Exam #2 (Chapter 7)
A consumers willingness to pay measures the cost of a good to the buyer
False
A seller would be willing to sell a product ONLY IF the price received is less than the cost of production
False
A supply curve can be used to measure producer surplus because it reflects the actions of sellers
False
Amy buys a new dog for $150. She receives consumer surplus of $100 on her purchase. Her willingness to pay is $50.
False
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
Cost refers to a seller's producer surplus
False
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
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
If Roberta sells a shirt for $30, and her producer surplus from the sale is $21, her cost mus have been $51.
False
If demand decreases, the price of a product, as well as producer surplus, increases
False
If you pay a price exactly equal to your willingness to pay, then your consumer surplus is negative
False
Janine would be willing to pay $50 to see Les Miserables, but buys a ticket for only $30. Janine values the performance at $20.
False
Out-of-product expenses plus the value of the seller's own resources used in production are considered to be the seller's total revenue
False
Producer surplus equals Value to buyer - amount paid by buyers
False
Producer surplus is the area under the supply cure to the left of the amount sold
False
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
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
The area below a demand curve and above the price measures producer surplus
False
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
Total surplus in a market equals value to buyers - amount paid by buyers
False
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
We can say that the allocation of resources is efficient if producer surplus is maximized.
False
Welfare economics is the study of the well-being of less fortunate people
False
When markets fail, public policy can do nothing to improve the situation
False
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
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 buyers
False
The marginal seller is the seller who cannot compete with the other sellers in the market
FalsePro
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
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 buyers 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 consumers 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
The "invisible hand" refers to the marketplace guiding the self-interests of market participants into promoting general economic well-being
True
Total surplus in a market equals consumer surplus + producer surplus
True
Total surplus=value to sellers - cots of sellers is NOT correct
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
At the equilibrium price, the good will be purchased by those buyers who value the good more than price
true