Question 1

Which of the Ten Principles of Economics does welfare economics explain more fully?

Accepted Answer

A)   The cost of something is what you give up to get it.
B)   Markets are usually a good way to organize economic activity.
C)   Trade can make everyone better off.
D)   A country's standard of living depends on its ability to produce goods and services.E) A) and D)
F) C) and D)

Question 2

Figure 7-1 
-Refer to Figure 7-1. If the price of the good is $250, then consumer surplus amounts to

Accepted Answer

A)   $50.
B)   $100.
C)   $150.
D)   $200.E) None of the above
F) C) and D)

Question 3

Table 7-19
The following table shows the cost of producing a good for the only four producers in a market.
 
-Refer to Table 7-19. If these four producers bid in an auction to supply one unit to a consumer, at what price will the good be sold?

Accepted Answer

The good w...

Question 4

Consumer surplus equals the

Accepted Answer

A)   value to buyers minus the amount paid by buyers.
B)   value to buyers minus the cost to sellers.
C)   amount received by sellers minus the cost to sellers.
D)   amount received by sellers minus the amount paid by buyers.E) A) and C)
F) B) and C)

Question 5

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?

Accepted Answer

A)   For the three individuals together, consumer surplus amounts to $35.
B)   Having bought the cell phone, Kristen is better off than she would have been had she not bought it.
C)   Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer.
D)   The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone.E) A) and B)
F) B) and C)

Question 6

Welfare economics is the study of

Accepted Answer

A)   taxes and subsidies.
B)   how technology is best put to use in the production of goods and services.
C)   government welfare programs for needy people.
D)   how the allocation of resources affects economic well-being.E) B) and C)
F) A) and D)

Question 7

Total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve, up to the point of equilibrium.

Accepted Answer

A) True 
 B)False

Question 8

Table 7-11
The following table represents the costs of five possible sellers.
 
-Refer to Table 7-11. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 4 if the price is

Accepted Answer

A)   $860.
B)   $1,050.
C)   $1,650.
D)   $1,400.E) A) and C)
F) B) and D)

Question 9

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

Accepted Answer

A)   increase producer surplus.
B)   reduce producer surplus.
C)   not affect producer surplus.
D)   Any of the above are possible.E) B) and C)
F) A) and D)

Question 10

Figure 7-27 
-Refer to Figure 7-27. Sellers whose costs are greater than the equilibrium price are represented by segment

Accepted Answer

A)   AC.
B)   CK.
C)   BC.
D)   CH.E) All of the above
F) B) and C)

Question 11

Table 7-14
The only four producers in a market have the following costs:
 
-Refer to Table 7-14. If Abbey, Bev, and Carl sell the good, and the resulting producer surplus is $55 altogether, then the price must have been

Accepted Answer

A)   $40.
B)   $50.
C)   $60.
D)   $70.E) C) and D)
F) A) and D)

Question 12

Suppose John's cost for performing some carpentry work is $120. If John is paid $200 for the carpentry work, what is his producer surplus?

Accepted Answer

His produc...

Question 13

A seller's opportunity cost measures the

Accepted Answer

A)   value of everything she must give up to produce a good.
B)   amount she is paid for a good minus her cost of providing it.
C)   consumer surplus.
D)   out of pocket expenses to produce a good but not the value of her time.E) All of the above
F) A) and B)

Question 14

Table 7-11
The following table represents the costs of five possible sellers.
 
-Refer to Table 7-11. If the market price is $1,200, the producer surplus in the market is

Accepted Answer

A)   $100.
B)   $800.
C)   $400.
D)   $500.E) None of the above
F) B) and C)

Question 15

Table 7-20
 
-Refer to Table 7-20. How much is total producer surplus at the equilibrium price in this market?

Accepted Answer

Total producer surpl...

Question 16

The area below the price and above the supply curve measures the producer surplus in a market.

Accepted Answer

A) True 
 B)False

Question 17

Figure 7-8 
-Refer to Figure 7-8. 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

Accepted Answer

A)   $900.
B)   $1,200.
C)   $1,500.
D)   $1,600.E) All of the above
F) B) and C)

Question 18

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Accepted Answer

A) True 
 B)False

Question 19

A demand curve reflects each of the following except the

Accepted Answer

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.E) All of the above
F) A) and C)

Question 20

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software?

Accepted Answer

A)   $50.
B)   $150.
C)   $200.
D)   $350.E) A) and C)
F) A) and B)

Exam 7: Consumers, Producers, and the Efficiency of Markets

The area below the price and above the supply curve measures the producer surplus in a market.

Correct AnswerverifiedShow Answer

Which of the Ten Principles of Economics does welfare economics explain more fully?

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Table 7-11 The following table represents the costs of five possible sellers. -Refer to Table 7-11. If the market price is $1,200, the producer surplus in the market is

Correct AnswerverifiedShow Answer

Welfare economics is the study of

Correct AnswerverifiedShow Answer

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve, up to the point of equilibrium.

Correct AnswerverifiedShow Answer

Suppose John's cost for performing some carpentry work is $120. If John is paid $200 for the carpentry work, what is his producer surplus?

Correct AnswerverifiedHis produc...View AnswerShow Answer

Figure 7-8 -Refer to Figure 7-8. 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

Correct AnswerverifiedShow Answer

Table 7-19 The following table shows the cost of producing a good for the only four producers in a market. -Refer to Table 7-19. If these four producers bid in an auction to supply one unit to a consumer, at what price will the good be sold?

Correct AnswerverifiedThe good w...View AnswerShow Answer

Table 7-14 The only four producers in a market have the following costs: -Refer to Table 7-14. If Abbey, Bev, and Carl sell the good, and the resulting producer surplus is $55 altogether, then the price must have been

Correct AnswerverifiedShow Answer

Figure 7-27 -Refer to Figure 7-27. Sellers whose costs are greater than the equilibrium price are represented by segment

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Figure 7-1 -Refer to Figure 7-1. If the price of the good is $250, then consumer surplus amounts to

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A demand curve reflects each of the following except the

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Table 7-11 The following table represents the costs of five possible sellers. -Refer to Table 7-11. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 4 if the price is

Correct AnswerverifiedShow Answer

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software?

Correct AnswerverifiedShow Answer

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Correct AnswerverifiedShow Answer

Consumer surplus equals the

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A seller's opportunity cost measures the

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

Correct AnswerverifiedShow Answer

Table 7-20 -Refer to Table 7-20. How much is total producer surplus at the equilibrium price in this market?

Correct AnswerverifiedTotal producer surpl...View AnswerShow Answer

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His produc...
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The good w...
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Total producer surpl...
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