MicroEconomics Chap. 7

According to the graph shown, area A represents producer surplus to new producers entering the market as the result of price rising from P1 to P2.

False

According to the graph shown, at the price of P1, producer surplus is A.

False

According to the graph shown, when the price falls from P2 to P1, producer surplus decreases by an amount equal to A

False

According to the graph shown, when the price is P2, producer surplus is A.

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 must 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 Misérables, but buys a ticket for only $30. Janine values the performance at $20.

False

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

Producer surplus equals Value to buyers - Amount paid by buyers.

False

Producer surplus is the area under the supply curve 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 Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium market price of chocolate increases, and producer surplus increases.

False

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

False

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

False

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

False

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

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 to buyers.

False

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

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

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 of a good increases, consumer surplus decreases.

true

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

False

A consumer's 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

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

True

. In most markets, consumer surplus reflects economic well-being.

True

A demand curve measures a buyer's willingness to pay.

True

According to the graph shown, B + C represents total surplus in the market when the price is P1.

True

According to the graph shown, B represents consumer surplus when the price is P1.

True

According to the graph shown, C represents producer surplus when the price is P1.

True

According to the graph shown, area B represents producer surplus to new producers entering the market as the result of price rising from P1 to P2.

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 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

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 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

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

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

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

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

True