Question 1

Graph 7-3 
-Refer to Graph 7-3.When the price falls from P₂ to P₁, which of the following is NOT true?

Accepted Answer

A)  the sellers who still sell the good are worse off because they now receive less
B)  some sellers leave the market because they are not willing to sell the good at the lower price
C)  the total cost of what is now sold by sellers is actually higher
D)  all of the above are correctE) None of the above
F) A) and B)

Question 2

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

Accepted Answer

A)  A
B)  B
C)  A + B
D)  A + B + CE) All of the above
F) B) and C)

Question 3

A group of people are bidding on an internet auction for a used car.Each bidder will not bid more than a maximum amount that is unique to them.This maximum is called:

Accepted Answer

A)  a strategic price
B)  willingness to pay
C)  consumer surplus
D)  price elasticity of demandE) A) and B)
F) A) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Efficiency is related to the size of the economic pie, whereas equity is related to how the pie gets sliced and distributed.

Accepted Answer

A) True 
 B)False

Question 6

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Accepted Answer

A) True 
 B)False

Question 7

Graph 7-3 
-According to Graph 7-3, at the price P₁, producer surplus is:

Accepted Answer

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

Question 8

Market power refers to the:

Accepted Answer

A)  company that generates electricity to firms
B)  buyers and sellers being price takers
C)  ability of to influence price
D)  market situation that only ever happens with a monopoly sellerE) A) and B)
F) C) and D)

Question 9

How does producer surplus differ from the market price?

Accepted Answer

Producer surplus is the measure of the b...

Question 10

Peter owns a sawmill and produces timber for construction.He sells the timber for $250 per cubic metre.His production costs are $90 per cubic metre.His producer surplus is:

Accepted Answer

A)  $250 per cubic metre
B)  $90 per cubic metre
C)  $160 per cubic metre
D)  none of the aboveE) All of the above
F) A) and D)

Question 11

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

Question 12

Graph 7-3 
-According to Graph 7-3, when the price falls from P₂ to P₁, producer surplus:

Accepted Answer

A)  decreases by an amount equal to A
B)  decreases by an amount equal to A + C
C)  decreases by an amount equal to A + B
D)  increases by an amount equal to A + BE) None of the above
F) B) and D)

Question 13

A supply curve provides a graphical measure of a producer's true willingness to sell.

Accepted Answer

A) True 
 B)False

Question 14

Total surplus in a market can be measured as the area below the supply curve and the area above the demand curve.

Accepted Answer

A) True 
 B)False

Question 15

Lee is willing and able to pay $250 for an iPhone but is able to buy it for $199.Lee's consumer surplus is:

Accepted Answer

A)  $0
B)  $51
C)  $199
D)  $250E) All of the above
F) A) and B)

Question 16

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

Accepted Answer

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

Question 17

Out-of-pocket expenses plus the value of the seller's own resources used in production are considered to be:

Accepted Answer

A)  the seller's total revenue
B)  the seller's consumer surplus
C)  producer surplus
D)  the cost of productionE) A) and B)
F) A) and C)

Question 18

Sharon is bidding on a new camera on an internet auction.She values the camera at $700 and wins the auction with a bid of $650, therefore:

Accepted Answer

A)  Sharon's willingness to pay is $700 and her consumer surplus is 0
B)  Sharon's willingness to pay is $700 and her consumer surplus is $50
C)  Sharon's willingness to pay is $650 and her consumer surplus is $50
D)  Sharon's willingness to pay is $650 and her consumer surplus is $0E) A) and D)
F) A) and C)

Question 19

Laissez-faire is a French expression that literally means 'let the market fare well'.

Accepted Answer

A) True 
 B)False

Question 20

The tools of consumer surplus and producer surplus enables us to determine whether free-market allocation of resources is desirable.

Accepted Answer

A) True 
 B)False

Exam 7: Consumers, Producers and the Efficiency of Markets

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

Correct AnswerverifiedShow Answer

Peter owns a sawmill and produces timber for construction.He sells the timber for $250 per cubic metre.His production costs are $90 per cubic metre.His producer surplus is:

Correct AnswerverifiedShow Answer

How does producer surplus differ from the market price?

Correct AnswerverifiedProducer surplus is the measure of the b...View AnswerShow Answer

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

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Sharon is bidding on a new camera on an internet auction.She values the camera at $700 and wins the auction with a bid of $650, therefore:

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Lee is willing and able to pay $250 for an iPhone but is able to buy it for $199.Lee's consumer surplus is:

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A supply curve provides a graphical measure of a producer's true willingness to sell.

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Market power refers to the:

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Efficiency is related to the size of the economic pie, whereas equity is related to how the pie gets sliced and distributed.

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Out-of-pocket expenses plus the value of the seller's own resources used in production are considered to be:

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Graph 7-3 -According to Graph 7-3, at the price P₁, producer surplus is:

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A consumer's willingness to pay measures:

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Graph 7-3 -Refer to Graph 7-3.When the price falls from P₂ to P₁, which of the following is NOT true?

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Graph 7-3 -According to Graph 7-3, when the price falls from P₂ to P₁, producer surplus:

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Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

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The tools of consumer surplus and producer surplus enables us to determine whether free-market allocation of resources is desirable.

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A group of people are bidding on an internet auction for a used car.Each bidder will not bid more than a maximum amount that is unique to them.This maximum is called:

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

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Laissez-faire is a French expression that literally means 'let the market fare well'.

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Total surplus in a market can be measured as the area below the supply curve and the area above the demand curve.

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Producer surplus is the measure of the b...
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