to its lowest level in 10 years last month." This statement is a(n):

positive analysis.

Producer surplus for an individual seller is equal to the:

price received for selling the good minus the marginal cost of the good.

Markets achieve an efficient allocation of resources when:

the quantity demanded equals the quantity supplied.

(Figure: Market 4) Use the graph for pounds of grapes to answer the question. When the actual pounds produced and sold is two, economic surplus in the market is represented by the area between the demand and supply curves:

to the left of the quantity of two.

(Figure: Marginal Benefit Curves) Use the graph of marginal benefit curves for slices of cheesecake to answer the question. When the market price is $1, what is the total amount of cheesecake slices purchased across Becca and Marcella?

twelve

Assume a positively sloped supply curve and a negatively sloped demand curve. If the price of lemons is below the equilibrium price, economic surplus in the lemon market:

will be less than if the price were at the equilibrium level.

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2 each. What is Chin's consumer surplus on the fifth bar?

$0

Pule purchases four bottles of bathroom cleaner for $3 each. The maximum prices she would have been willing to pay for each bottle are $6 for the first bottle, $5 for the second bottle, $4 for the third bottle, and $3 for the fourth bottle. The marginal cost of producing the bottles is $2.50. What is Pule's consumer surplus on the fourth bottle of bathroom cleaner?

$0

Eliana and Olivia are at Barnes and Noble buying new calculators for the semester. Eliana is willing to pay (or her marginal benefit is) $65, and Olivia is willing to pay (or her marginal benefit is) $75 for a graphing calculator. The price of a calculator at Barnes and Noble is $55. How much is Eliana's individual consumer surplus?

$10

Jorge sells a hammock for $85. His marginal cost for one hammock is $40, and his average cost is $50. What is Jorge's producer surplus on the sale of one hammock?

$45

(Figure: Gain in Producer Surplus from the Sale of Cappuccino Machines) Consider the figure Gain in Producer Surplus from the Sale of Cappuccino Machines. Which areas represent producer surplus when the price is equal to P2?

D, E, and F

Which statement makes use of normative analysis?

The best way to encourage growth in the economy is through education.

Which statement makes use of normative analysis?

The price of gasoline should be less than $2 per gallon.

Which of the following is a normative statement?

Unequal incomes are unfair

The consumer surplus for a given good can be found by computing the area _____ the _____ curve and _____ the price paid for the good.

below; demand; above

Consumer surplus for an individual buyer is equal to the:

consumer's willingness to pay for the good, or the marginal benefit from the good, minus the price paid for the good.

(Figure: Producer Surplus and Mystery Books) Consider the figure Producer Surplus and Mystery Books. When the price of a book falls from $45 to $35, the producer surplus _____, leaving the total producer surplus at _____.

decreases by $40; $60

Positive analysis is based on identifying _____ and _____.

facts; relationships

Two ways to calculate economic surplus are _____ and _____.

marginal benefit minus marginal cost; consumer surplus plus producer surplus

Statements that make value judgments are:

normative

A government leader determines that the 5% unemployment rate is too high. She asks her staff to research policy options to reduce the rate and a few weeks later is given four options. Each option would reduce the rate by a different amount and at a different cost. The leader studies the options and chooses the one she feels is best for the country. In order, what types of analysis were used in this three-stage chain of events?

normative; positive; normative

Ian's research indicates that at a price of $12, his firm would sell 100,000 units of output. He determines that sales of 100,000 units is too low for his preferences. He then explores his options to increase sales. In order, what types of analysis are used in this three-stage chain of events?

positive; normative; positive

Suppose that in the market for new furniture, sales are allocated to the sellers who are willing and able to produce the good at the lowest cost. The market would thereby maximize:

producer surplus

The area on a market graph that lies below the price and above the supply curve is equal to:

producer surplus

Price minus marginal cost equals the:

producer surplus of a unit sold.

Economic surplus measures the value of a decision's:

total benefits minus its total costs.

(Figure: Producer Surplus in the Market for Lattes) Consider the figure Producer Surplus in the Market for Lattes. If the price of lattes is $3, the producer surplus will be:

$180

(Figure: The Market for Beyond Meat Hamburgers) The figure The Market for Beyond Meat Hamburgers shows the weekly market for Beyond Meat hamburgers in Kansas City, Missouri. If the price of a burger is $2, consumer surplus will equal:

$225

(Figure: Demand Curve 3) Use the graph of a demand curve for jars of laundry detergent to answer the question. What is the total consumer surplus if 50 jars are sold at a price of $6?

$350

If the market for alpine skis is in competitive equilibrium, and there are no external costs or government interventions, then:

all of the other answer choices are correct. (marg bene= mar cost, sum of cons surplus, resources being used efficiently)

(Figure: Market 5) The graph shows the market for teddy bears. When the market produces and sells nine teddy bears, the deadweight loss is represented by the:

area between the demand and supply curves between quantities of 5 and 9.

(Figure: Market Demand for Oranges) Consider the figure Market Demand for Oranges. The amount by which the total benefits of oranges to consumers exceed consumers' total expenditures on oranges is called _____. If the price of oranges is B, this quantity is depicted by the area _____.

consumer surplus; BCD

(Figure: Marginal Benefit Curves) Use the graph of marginal benefit curves for slices of cheesecake to answer the question.

six; six

Irrational decision making in markets results in:

some supply decisions not matching marginal costs, and some demand decisions not reflecting marginal benefits.

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2.50 each. What is Chin's total consumer surplus from the five bars that he purchased?

$5

(Figure: Market 3) Use the graph for the watermelon market to answer the question.

five

The marginal benefit minus the marginal cost equals:

the economic surplus.

Competitive markets do NOT result in:

the largest possible economic profit for firms.

(Figure: Demand Curve 2) Use the graph of a demand curve for monthly music streaming subscriptions to answer the following question. The vertical axis is the monthly price of a subscription and the horizontal axis is millions of monthly subscriptions for the market. What is the total consumer surplus if three million subscriptions are sold at a price of $4 each?

$12,000,000

(Figure: Supply Curve) Use the graph of a supply curve for jugs of laundry detergent to answer the question. If 18 jugs are sold at a price of $20, what is the total producer surplus?

$135

(Figure: Producer Surplus in the Market for Lattes) Consider the figure Producer Surplus in the Market for Lattes. If the price of lattes increases from $3 to $4, the producer surplus will increase by:

$140

Brianna and India are shopping together at the mall for new sandals. Brianna's marginal benefit is $90, and India's marginal benefit is $50 for a pair of sandals. What is the gain in total consumer surplus when the price decreases from $59 to $40?

$29

(Figure: The Market for Beyond Meat Hamburgers) The figure The Market for Beyond Meat Hamburgers shows the weekly market for Beyond Meat hamburgers in Kansas City, Missouri. If 400 hamburgers are sold, consumer surplus will equal:

$400

When Chandra is hiking on a hot day without any water, she is willing to pay up to $6 for a bottle of water. When she does her grocery shopping, she is not willing to pay more than $3.60 for a case of 36 bottles of water. If Chandra buys a case of 36 bottles for $3.60, or $.10 per bottle, her consumer surplus is _____ on the first bottle and is _____ on the 36th bottle.

$5.90; $0

(Figure: The Market for Beyond Meat Hamburgers) The figure The Market for Beyond Meat Hamburgers shows the weekly market for Beyond Meat Hamburgers in Atlanta, Georgia. If the price of a hamburger is $1, and 200 Beyond Meat hamburgers are supplied, producer surplus will be:

$50

Pule is purchasing four bottles of bathroom cleaner for $3 each. The maximum prices she would have been willing to pay for each bottle are $6 for the first bottle, $5 for the second bottle, $4 for the third bottle, and $3 for the fourth bottle. The marginal revenue for each bottle is $2.50. What is Pule's total consumer surplus from purchasing the four bottles of bathroom cleaner?

$6

(Figure: Market 3) Use the watermelon market graph to answer the question. At a quantity of two melons, the value of marginal benefit is _____, and marginal cost is _____.

$6; $3

(Figure: Producer Surplus in the Market for Lattes) Consider the figure Producer Surplus in the Market for Lattes. If the price of the lattes is $2, the producer surplus will be:

$80

Bae is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. How large is the economic surplus associated with her purchase of the boots?

$90

Often, some smaller retailers go out of business when Target opens a new store. The MOST likely reason for this outcome is that:

consumers in those areas receive a larger consumer surplus from shopping at Target than from smaller stores.