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Sarah buys a new MP3 player for $135.She receives consumer surplus of $25 on her purchase if her willingness to pay is


A) $25.
B) $110.
C) $135.
D) $160.

E) B) and D)
F) All of the above

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Figure 7-7 Figure 7-7 -Refer to Figure 7-7.If the price of the good is $9.50,then producer surplus is A) $2.50. B) $6.50. C) $8.00. D) $10.00. -Refer to Figure 7-7.If the price of the good is $9.50,then producer surplus is


A) $2.50.
B) $6.50.
C) $8.00.
D) $10.00.

E) A) and D)
F) A) and C)

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Figure 7-12 Figure 7-12 -Refer to Figure 7-12.Area A represents A) producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. B) the increase in consumer surplus that results from an upward-sloping supply curve. C) the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. D) the increase in producer surplus to those producers already in the market when the price increases from P1 to P2. -Refer to Figure 7-12.Area A represents


A) producer surplus to new producers entering the market as the result of an increase in price from P1 to P2.
B) the increase in consumer surplus that results from an upward-sloping supply curve.
C) the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2.
D) the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.

E) C) and D)
F) A) and D)

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Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?


A) profits and costs to firms
B) consumer and producer surplus
C) the equilibrium price and quantity
D) incomes of and prices paid by buyers

E) A) and D)
F) B) and D)

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When a buyer's willingness to pay for a good is equal to the price of the good,the


A) buyer's consumer surplus for that good is maximized.
B) buyer will buy as much of the good as the buyer's budget allows.
C) price of the good exceeds the value that the buyer places on the good.
D) buyer is indifferent between buying the good and not buying it.

E) All of the above
F) B) and C)

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Total surplus is represented by the area


A) under the demand curve and above the price.
B) above the supply curve and up to the price.
C) under the supply curve and up to the price.
D) between the demand and supply curves up to the point of equilibrium.

E) A) and C)
F) A) and B)

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At Nick's Bakery,the cost to make homemade chocolate cake is $4 per cake.As a result of selling five cakes,Nick experiences a producer surplus in the amount of $17.50.Nick must be selling his cakes for


A) $6.50 each.
B) $7.50 each.
C) $9.50 each.
D) $10.50 each.

E) None of the above
F) B) and D)

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Figure 7-15 Figure 7-15 -Refer to Figure 7-15.If the government imposes a price floor of $60 in this market,then total surplus will be A) higher by $57.50 than it would be without the price floor. B) lower by $20.00 than it would be without the price floor. C) lower by $45.00 than it would be without the price floor. D) lower by $62.50 than it would be without the price floor. -Refer to Figure 7-15.If the government imposes a price floor of $60 in this market,then total surplus will be


A) higher by $57.50 than it would be without the price floor.
B) lower by $20.00 than it would be without the price floor.
C) lower by $45.00 than it would be without the price floor.
D) lower by $62.50 than it would be without the price floor.

E) B) and D)
F) B) and C)

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


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

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

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A seller's opportunity cost measures the


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) None of the above
F) B) and C)

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When markets fail,public policy can potentially remedy the problem and increase economic efficiency.

A) True
B) False

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Figure 7-21 Figure 7-21 -Refer to Figure 7-21.Sellers whose costs are less than the equilibrium price are represented by which line segment? A) AC. B) CK. C) BC. D) CH. -Refer to Figure 7-21.Sellers whose costs are less than the equilibrium price are represented by which line segment?


A) AC.
B) CK.
C) BC.
D) CH.

E) A) and C)
F) A) and D)

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Figure 7-18 Figure 7-18 -Refer to Figure 7-18.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus would be A) $210. B) $360. C) $480. D) $570. -Refer to Figure 7-18.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus would be


A) $210.
B) $360.
C) $480.
D) $570.

E) A) and C)
F) A) and D)

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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. 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? A) $25 B) $35 C) $60 D) $110 -Refer to Table 7-4.If tickets sell for $25 each,then what is the total consumer surplus in the market?


A) $25
B) $35
C) $60
D) $110

E) All of the above
F) A) and B)

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Suppose there is an early freeze in California that reduces the size of the lemon crop.What happens to consumer surplus in the market for lemons?


A) Consumer surplus increases.
B) Consumer surplus decreases.
C) Consumer surplus is not affected by this change in market forces.
D) We would have to know whether the demand for lemons is elastic or inelastic to make this determination.

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

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Moving production from a high-cost producer to a low-cost producer will


A) lower total surplus.
B) raise total surplus.
C) lower producer surplus.
D) raise producer surplus but lower consumer surplus.

E) A) and B)
F) B) and D)

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Figure 7-3 Figure 7-3 -Refer to Figure 7-3.When the price falls from P1 to P2,which area represents the increase in consumer surplus to existing buyers? A) ABD B) ACG C) BCFD D) DFG -Refer to Figure 7-3.When the price falls from P1 to P2,which area represents the increase in consumer surplus to existing buyers?


A) ABD
B) ACG
C) BCFD
D) DFG

E) All of the above
F) C) and D)

Correct Answer

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Tom tunes pianos in his spare time for extra income.Buyers of his service are willing to pay $155 per tuning.One particular week,Tom is willing to tune the first piano for $120,the second piano for $125,the third piano for $140,and the fourth piano for $160.Assume Tom is rational in deciding how many pianos to tune.His producer surplus is


A) $95.
B) $80.
C) $75.
D) $60.

E) A) and C)
F) B) and C)

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Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. -Refer to Table 7-2.Which of the following is not true? A) At a price of $9.00, no buyer is willing to purchase Vanilla Coke. B) At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one. C) At a price of $4.00, total consumer surplus in the market will be $9.00. D) All of the above are correct. -Refer to Table 7-2.Which of the following is not true?


A) At a price of $9.00, no buyer is willing to purchase Vanilla Coke.
B) At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one.
C) At a price of $4.00, total consumer surplus in the market will be $9.00.
D) All of the above are correct.

E) All of the above
F) B) and D)

Correct Answer

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Table 7-3 The only four consumers in a market have the following willingness to pay for a good: Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3.If there is only one unit of the good and if the buyers bid against each other for the right to purchase it,then the consumer surplus will be A) $0 or slightly more. B) $10 or slightly less. C) $30 or slightly more. D) $45 or slightly less. -Refer to Table 7-3.If there is only one unit of the good and if the buyers bid against each other for the right to purchase it,then the consumer surplus will be


A) $0 or slightly more.
B) $10 or slightly less.
C) $30 or slightly more.
D) $45 or slightly less.

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

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