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Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot can offer their hammer for a minimum of $7. Lace Hardware can offer the hammer for a minimum of $10. Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described, if the market price of hammers increased from $8 to $11:


A) total producer surplus would increase to $5.
B) total producer surplus would decrease to $1.
C) total producer surplus would increase to $17.
D) total producer surplus would decrease to $7.

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

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Assume the market was in equilibrium in the graph shown. If the market price were set to $12, which of the following is true? A) For those still interacting in the market, some surplus is transferred from buyer to seller. B) For those still interacting in the market, some surplus is transferred from seller to buyer. C) Producers gain the surplus of those buyers who dropped out of the market. D) Consumers gain the surplus of those sellers who dropped out of the market. Assume the market was in equilibrium in the graph shown. If the market price were set to $12, which of the following is true?


A) For those still interacting in the market, some surplus is transferred from buyer to seller.
B) For those still interacting in the market, some surplus is transferred from seller to buyer.
C) Producers gain the surplus of those buyers who dropped out of the market.
D) Consumers gain the surplus of those sellers who dropped out of the market.

E) A) and D)
F) All of the above

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A

Assume a market that has an equilibrium price of $4. If the market price is set at $8, which of the following is true?


A) Some surplus is transferred from consumers to producers, but total surplus falls.
B) All surplus is transferred from consumers to producers, and total surplus stays the same.
C) Some surplus is transferred from producers to consumers, but total surplus falls.
D) Some surplus is transferred from consumers to producers, causing total surplus to increase.

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

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The concept of surplus can:


A) show the benefits of introducing new markets.
B) show who benefits from a tax.
C) show who loses from minimum wage.
D) show any of these.

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

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D

Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot can offer their hammer for a minimum of $7. Lace Hardware can offer the hammer for a minimum of $10. Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described, if the market price of hammers decreased from $17 to $12:


A) producer participation in the market would increase.
B) producer participation in the market would decrease.
C) producer participation in the market would not be affected.
D) total producer surplus would remain unchanged.

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

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Assume the market is in equilibrium in the graph shown at demand D and supply S<sub>2</sub>. If the supply curve shifts to S<sub>1</sub>, and a new equilibrium is reached, which of the following is true? A) Producer surplus would increase, and total surplus would increase. B) Producer surplus would decrease, and total surplus would increase. C) Producer surplus would increase, and total surplus would decrease. D) Producer surplus would decrease, and total surplus would decrease. Assume the market is in equilibrium in the graph shown at demand D and supply S2. If the supply curve shifts to S1, and a new equilibrium is reached, which of the following is true?


A) Producer surplus would increase, and total surplus would increase.
B) Producer surplus would decrease, and total surplus would increase.
C) Producer surplus would increase, and total surplus would decrease.
D) Producer surplus would decrease, and total surplus would decrease.

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

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Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot can offer their hammer for a minimum of $7. Lace Hardware can offer the hammer for a minimum of $10. Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described, if the market price of hammers increased from $9 to $13:


A) producer surplus would increase for each producer.
B) producer surplus would increase only for House Depot.
C) producer surplus would remain unchanged for Bob's Hardware.
D) producer surplus would increase by $4 for Lace Hardware.

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

Correct Answer

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According to the graph shown, if the market goes from equilibrium to having its price set at $10 then: A) consumer surplus will decrease from (A + B + C) to (B + C) only. B) consumer surplus will increase from (A + B + C) to A only. C) consumer surplus (B + C) will transfer to producers. D) consumer surplus will decrease by (B + C) . According to the graph shown, if the market goes from equilibrium to having its price set at $10 then:


A) consumer surplus will decrease from (A + B + C) to (B + C) only.
B) consumer surplus will increase from (A + B + C) to A only.
C) consumer surplus (B + C) will transfer to producers.
D) consumer surplus will decrease by (B + C) .

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

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Total surplus:


A) is producer and consumer surplus combined.
B) is producer surplus minus consumer surplus.
C) is consumer surplus minus producer surplus.
D) is the total amount spent on a good in a market.

E) All of the above
F) A) and B)

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Consider the hypothetical supply and demand of Kidneys. Consider the hypothetical supply and demand of Kidneys. Initially, kidneys are exchanged by donations only (price=0) . If the government decides to legalize kidney sales and the market reaches equilibrium, then: A) total surplus increases. B) consumer surplus remains the same. C) producer surplus remains the same. D) a shortage of kidneys will arise. Initially, kidneys are exchanged by donations only (price=0) . If the government decides to legalize kidney sales and the market reaches equilibrium, then:


A) total surplus increases.
B) consumer surplus remains the same.
C) producer surplus remains the same.
D) a shortage of kidneys will arise.

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

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A

When a perfectly competitive, well-functioning market is not in equilibrium:


A) total surplus can be increased by a change in market price.
B) the market is not efficient.
C) there are exchanges that can make some better off without someone becoming worse off.
D) All of these are true.

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

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According to the graph shown, if the market is in equilibrium, producer surplus is: A) $30. B) $20. C) $50. D) $60. According to the graph shown, if the market is in equilibrium, producer surplus is:


A) $30.
B) $20.
C) $50.
D) $60.

E) All of the above
F) A) and D)

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According to the graph shown, producer surplus is: A) $36. B) $48. C) $120. D) None of these. According to the graph shown, producer surplus is:


A) $36.
B) $48.
C) $120.
D) None of these.

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

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According to the graph shown, if the market price decreases (all else staying the same) : A) producer surplus would increase. B) producer surplus would decrease. C) total surplus would increase. D) quantity would increase. According to the graph shown, if the market price decreases (all else staying the same) :


A) producer surplus would increase.
B) producer surplus would decrease.
C) total surplus would increase.
D) quantity would increase.

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

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Assume the market in the graph shown with demand D and supply S<sub>1</sub> is in equilibrium at a quantity of 5 units. Total surplus is: A) $5. B) $15. C) $12.50. D) $60. Assume the market in the graph shown with demand D and supply S1 is in equilibrium at a quantity of 5 units. Total surplus is:


A) $5.
B) $15.
C) $12.50.
D) $60.

E) All of the above
F) C) and D)

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Consider the hypothetical supply and demand of Kidneys. Consider the hypothetical supply and demand of Kidneys. Suppose Kidneys cannot be sold, only donated (price is zero) . How many kidneys are donated in this hypothetical situation? A) 0 B) 900 C) 2000 D) 1200 Suppose Kidneys cannot be sold, only donated (price is zero) . How many kidneys are donated in this hypothetical situation?


A) 0
B) 900
C) 2000
D) 1200

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

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The maximum price that a buyer would be willing to pay for a good or service is also called:


A) the reservation price.
B) the buyer-max price.
C) the reserved max price.
D) the opportunity cost.

E) All of the above
F) A) and D)

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Efficient markets:


A) maximize total surplus.
B) can occur without a central planner.
C) occur when a perfectly competitive, well-functioning market is in equilibrium.
D) All of these are true.

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

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Consider the hypothetical supply and demand of Kidneys. Consider the hypothetical supply and demand of Kidneys. Initially, Kidney exchanges are regulated to donations only. This means kidneys can only be exchanged at a price of zero. What is the deadweight loss from this restriction? A) $0 B) $825,000 C) $1,350,000 D) $1200 Initially, Kidney exchanges are regulated to donations only. This means kidneys can only be exchanged at a price of zero. What is the deadweight loss from this restriction?


A) $0
B) $825,000
C) $1,350,000
D) $1200

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

Correct Answer

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Total surplus:


A) can never be zero.
B) can never fall below zero.
C) is always above zero.
D) is less than the consumer surplus.

E) None of the above
F) A) and D)

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