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Exam 7: Consumers, Producers and the Efficiency of Markets

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Question 91

Multiple Choice

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The cost of producing digital cameras decreases. As a result, the consumer surplus associated with digital cameras:

A) decreases
B) increases
C) doesn't change
D) could increase or decrease but the overall effect is ambiguous

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

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Question 92

Multiple Choice

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Table 7-2 The costs of five possible sellers -Refer to Table 7-2. If the price is $900 who will be willing to supply the product?

A) Kyle and Nathan
B) Kyle, Nathan and Cheslea
C) Cheslea, Hillary and Landon
D) Hillary and Landon

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

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Question 93

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Gene earns $15,000 for shooting alligators under permit in Louisiana. His producer surplus is $5,000. His willingness to sell is:

The height of the demand curve measures the value buyers place on the good, as measured by their willingness to pay for it.

Gene buys a new medium-format camera for $20 000. He receives consumer surplus of $6000 on his purchase. Gene's willingness to pay is:

Peter owns a sawmill and produces timber for construction. He sells the timber for $300 per cubic metre. His production costs are $140 per cubic metre. His producer surplus is:

What is the relationship between the willingness to sell and the supply curve?

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Australian parrots are smuggled to overseas markets where they can command very high prices. An important innovation for smugglers was the egg vest. This meant that more parrots could be smuggled with higher survival rates and less risk of detection. If this lowered the price of black market Australian parrots, does the increase in consumer surplus necessarily represent a welfare improvement to society?

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

The opportunity cost for a seller should only include their cash expenses on inputs.

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

The producer surplus in a market is the area above the price plus the area below the demand curve.

Producer surplus measures the cost to sellers of participating in a market.

When markets fail, public policy can:

Graph 7-2 -Refer to Graph 7-2. At the higher price P₂, consumer surplus is:

We can say that the allocation of resources is efficient if: