Question 1

In order for market outcomes to maximise the total benefits to buyers and sellers, the markets must be perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 2

If the cost of producing automobiles increases, consumer surplus will:

Accepted Answer

A)   increase
B)   decrease
C)   remain constant
D)   increase, then decreaseE) B) and C)
F) None of the above

Question 3

Willingness to pay measures the:

Accepted Answer

A)   amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
B)   amount a seller actually receives for a good minus the minimum amount the seller is willing to accept
C)   maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept
D)   maximum amount that a buyer will pay for a goodE) None of the above
F) B) and D)

Question 4

Consumer surplus is the:

Accepted Answer

A)   quantity of a good consumers get free
B)   amount a consumer has to pay less the amount the consumer was willing to pay
C)   amount a consumer is willing to pay less the amount the consumer actually pays
D)   total value of a good to a consumerE) C) and D)
F) None of the above

Question 5

Many countries allow people to visit national parks, lakes or rivers for free. If a good is free in the sense of having zero market price, does this mean that the consumer surplus is also zero?

Accepted Answer

Just because a good has no mar...

Question 6

A consumer's willingness to pay measures:

Accepted Answer

A)   the cost of a good to the buyer
B)   how much a buyer values a good
C)   how much a buyer has to pay to receive a good
D)   how much a seller receives from the sale of a goodE) A) and D)
F) C) and D)

Question 7

Suppose a market clears and this generates an equilibrium price and quantity. An important outcome of this equilibrium is that it maximises the total benefits to both buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 8

Graph 7-2
 2 to P1 C)  an increase in producer surplus when the quantity sold increases from Q2 to Q1 D)  a decrease in consumer surplus to each consumer in the market" class="answers-bank-image d-inline" rel="preload" >
-According to Graph 7-2, area C represents:

Accepted Answer

A)   the decrease in consumer surplus that results from a downward-sloping demand curve
B)   consumer surplus to new consumers who enter the market when the price falls from P2 to P1
C)   an increase in producer surplus when the quantity sold increases from Q2 to Q1
D)   a decrease in consumer surplus to each consumer in the marketE) C) and D)
F) A) and C)

Question 9

Producer surplus is the area:

Accepted Answer

A)   under the supply curve
B)   between the supply and demand curves
C)   below the price and above the supply curve
D)   under the demand curve and above the priceE) B) and C)
F) None of the above

Question 10

What was the 'invisible hand' doctrine that Adam Smith discussed in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations?

Accepted Answer

Smith said that participants i...

Question 11

Table 7-2
The costs of five possible sellers
 
-Refer to Table 7-2. If the price is $1000, Landon's producer surplus will be:

Accepted Answer

A)   $1000
B)   $750
C)   $500
D)   $25E) C) and D)
F) All of the above

Question 12

Graph 7-2
 1, consumer surplus is: A)  A B)  A + B C)  A + B + C D)  A + B + D" class="answers-bank-image d-inline" rel="preload" >
-Refer to Graph 7-2. When the price is P1, consumer surplus is:

Accepted Answer

A)   A
B)   A + B
C)   A + B + C
D)   A + B + DE) A) and C)
F) B) and D)

Question 13

Graph 7-3
 1 to P2 B)  the increase in consumer surplus that results from an upward-sloping supply curve C)  a decrease in producer surplus to each producer in the market D)  an increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2" class="answers-bank-image d-inline" rel="preload" >
-According to Graph 7-3, area B represents:

Accepted Answer

A)   producer surplus to new producers entering the market as the result of price rising from P1 to P2
B)   the increase in consumer surplus that results from an upward-sloping supply curve
C)   a decrease in producer surplus to each producer in the market
D)   an increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2E) A) and C)
F) A) and B)

Question 14

A seller would be willing to sell a product ONLY if the price received is:

Accepted Answer

A)   less than the cost of production
B)   at least as great as the cost of production
C)   equal to the cost of production
D)   at least double the cost of productionE) C) and D)
F) All of the above

Question 15

At all quantity levels the price given by the supply curve shows the cost of the lowest cost seller.

Accepted Answer

A) True 
 B)False

Question 16

The area below a demand curve and above the price measures:

Accepted Answer

A)   willingness to pay
B)   total surplus
C)   consumer surplus
D)   producer surplusE) A) and B)
F) A) and C)

Question 17

Nick's willingness to sell his homemade chocolate chip biscuits is $4 per dozen. He sells them and realises a producer surplus of $4 per dozen. Nick sells his biscuits for:

Accepted Answer

A)   $2 a dozen
B)   $8 a dozen
C)   $10 a dozen
D)   $12 a dozenE) B) and C)
F) A) and C)

Question 18

The highest price a buyer is prepared to spend on a good, is that buyer's willingness to pay.

Accepted Answer

A) True 
 B)False

Question 19

Jean wants to sell her camera. Greg offers her $250. Lee offers her $300. Jean decides to sell the camera to Greg because he made the first offer. This is an example of an efficient market transaction.

Accepted Answer

A) True 
 B)False

Question 20

Many economists believe that a market in human organs would lead to both an efficient allocation and fair distribution of organs.

Accepted Answer

A) True 
 B)False

Exam 7: Consumers, Producers and the Efficiency of Markets

Willingness to pay measures the:

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Suppose a market clears and this generates an equilibrium price and quantity. An important outcome of this equilibrium is that it maximises the total benefits to both buyers and sellers.

Correct AnswerverifiedShow Answer

A seller would be willing to sell a product ONLY if the price received is:

Correct AnswerverifiedShow Answer

The highest price a buyer is prepared to spend on a good, is that buyer's willingness to pay.

Correct AnswerverifiedShow Answer

The area below a demand curve and above the price measures:

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Graph 7-2 -Refer to Graph 7-2. When the price is P1, consumer surplus is:

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Graph 7-2 -According to Graph 7-2, area C represents:

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What was the 'invisible hand' doctrine that Adam Smith discussed in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations?

Correct AnswerverifiedSmith said that participants i...View AnswerShow Answer

Table 7-2 The costs of five possible sellers -Refer to Table 7-2. If the price is $1000, Landon's producer surplus will be:

Correct AnswerverifiedShow Answer

Many countries allow people to visit national parks, lakes or rivers for free. If a good is free in the sense of having zero market price, does this mean that the consumer surplus is also zero?

Correct AnswerverifiedJust because a good has no mar...View AnswerShow Answer

Graph 7-3 -According to Graph 7-3, area B represents:

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In order for market outcomes to maximise the total benefits to buyers and sellers, the markets must be perfectly competitive.

Correct AnswerverifiedShow Answer

Producer surplus is the area:

Correct AnswerverifiedShow Answer

At all quantity levels the price given by the supply curve shows the cost of the lowest cost seller.

Correct AnswerverifiedShow Answer

Consumer surplus is the:

Correct AnswerverifiedShow Answer

Jean wants to sell her camera. Greg offers her $250. Lee offers her $300. Jean decides to sell the camera to Greg because he made the first offer. This is an example of an efficient market transaction.

Correct AnswerverifiedShow Answer

If the cost of producing automobiles increases, consumer surplus will:

Correct AnswerverifiedShow Answer

A consumer's willingness to pay measures:

Correct AnswerverifiedShow Answer

Nick's willingness to sell his homemade chocolate chip biscuits is $4 per dozen. He sells them and realises a producer surplus of $4 per dozen. Nick sells his biscuits for:

Correct AnswerverifiedShow Answer

Many economists believe that a market in human organs would lead to both an efficient allocation and fair distribution of organs.

Correct AnswerverifiedShow Answer

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Graph 7-2 -Refer to Graph 7-2. When the price is P₁, consumer surplus is:

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Smith said that participants i...
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Just because a good has no mar...
View Answer

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