Microeconomics Midterm Review

Total surplus in a market is equal to A. consumer surplus + producer surplus. B. value to buyers - amount paid by buyers. C. amount received by sellers - costs of sellers. D. producer surplus - consumer surplus.

A. consumer surplus + producer surplus.

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will A. increase consumer surplus. B. reduce consumer surplus. C. not affect consumer surplus. D. Any of the above are possible.

A. increase consumer surplus.

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

A. increase.

Willingness to pay A. measures the value that a buyer places on a good. B. is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept. C. is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept. D. is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

A. measures the value that a buyer places on a good.

Consumer surplus is A. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. B. the amount a buyer is willing to pay for a good minus the cost of producing the good. C. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. D. a buyer's willingness to pay for a good plus the price of the good.

A. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be A. $200. B. $100. C. $125. D. $250.

B. $100.

If the market price is $5.50, the consumer surplus in the market will be A. $3.00. B. $4.50. C. $15.50. D. $21.00.

B. $4.50.

If the price of the product is $122, then the total consumer surplus is A. $28. B. $41. C. $43. D. $405.

B. $41.

Allen tutors in his spare time for extra income. Buyers of his service are willing to pay $40 per hour for as many hours Allen is willing to tutor. On a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. Assume Allen is rational in deciding how many hours to tutor. His producer surplus is A. $40. B. $64. C. $12. D. $56.

B. $64.

At the equilibrium price, consumer surplus is A. $1,600. B. $800. C. $1,400. D. $700.

B. $800.

If the market price is $1,200, the producer surplus in the market is A. $100. B. $800. C. $400. D. $500.

B. $800.

Which area represents consumer surplus at a price of P2? A. BDF B. AFG C. ABDG D. ABC

B. AFG

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the A. consumer has consumer surplus of $2 if he or she buys the good. B. consumer does not purchase the good. C. market is not a competitive market. D. price of the good will fall due to market forces.

B. consumer does not purchase the good.

When the price rises from P1 to P2, consumer surplus A. increases by an amount equal to A. B. decreases by an amount equal to B+C. C. increases by an amount equal to B+C. D. decreases by an amount equal to C.

B. decreases by an amount equal to B+C.

At a price of $2.00, total surplus is A. larger than it would be at the equilibrium price. B. smaller than it would be at the equilibrium price. C. the same as it would be at the equilibrium price. D. There is insufficient information to make this determination.

B. smaller than it would be at the equilibrium price.

If the government imposes a price ceiling of $80 in this market, then, assuming those with the highest willingness to pay purchase the good, consumer surplus will be A. $900. B. $1,200. C. $1,500. D. $1,600.

C. $1,500.

At equilibrium, total surplus is represented by the area A. A+B+C. B. A+B+D+F. C. A+B+C+D+H+F. D. A+B+C+D+H+F+G+I.

C. A+B+C+D+H+F.

If an allocation of resources is efficient, then A. consumer surplus is maximized. B. producer surplus is maximized. C. all potential gains from trade among buyers are sellers are being realized. D. the allocation achieves equality as well.

C. all potential gains from trade among buyers are sellers are being realized.

When the demand for a good increases and the supply of the good remains unchanged, consumer surplus A. decreases. B. is unchanged. C. increases. D. may increase, decrease, or remain unchanged.

C. increases.

Producer surplus is A. measured using the demand curve for a good. B. always a negative number for sellers in a competitive market. C. the amount a seller is paid minus the cost of production. D. the opportunity cost of production minus the cost of producing goods that go unsold.

C. the amount a seller is paid minus the cost of production.

Economists typically measure efficiency using A. the price paid by buyers. B. the quantity supplied by sellers. C. total surplus. D. profits to firms.

C. total surplus.

At the equilibrium price, total surplus is A. $600. B. $1,200. C. $1,500. D. $1,800.

D. $1,800.

. If the government imposes a price floor of $55 in this market, then total surplus will be A. $100.00 higher than it would be without the price floor. B. $50.00 lower than it would be without the price floor. C. $125.00 lower than it would be without the price floor. D. $62.50 lower than it would be without the price floor.

D. $62.50 lower than it would be without the price floor.

Which area represents the increase in producer surplus when the price rises from P1 to P2? A. BCG B. ACH C. ABGD D. AHGB

D. AHGB

A demand curve reflects each of the following except the A. willingness to pay of all buyers in the market. B. value each buyer in the market places on the good. C. highest price buyers are willing to pay for each quantity. D. ability of buyers to obtain the quantity they desire.

D. ability of buyers to obtain the quantity they desire.