Question 1

Market power and externalities are examples of

Accepted Answer

A)   laissez-faire economics.
B)   public policy.
C)   market failure.
D)   welfare economics.E) B) and C)
F) All of the above

Question 2

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,producer surplus

Accepted Answer

A)   would necessarily increase even if the higher price resulted in a surplus of widgets.
B)   would necessarily decrease because the higher price would create a surplus of widgets.
C)   might increase or decrease.
D)   would be unaffected.E) A) and D)
F) B) and D)

Question 3

A consumer's willingness to pay directly measures

Accepted Answer

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

Question 4

Which of the following will cause a decrease in producer surplus?

Accepted Answer

A)   the imposition of a nonbinding price ceiling in the market
B)   buyers expect the price of a good to be higher next month
C)   the price of a substitute increases
D)   income increases and buyers consider the good to be inferiorE) C) and D)
F) All of the above

Question 5

Total surplus is represented by the area below the

Accepted Answer

A)   demand curve and above the price.
B)   price and up to the point of equilibrium.
C)   demand curve and above the supply curve, up to the equilibrium quantity.
D)   demand curve and above the horizontal axis, up to the equilibrium quantity.E) C) and D)
F) B) and C)

Question 6

A supply curve can be used to measure producer surplus because it reflects

Accepted Answer

A)   the actions of sellers.
B)   quantity supplied.
C)   sellers' costs.
D)   the amount that will be purchased by consumers in the market.E) A) and B)
F) A) and C)

Question 7

When the demand for a good increases and the supply of the good remains unchanged,consumer surplus

Accepted Answer

A)   decreases.
B)   is unchanged.
C)   increases.
D)   may increase, decrease, or remain unchanged.E) C) and D)
F) None of the above

Question 8

Figure 7-23
 
-Refer to Figure 7-23.Which of the following statements is correct?

Accepted Answer

A)   The market is in equilibrium at Q1.
B)   At Q2, the cost to sellers exceeds the value to buyers.
C)   At Q4, the value to buyers is less than the cost to sellers.
D)   At Q3, the market is producing too much output.E) B) and C)
F) All of the above

Question 9

Producing a soccer ball costs Jake $5.He sells it to Darby for $35.Darby values the soccer ball at $50.For this transaction,the total surplus in the market is $40.

Accepted Answer

A) True 
 B)False

Question 10

If the demand for leather decreases,producer surplus in the leather market

Accepted Answer

A)   increases.
B)   decreases.
C)   remains the same.
D)   may increase, decrease, or remain the same.E) None of the above
F) A) and B)

Question 11

Market power refers to the

Accepted Answer

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 B)

Question 12

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

Accepted Answer

A)   maximizes both the total revenue for firms and the quantity supplied of the product.
B)   maximizes the combined welfare of buyers and sellers.
C)   minimizes costs and maximizes output.
D)   minimizes the level of welfare payments.E) B) and C)
F) A) and D)

Question 13

Figure 7-18
 
-Refer to Figure 7-18.If 110 units of the good are being bought and sold,then

Accepted Answer

A)   the marginal cost to sellers is equal to the marginal value to buyers.
B)   the marginal value to buyers is greater than the marginal cost to sellers.
C)   the marginal cost to sellers is greater than the marginal value to buyers.
D)   producer surplus is greater than consumer surplus.E) B) and C)
F) B) and D)

Question 14

Table 7-11
 
-Refer to Table 7-11.Both the demand curve and the supply curve are straight lines.If the price is $4 but only 6 units are bought and sold,total surplus will be

Accepted Answer

A)   $42.
B)   $48.
C)   $54.
D)   $60.E) A) and C)
F) A) and B)

Question 15

Motor oil and gasoline are complements.If the price of motor oil decreases,consumer surplus in the gasoline market

Accepted Answer

A)   decreases.
B)   is unchanged.
C)   increases.
D)   may increase, decrease, or remain unchanged.E) A) and B)
F) A) and C)

Question 16

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) B) and D)

Question 17

Tammy loves donuts.The table shown reflects the value Tammy places on each donut she eats:

Accepted Answer

a.

b.

At a price of $0.20,Tammy woul...

Question 18

In a market,the marginal buyer is the buyer

Accepted Answer

A)   whose willingness to pay is higher than that of all other buyers and potential buyers.
B)   whose willingness to pay is lower than that of all other buyers and potential buyers.
C)   who is willing to buy exactly one unit of the good.
D)   who would be the first to leave the market if the price were any higher.E) A) and D)
F) A) and B)

Question 19

Figure 7-17
 
-Refer to Figure 7-17.Which area represents consumer surplus when the price is P1?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) C) and D)
F) None of the above

Question 20

Efficiency refers to whether a market outcome is fair,while equality refers to whether the maximum amount of output was produced from a given number of inputs.

Accepted Answer

A) True 
 B)False

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

Efficiency refers to whether a market outcome is fair,while equality refers to whether the maximum amount of output was produced from a given number of inputs.

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In a market,the marginal buyer is the buyer

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Total surplus is represented by the area below the

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Market power and externalities are examples of

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A consumer's willingness to pay directly measures

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Table 7-11 -Refer to Table 7-11.Both the demand curve and the supply curve are straight lines.If the price is $4 but only 6 units are bought and sold,total surplus will be

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Motor oil and gasoline are complements.If the price of motor oil decreases,consumer surplus in the gasoline market

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When the demand for a good increases and the supply of the good remains unchanged,consumer surplus

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Figure 7-17 -Refer to Figure 7-17.Which area represents consumer surplus when the price is P1?

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A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

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Market power refers to the

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If the demand for leather decreases,producer surplus in the leather market

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A supply curve can be used to measure producer surplus because it reflects

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Figure 7-23 -Refer to Figure 7-23.Which of the following statements is correct?

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Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,producer surplus

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Tammy loves donuts.The table shown reflects the value Tammy places on each donut she eats:

Correct Answerverifieda. b. At a price of $0.20,Tammy woul...View AnswerShow Answer

Which of the following will cause a decrease in producer surplus?

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Figure 7-18 -Refer to Figure 7-18.If 110 units of the good are being bought and sold,then

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Producing a soccer ball costs Jake $5.He sells it to Darby for $35.Darby values the soccer ball at $50.For this transaction,the total surplus in the market is $40.

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

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At a price of $0.20,Tammy woul...
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