Question 1

Figure 7-23 
-Refer to Figure 7-23. The efficient price-quantity combination is

Accepted Answer

A)  P1 and Q1.
B)  P2 and Q2.
C)  P3 and Q1.
D)  P4 and 0.E) B) and C)
F) C) and D)

Question 2

The marginal seller is the seller

Accepted Answer

A)  for whom the marginal cost of producing one more unit of output is the lowest among all sellers, and the marginal buyer is the buyer for whom the marginal benefit of one more unit of the good is the highest among all buyers.
B)  who supplies the smallest quantity of the good among all sellers, and the marginal buyer is the buyer who demands the smallest quantity of the good among all buyers.
C)  who would leave the market first if the price were any lower, and the marginal buyer is the buyer who would leave the market first if the price were any higher.
D)  who has the largest producer surplus, and the marginal buyer is the buyer who has the largest consumer surplus.E) A) and B)
F) B) and C)

Question 3

Figure 7-21 
-Refer to Figure 7-21. Which area represents producer surplus when the price is P1?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) All of the above
F) A) and B)

Question 4

The "invisible hand" refers to

Accepted Answer

A)  the marketplace guiding the self-interests of market participants into promoting general economic well-being.
B)  the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient.
C)  the equality that results from market forces allocating the goods produced in the market.
D)  the automatic maximization of consumer surplus in free markets.E) A) and C)
F) All of the above

Question 5

The cost of production plus producer surplus is the price a seller is paid.

Accepted Answer

A) True 
 B)False

Question 6

Producer surplus directly measures

Accepted Answer

A)  the well-being of sellers.
B)  production costs.
C)  excess demand.
D)  unsold inventories.E) All of the above
F) A) and B)

Question 7

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6,

Accepted Answer

A)  the resulting increase in consumer surplus would be larger than any possible loss of producer surplus.
B)  the resulting increase in consumer surplus would be smaller than any possible loss of producer surplus.
C)  any possible increase in producer surplus would be larger than the loss of consumer surplus.
D)  any possible increase in producer surplus would be smaller than the loss of consumer surplus.E) A) and D)
F) None of the above

Question 8

Table 7-10
The following table represents the costs of five possible sellers. 
-Refer to Table 7-10. If the market price is $1,000, the producer surplus in the market is

Accepted Answer

A)  $1000.
B)  $300.
C)  $1,700.
D)  $700.E) None of the above
F) A) and B)

Question 9

Table 7-16 
-Refer to Table 7-16. The equilibrium price is

Accepted Answer

A)  $10.00.
B)  $8.00.
C)  $6.00.
D)  $4.00.E) None of the above
F) A) and B)

Question 10

Scenario 7-1
Suppose market demand is given by the equation 
-Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Accepted Answer

The consumers enteri...

Question 11

Figure 7-21 
-Refer to Figure 7-21. When the price is P1, area C represents

Accepted Answer

A)  total benefit.
B)  producer surplus.
C)  consumer surplus.
D)  None of the above is correct.E) None of the above
F) A) and D)

Question 12

Figure 7-15 
-Refer to Figure 7-15. Area A represents

Accepted Answer

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

Question 13

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

A) True 
 B)False

Question 14

When markets fail, public policy can

Accepted Answer

A)  do nothing to improve the situation.
B)  potentially remedy the problem and increase economic efficiency.
C)  always remedy the problem and increase economic efficiency.
D)  in theory, remedy the problem, but in practice, public policy has proven to be ineffective.E) B) and C)
F) C) and D)

Question 15

Consumer surplus equals the

Accepted Answer

A)  value to buyers minus the amount paid by buyers.
B)  value to buyers minus the cost to sellers.
C)  amount received by sellers minus the cost to sellers.
D)  amount received by sellers minus the amount paid by buyers.E) B) and D)
F) A) and B)

Question 16

If the government imposes a binding price floor in a market, then the consumer surplus in that market will decrease.

Accepted Answer

A) True 
 B)False

Question 17

Efficiency is attained when

Accepted Answer

A)  total surplus is maximized.
B)  producer surplus is maximized.
C)  all resources are being used.
D)  consumer surplus is maximized and producer surplus is minimized.E) B) and D)
F) B) and C)

Question 18

Figure 7-5 
-Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is

Accepted Answer

A)  $16.
B)  $24.
C)  $30.
D)  $36.E) A) and C)
F) A) and B)

Question 19

Figure 7-14 
-Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be

Accepted Answer

A)  $200.
B)  $100.
C)  $125.
D)  $250.E) A) and C)
F) B) and C)

Question 20

Figure 7-3 
-Refer to Figure 7-3. When the price is P1, consumer surplus is

Accepted Answer

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

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

Table 7-16 -Refer to Table 7-16. The equilibrium price is

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Efficiency is attained when

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Figure 7-23 -Refer to Figure 7-23. The efficient price-quantity combination is

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Table 7-10 The following table represents the costs of five possible sellers. -Refer to Table 7-10. If the market price is $1,000, the producer surplus in the market is

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Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

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When markets fail, public policy can

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Total surplus = Value to buyers - Costs to sellers.

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The "invisible hand" refers to

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Figure 7-14 -Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be

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Producer surplus directly measures

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Figure 7-3 -Refer to Figure 7-3. When the price is P1, consumer surplus is

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Consumer surplus equals the

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Figure 7-21 -Refer to Figure 7-21. When the price is P1, area C represents

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Figure 7-15 -Refer to Figure 7-15. Area A represents

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Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6,

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Figure 7-5 -Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is

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Figure 7-21 -Refer to Figure 7-21. Which area represents producer surplus when the price is P1?

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The cost of production plus producer surplus is the price a seller is paid.

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The marginal seller is the seller

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If the government imposes a binding price floor in a market, then the consumer surplus in that market will decrease.

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The consumers enteri...
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