Microeconomics Chapter 7

A consumer's willingness to pay directly measures A. the extent to which advertising and other external forces have influenced the consumer's preferences. B. how much a buyer values a good. C. consumer surplus. D. the cost of a good to the buyer.

B

Austin and Erin are willing to pay $10 and $9, respectively, for a ticket to a screening of a new movie. What is the total consumer surplus for both Austin and Erin if the market price of a ticket is $6? A. $4 B. $7 C. $9 D. $19

B

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is A. $150. B. $500. C. $425. D. $850.

B

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts? A. It may increase, decrease, or remain unchanged. B. It decreases. C. It remains unchanged. D. It increases.

D

T/F All else equal, a decrease in demand will cause an increase in producer surplus.

false

T/F An increase in supply will always increase consumer surplus.

true

If the government wants to minimize the deadweight loss of taxation, which of the following items are good candidates for an excise tax (select all that apply)? A. emergency plumber services B. Coca-Cola C. Chocolate D. food at restaurants

A

If the cost of producing sofas decreases, then consumer surplus in the sofa market will A. increase for some buyers and decrease for other buyers. B. increase. C. remain constant. D. decrease.

B

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is the total surplus generated from the Andrew's sale to Nick? A. $20 B. $30 C. $35

C

If you were willing to pay $3.05 for a gallon of milk purchased at the grocery store but were required to pay only $2.05, you have gained A. None of these answers are true. B. a refund of $1.00 from the clerk C. a consumer surplus amounting to $1.00 D. a producer surplus amounting to $1.00

C

Welfare economics is the study of how A. a price ceiling compares to a price floor. B. a consumer's optimal choice affects her demand curve. C. the allocation of resources affects economic well-being. D. the government helps poor people.

C

The difference between the willingness to pay for a good and the price that is paid to get it is A. welfare economics B. producer surplus C. willingness to sell D. consumer surplus

D

The difference between the willingness to sell a good and the price that the seller receives for it is A. willingness to pay B. consumer surplus C. welfare economics D. producer surplus

D

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Andrew's original consumer surplus? A. $15 B. $20 C. $30 D. $50

A

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Andrew's producer surplus from the resale? A. $15 B. $20 C. $30 D. $50

A

At Nick's Bakery, the cost to make homemade chocolate cake is $3 per cake. As a result of selling three cakes, Nick experiences a producer surplus in the amount of $19.50. Nick must be selling his cakes for A. $7.50 each. B. $10.50 each. C. $9.50 each. D. $6.50 each.

C

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound, A. Janine experiences an increase in consumer surplus, but Henry does not. B. Henry experiences an increase in consumer surplus, but Janine does not. C. neither Janine nor Henry experiences an increase in consumer surplus. D. both Janine and Henry experience an increase in consumer surplus.

D

On a graph, the area below a demand curve and above the price measures A. willingness to pay. B. producer surplus. C. deadweight loss. D. consumer surplus.

D

Total surplus is represented by the area below the A. demand curve and above the price. B. price and up to the point of equilibrium. C. demand curve and above the horizontal axis, up to the equilibrium quantity. D. demand curve and above the supply curve, up to the equilibrium quantity.

D

T/F If Ahmed is willing to pay $450 and his consumer surplus is $175, the price must be $625.

false

T/F If Rebecca values a soccer ball at $50 and she pays $40 for it, her consumer surplus is $50.

false

T/F Producer surplus is the cost of production minus the amount the seller is paid.

false

T/F Connie's cost is $1 and the market price is $3. If she sells 100 units, her producer surplus is $200.

true

T/F If Jake produces a soccer ball for $5 and sells it for $40, his producer surplus is $35.

true

T/F The lower the price, the lower the producer surplus, all else equal.

true

T/F: The willingness to pay shows how much the buyer values the good.

true