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

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Question 241

Multiple Choice

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Figure 7-24 -Refer to Figure 7-24. At equilibrium, producer surplus is measured by the area

A) ABD.
B) ABF.
C) CDI.
D) BDF.

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

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Question 242

Multiple Choice

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Figure 7-13 -Refer to Figure 7-13. If the equilibrium price rises from $60 to $120, what is the producer surplus to new producer s in the market?

A) $1,200
B) $2,400
C) $3,600
D) $4,800

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

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Question 243

Multiple Choice

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If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must have been

Figure 7-16 -Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to

Total surplus in a market will increase when the government

Consumer surplus

Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is

Consumer surplus in a market can be represented by the

Table 7-7 -Refer to Table 7-7. You have four essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You offer to sell the tickets for $400. How many tickets do you sell, and what is the total consumer surplus in the market?

For any given quantity, the price on a demand curve represents the marginal buyer's willingness to pay.

Which of the following is true when the price of a good or service rises?

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

Total surplus measures the

Table 7-5 For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. -Refer to Table 7-5. Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40?

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software?

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to How much total consumer surplus goes to new consumers who enter the market after the supply curve shifts?

Answer each of the following questions about demand and consumer surplus. a. What is consumer surplus, and how is it measured? b. What is the relationship between the demand curve and the willingness to pay? c. Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve. d. In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve, what else must be considered to determine consumer surplus?

Which of the following statements is not correct about a market in equilibrium?

Figure 7-23 -Refer to Figure 7-23. If the price were P1, producer surplus would be represented by the area

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 $40 each, then what is the total consumer surplus in the market?