Supply and Demand, Price Ceilings and Floors, and Producer and Consumer Surplus Quiz

Question 14 Refer to the above diagram. Assuming equilibrium price P1, consumer surplus is represented by areas:

Answer to question 14 a + b ( a plus b )

Question 15 Refer to the above diagram. Assuming equilibrium price P1, producer surplus is represented by areas:

Answer to question 15 c + d ( c plus d )

Question 16 Refer to the above diagram. The area that identifies the maximum sum of consumer surplus and producer surplus is:

Answer to question 16 a + b + c + d ( a plus b plus c plus d )

Question 17 Refer to the above diagram. If actual production and consumption occur at Q1:

Answer to question 17 an efficiency loss (or deadweight loss) of b + d occurs.

Question 18 Refer to the above diagram. If actual production and consumption occur at Q2:

Answer to question 18 efficiency is achieved.

Question 19 Refer to the above diagram. If actual production and consumption occur at Q3:

Answer to question 19 an efficiency loss (or deadweight loss) of e + f occurs.

Question 2 Refer to the above diagram. A surplus of 160 units would be encountered if price was:

Answer to question 2 $1.60.

Question 20 Allocative efficiency occurs only at output where:

Answer to question 20 the combined amounts of consumer surplus and producer surplus are maximized.

Question 21 The optimal or allocatively efficient point on a production possibilities curve is achieved where:

Answer to question 21 each good is produced at a level where marginal benefit equal marginal costs.

Question 22 Which of the following statements is true about productive and allocative efficiency?

Answer to question 22 Realizing allocative efficiency implies that productive efficiency has been realized.

Question 23 At the output level defining allocative efficiency:

Answer to question 23 the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.

Question 24 An efficiency loss (or deadweight loss):

Answer to question 24 is measured as the combined loss of consumer surplus and producer surplus.

Question 25 An efficiency loss (or deadweight loss) declines in size when a unit of output is produced for which:

Answer to question 25 maximum willingness to pay exceeds minimum acceptable price.

Question 3 If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will:

Answer to question 3 increase the quantity supplied and decrease the quantity demanded of X.

Question 4 If a price floor above the equilibrium price is imposed by government in a market:

Answer to question 4 The quantity supplied will exceed the quantity demanded

Question 5 Government-set price floors and price ceilings:

Answer to question 5 Interfere with the rationing function of price in a free market

Question 6 Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?

Answer to question 6 People moving into the community will have difficulty locating residential space to rent

Question 7 Which would be an example of a government price ceiling?

Answer to question 7 Limits on interest rates charged by credit card companies

Question 8 Consumer surplus:

Answer to question 8 Consumer surplus is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price

Question 9 Producer surplus:

Answer to question 9 Producer surplus is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price

Question 11 Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Amanda experiences:

Answer to question 11 a consumer surplus of $10 and Tony experiences a producer surplus of $190.

Question 12 Graphically, consumer surplus is measured as the triangle:

Answer to question 12 under the demand curve and above the actual price.

Question 1 Refer to the above diagram. The equilibrium price and quantity in this market will be:

Answer to question 1 $1.00 and 200.

Question 10 Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay for $42. The minimum acceptable price to the seller, Nathan, was $30, Jennifer experiences:

Answer to question 10 a consumer surplus of $9 and Nathan experiences a producer surplus of $3.

Question 13 Graphically, producer surplus is measured as the triangle:

Answer to question 13 above the supply curve and below the actual price