Chapter 7 micro

Total surplus in a market equals Value to buyers - Amount paid by buyers

False

When markets fail, public policy can do nothing to improve the situation

False

If you pay a price exactly equal to your willingness to pay, then your consumer surplus is negative

False (0)

At Nick's Bakery, the cost to make his homemade chocolate cake is $3 per cake. He sells three and receives a total of $21 worth of producer surplus. Nick must be selling his cakes for $2 each

False (10)

Shannon buys a new CD player for her car for $135. She receives consumer surplus of $25 on her purchase. Her willingness to pay is $25

False (160)

Amy buys a new dog for $150. She receives consumer surplus of $100 on her purchase. Her willingness to pay is $50

False (250)

Donald produces nails at a cost of $200 per ton. If he sells the nails for $500 per ton, his producer surplus is $200 per ton

False (300)

Denea produces cookies. Her production cost is $3 per dozen. She sells the cookies for $8 per dozen. Her producer surplus is $3 per dozen

False (5)

Janine would be willing to pay $50 to see Les Misérables, but buys a ticket for only $30. Janine values the performance at $20

False (50)

If Roberta sells a shirt for $30, and her producer surplus from the sale is $21, her cost must have been $51

False (9)

A seller would be willing to sell a product ONLY IF the price received is less than the cost of production.

False (AT LEAST as great as cost of production)

We can say that the allocation of resources is efficient if producer surplus is maximized

False (a good is not being produced by the sellers with the lowest cost)

Producer surplus is the area under the supply curve to the left of the amount sold

False (amount a seller is paid less than the cost of production)

Producer surplus equals Value to buyers - Amount paid by buyers

False (amount received by sellers, cost of sellers)

Total surplus in a market is represented by the total area under the demand curve and above the price

False (between the demand and supply curves up to the point of equilibrium)

The area below a demand curve and above the price measures producer surplus

False (consumer surplus)

Out-of-pocket expenses plus the value of the seller's own resources used in production are considered to be the seller's total revenue

False (cost of production)

If demand decreases, the price of a product, as well as producer surplus, increases

False (decreases)

A consumer's willingness to pay measures the cost of a good to the buyer

False (how much a buyer values a good)

Welfare economics is the study of the well-being of less fortunate people

False (how the allocation of resources affects economic well-being)

With respect to welfare economics, the equilibrium price of a product is considered to be the best price because it maximizes total revenue to firms and total utility to buyers

False (maximizes the total welfare of buyers and sellers)

Willingness to pay measures the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

False (maximum amount a buyer will pay for a good)

Cost refers to a seller's producer surplus

False (opportunity cost)

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

False (price and producer surplus decrease)

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will decrease, and producer surplus in the industry will decrease

False (price will increase and the producer surplus will also increase)

A supply curve can be used to measure producer surplus because it reflects the actions of sellers

False (seller's costs)

The marginal seller is the seller who cannot compete with the other sellers in the market

False (would leave the market first if the price were any lower)

Total surplus in a market is the total costs to sellers of providing the goods less the total value to buyers of the goods

False(the total value to buyers of the goods less than the costs to sellers of providing those goods)

A demand curve measures a buyer's willingness to pay

True

An allocation of resources is said to be inefficient if a good is not being produced by the sellers with the lowest cost

True

At the equilibrium price, the good will be purchased by those buyers who value the good more than price

True

Belva is willing to pay $65.00 for a pair of shoes for a formal dance. She finds a pair at her favorite outlet shoe store for $48.00. Belva's consumer surplus is $17

True

Consumer surplus equals the Value to buyers - Amount paid by buyers

True

Consumer surplus is a buyer's willingness to pay minus the price

True

Cost is a measure of the seller's willingness to sell

True

Efficiency occurs when total surplus is maximized

True

Externalities are side effects passed on to a party other than the buyers and sellers in the market

True

If a consumer is willing and able to pay $20.00 for a particular good but only has to pay $14.00, the consumer surplus is $6.00

True

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will increase consumer surplus

True

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus of that purchase would be zero

True

If the price of a good increases, consumer surplus decreases

True

In a market, total surplus is equal to producer surplus plus consumer surplus

True

In most markets, consumer surplus reflects economic well-being

True

Inefficiency exists in any economy when a good is not being consumed by buyers who value it most highly

True

Producer surplus measures the well-being of sellers

True

Suppose the demand for nachos increases. Producer surplus in the market for nachos will increase

True

Suppose there is an early freeze in California that ruins the lemon crop. Consumer surplus in the market for lemons decreases

True

Total surplus in a market equals Consumer surplus + Producer surplus.

True

When economists say that markets are efficient, they are assuming that markets are perfectly competitive

True

When technology improves in the ice cream industry, consumer surplus will increase

True

he "invisible hand" refers to the marketplace guiding the self-interests of market participants into promoting general economic well-being

True

total surplus = value to sellers - costs of sellers is NOT correct

True