Question 1

Cost is a measure of the

Accepted Answer

A)   seller's willingness to sell.
B)   seller's producer surplus.
C)   producer shortage.
D)   seller's willingness to buy.E) All of the above
F) None of the above

Question 2

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?

Accepted Answer

Since the demand curve represents the ma...

Question 3

Producer surplus tends to be large when

Accepted Answer

A)   supply is price elastic.
B)   demand is price elastic.
C)   supply is price inelastic.
D)   demand is price inelastic.E) A) and C)
F) B) and D)

Question 4

An increase in the price of a good along a stationary demand curve

Accepted Answer

A)   improves the material welfare of the buyers.
B)   decreases consumer surplus.
C)   improves market efficiency.
D)   increases consumer surplus.E) B) and C)
F) A) and D)

Question 5

Total surplus is the area

Accepted Answer

A)   above the supply curve and below the price.
B)   below the demand curve and above the price.
C)   below the demand curve and above the supply curve.
D)   below the supply curve and above the price.
E)   above the demand curve and below the price.F) All of the above
G) A) and D)

Question 6

If a buyer's willingness to pay for a new Honda is €20,000 and she is able to actually buy it for €18,000, her consumer surplus is

Accepted Answer

A)   €0.
B)   €2,000.
C)   €18,000.
D)   €20,000.
E)   €38,000.F) A) and E)
G) B) and E)

Question 7

A competitive market outcome

Accepted Answer

A)   maximizes total surplus.
B)   generates equality among the members of society.
C)   minimizes total surplus.
D)   both maximizes total surplus and generates equality among the members of society.E) None of the above
F) All of the above

Question 8

What is the relationship between the cost to sellers and the supply curve?

Accepted Answer

Because the supply curve shows...

Question 9

Consumer surplus is a good measure of buyers' benefits if buyers are rational.

Accepted Answer

A) True 
 B)False

Question 10

Given the following two equations:
1) Total Surplus = Consumer Surplus + Producer Surplus
2) Total Surplus = Value to Buyers - Cost to Sellers
Show how equation (1) can be used to derive equation (2).

Accepted Answer

Start with the equation: Total Surplus =...

Question 11

This table refers to five possible buyers' willingness to pay for a take-away meal. ?
  Buyer  Willingness To  Pay  David €8.50 Laura €7.00 Megan €5.50 Mallory €4.00 Audrey €3.50\begin{array}{|l|l|}\hline 	ext { Buyer } & \begin{array}{l}	ext { Willingness To } \	ext { Pay }\end{array} \\hline 	ext { David } & € 8.50 \\hline 	ext { Laura } & € 7.00 \\hline 	ext { Megan } & € 5.50 \\hline 	ext { Mallory } & € 4.00 \\hline 	ext { Audrey } & € 3.50 \\hline\end{array} Buyer  David  Laura  Megan  Mallory  Audrey ​ Willingness To  Pay ​€8.50€7.00€5.50€4.00€3.50​​ 
Refer to the table above. If the price of a take-away meal is €6.90, who will purchase the good?
?

Accepted Answer

A)   all five individuals
B)   Megan, Mallory and Audrey
C)   David, Laura and Megan
D)   David and Laura E) A) and B)
F) A) and C)

Question 12

If buyers are irrational then:

Accepted Answer

A)   free market solutions are inefficient.
B)   free market solutions maximize total surplus.
C)   all of these answers.
D)   free market solutions are equitable.E) B) and D)
F) B) and C)

Question 13

If a market is efficient, then

Accepted Answer

A)   the market allocates buyers to the sellers who can produce the good at least cost.
B)   all of these answers.
C)   the quantity produced in the market maximizes the sum of consumer and producer surplus.
D)   the market allocates output to the buyers that value it the most.E) A) and D)
F) B) and D)

Question 14

Consumer surplus is the buyer's willingness to pay minus the seller's cost.

Accepted Answer

A) True 
 B)False

Question 15

If you had been willing to pay €2.19 for the litre of milk purchased at the supermarket but were required to pay only €1.29, you have gained

Accepted Answer

A)   a refund of €0.90 from the cashier.
B)   a consumer surplus amounting to €0.90.
C)   excess marginal benefit of €2.19.
D)   producer surplus of €0.90.E) A) and B)
F) A) and C)

Question 16

Welfare economics is the study of

Accepted Answer

A)   the well-being of less fortunate people.
B)   welfare programs in the United States.
C)   how the allocation of resources affects economic well-being.
D)   the effect of income redistribution on work effort.E) A) and B)
F) A) and C)

Exam 7: Consumers, Producers and the Efficiency of Markets

An increase in the price of a good along a stationary demand curve

Correct Answer
verified

Producer surplus tends to be large when

Correct Answer
verified

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?

Correct Answer
verified
Since the demand curve represents the ma...
View Answer

Total surplus is the area

Correct Answer
verified

Welfare economics is the study of

Correct Answer
verified

Correct Answer
verified

If you had been willing to pay €2.19 for the litre of milk purchased at the supermarket but were required to pay only €1.29, you have gained

Correct Answer
verified

What is the relationship between the cost to sellers and the supply curve?

Correct Answer
verified
Because the supply curve shows...
View Answer

Consumer surplus is the buyer's willingness to pay minus the seller's cost.

Correct Answer
verified

If a market is efficient, then

Correct Answer
verified

A competitive market outcome

Correct Answer
verified

Cost is a measure of the

Correct Answer
verified

Given the following two equations: 1) Total Surplus = Consumer Surplus + Producer Surplus 2) Total Surplus = Value to Buyers - Cost to Sellers Show how equation (1) can be used to derive equation (2).

Correct Answer
verified
Start with the equation: Total Surplus =...
View Answer

If a buyer's willingness to pay for a new Honda is €20,000 and she is able to actually buy it for €18,000, her consumer surplus is

Correct Answer
verified

If buyers are irrational then:

Correct Answer
verified

Consumer surplus is a good measure of buyers' benefits if buyers are rational.

Correct Answer
verified

Exam 7: Consumers, Producers and the Efficiency of Markets

An increase in the price of a good along a stationary demand curve

Correct AnswerverifiedShow Answer

Producer surplus tends to be large when

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedSince the demand curve represents the ma...View AnswerShow Answer

Total surplus is the area

Correct AnswerverifiedShow Answer

Welfare economics is the study of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If you had been willing to pay €2.19 for the litre of milk purchased at the supermarket but were required to pay only €1.29, you have gained

Correct AnswerverifiedShow Answer

What is the relationship between the cost to sellers and the supply curve?

Correct AnswerverifiedBecause the supply curve shows...View AnswerShow Answer

Consumer surplus is the buyer's willingness to pay minus the seller's cost.

Correct AnswerverifiedShow Answer

If a market is efficient, then

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A competitive market outcome

Correct AnswerverifiedShow Answer

Cost is a measure of the

Correct AnswerverifiedShow Answer

Given the following two equations: 1) Total Surplus = Consumer Surplus + Producer Surplus 2) Total Surplus = Value to Buyers - Cost to Sellers Show how equation (1) can be used to derive equation (2).

Correct AnswerverifiedStart with the equation: Total Surplus =...View AnswerShow Answer

If a buyer's willingness to pay for a new Honda is €20,000 and she is able to actually buy it for €18,000, her consumer surplus is

Correct AnswerverifiedShow Answer

If buyers are irrational then:

Correct AnswerverifiedShow Answer

Consumer surplus is a good measure of buyers' benefits if buyers are rational.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Since the demand curve represents the ma...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Because the supply curve shows...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Start with the equation: Total Surplus =...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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