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

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Question 21

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Market power refers to the

A) side effects that may occur in a market.
B) government regulations imposed on the sellers in a market.
C) ability of market participants to influence price.
D) forces of supply and demand in determining equilibrium price.

E) None of the above
F) A) and C)

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Question 22

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Economists typically measure efficiency using

A) the price paid by buyers.
B) the quantity supplied by sellers.
C) total surplus.
D) profits to firms.

E) All of the above
F) None of the above

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Question 23

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Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. -Refer to Table 7-2. If the market price is $3.80,

Table 7-4 The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field. -Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus in the market?

Figure 7-31 -Refer to Figure 7-31. If the market equilibrium price rises from $25 to $35, how much is the producer surplus for the producers entering the market after the price increase?

The lower the price, the lower the consumer surplus, all else equal.

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?

Figure 7-11 -Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers entering the market?

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

Consumer surplus can be measured as the area between the demand curve and the equilibrium price.

Figure 7-9 -Refer to Figure 7-9. If the price of the good is $14, then producer surplus is

Total surplus in a market is equal to

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. How much is total consumer surplus at the equilibrium price in this market?

Figure 7-25 -Refer to Figure 7-25. At the equilibrium price, total surplus is

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm B produces a monitor that David buys, then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay. (ii) Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

Table 7-19 -Refer to Table 7-19. How much is total surplus at the equilibrium price in this market?

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is . If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.

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

All else equal, an increase in demand will always increase consumer surplus.

Figure 7-16 -Refer to Figure 7-16. Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to