Chapter 7 quiz Qs

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

It increases

Producer surplus is the area

below the price and above the supply curve

If the demand for leather decreases, producer surplus in the leather market

decreases

When the supply of a good increases and the demand for the good remains unchanged, consumer surplus

increases

If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that consumer, consumer surplus amounts to

$4

On a graph, the area below a demand curve and above the price measures

Consumer surplus

If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?

Consumer surplus decreases

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Consumer surplus may increase, decrease, or remain unchanged

Total surplus is represented by the area

between the demand and supply curves up to the point of equilibrium

Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to

both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

consumer does not buy the good

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

increase producer surplus

When markets fail, public policy can

potentially remedy the problem and increase economic efficiency

Moving production from a high-cost producer to a low-cost producer will

raise total surplus

Consumer surplus is a good measure of economic welfare if policymakers want to

respect the preferences of buyers

A supply curve can be used to measure producer surplus because it reflects

sellers' costs

Market failure is the inability of

some unregulated markets to allocate resources efficiently

Welfare economics is the study of how

the allocation of resources affects economic well-being

Economists typically measure efficiency using

total surplus

Efficiency is attained when

total surplus is maximized

Consumer Surplus is measured

using the demand curve for a product

A seller's opportunity cost measures the

value of everything she must give up to produce a good

At the equilibrium price of a good, the good will be purchased by those buyers who

value the good more than price

The maximum price that a buyer will pay for a good is called the

willingness to pay

Another way to think of the marginal seller is the seller who

would leave the market first if the price were any lower