Quiz #4: Applications of Supply and Demand

Refer to the figure below. Consumer surplus is:

$30

The local government is concerned about poverty so it institutes a minimum wage of $9 per hour. If the demand and supply for labor are given in the graph, there will be

a surplus of 6 workers.

Assume that currently banks pay 2% interest on money that customers deposit in savings accounts. As the overall amount of money held in savings accounts increases, in financial markets

the supply of savings increases.

Refer to the figure below. If the government sets a price ceiling of $4, there would be a(n):

shortage of 10 units

What is total surplus area from the figure below?

$210

Suppose, in the graph below, there is a price ceiling of $5. Then there is a shortage of

2 units.

A government decides to set a price ceiling on eggs so that eggs are affordable to the poor. The conditions of demand and supply are given in the table below. What will the excess supply or the shortage be if the price ceiling is set at $2.00?

3,000 shortage.

Compare a market operating at a quantity lower than equilibrium (ie. a price floor) with the same market operating at the equilibrium quantity. Which of the following statements are true?

A market operating below equilibrium will transfer some consumer surplus to producers.

Which of the following represents producer surplus?

B

Paul has two tickets to the next Texan game while Bella has two tickets to the next Rockets game. Bella values the Rockets tickets at $200 while she values the Texans tickets at $250. Paul values the Rockets tickets at $250 and the Texans tickets at $150. Allocative efficiency can be improved for Paul and Bella if

Paul buys Rockets tickets from Bella and Bella buys Texan tickets from Paul at a price agreeable to both.

Alabama this winter was socked in with snow which closed highways, stores and schools for weeks. Because of the road closures, soup was in greater demand but short on supply. The government put a temporary price ceiling on the cost of soup at $1. If the equilibrium for soup was at $5, what do you think happened?

There was greater demand than supplied and people began a black market for selling and delivering soup.

An increase in consumer surplus is caused by

a price ceiling.

The Kreidler Kids company can produce swing sets for $1,000. Kendra wants a new swing set for her children and will pay $1,500 for it. Kendra finds the swing set she wants and pays $1,500 for it from the Kreidler Kids company. The Kreidler Kids company has

a producer surplus of $500.

Supply and demand for bushels of wheat (millions) are shown in the following table. A $9.00 government mandated price floor would result in

an excess supply of 2 million bushels of wheat.

Supply and demand for bushels of wheat (millions) are shown in the following table. A $10.00 price floor would result in:

an excess supply of 4 million bushels and a price of $10.00.

After earthquakes hit the California coast and damaged tens of thousands of cars, there was a growing demand and need for automotive repair, glass replacement, dent repair and repainting. In the labor market for car repair, the demand would be represented by

automotive body shops and glass repair and replacement companies, and supply represented by the automotive workers

If the government increases the minimum wage, the social surplus would

decrease.

Consumer surplus is best described as the extra benefit consumers receive when they ________.

pay less than they would have been willing to pay

If you were describing consumer surplus, you would say it is

the social surplus minus producer surplus.

The main reason price ceilings are set is so that consumer prices

will be lower.