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1. Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?
a.
profits and costs to firms
b.
consumer and producer surplus
c.
the equilibrium price and quantity
d.
incomes of and prices paid by buyers
2. Economists typically measure efficiency using
a.
the price paid by buyers.
b.
the quantity supplied by sellers.
c.
total surplus.
d.
profits to firms.
3. Consumer surplus equals the
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.
4. Producer surplus equals the
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.
5. Total surplus
a.
can be used to measure a market’s efficiency.
b.
is the sum of consumer and producer surplus.
c.
is the value to buyers minus the cost to sellers.
d.
All of the above are correct.
6. Total surplus is
a.
the total cost to sellers of providing the good minus the total value of the good to buyers.
b.
the total value of the good to buyers minus the cost to sellers of providing the good.
c.
the difference between consumer surplus and sellers’ cost.
d.
always smaller than producer surplus.
7. Total surplus is
a.
equal to consumer surplus minus producer surplus.
b.
equal to the total value to buyers minus the total cost to sellers.
c.
equal to consumers' willingness to pay plus producers’ cost.
d.
greater than the sum of consumer surplus plus producer surplus.
8. Total surplus is equal to
a.
value to buyers - profit to sellers.
b.
value to buyers - cost to sellers.
c.
consumer surplus x producer surplus.
d.
(consumer surplus + producer surplus) x equilibrium quantity.
9. Total surplus in a market is equal to
a.
value to buyers - amount paid by buyers.
b.
amount received by sellers - costs of sellers.
c.
value to buyers - costs of sellers.
d.
amount received by sellers - amount paid by buyers.
10. Total surplus in a market is equal to
a.
consumer surplus + producer surplus.
b.
value to buyers - amount paid by buyers.
c.
amount received by sellers - costs of sellers.
d.
producer surplus - consumer surplus.
11. Total surplus is represented by the area
a.
under the demand curve and above the price.
b.
above the supply curve and up to the price.
c.
under the supply curve and up to the price.
d.
between the demand and supply curves up to the point of equilibrium.
12. Total surplus is represented by the area below the
a.
demand curve and above the price.
b.
price and up to the point of equilibrium.
c.
demand curve and above the supply curve, up to the equilibrium quantity.
d.
demand curve and above the horizontal axis, up to the equilibrium quantity.
13. Which of the following is correct?
a.
Consumer surplus refers to a situation in which there are more buyers than sellers in a market.
b.
Producer surplus refers to a situation in which there are more sellers than buyers in a market.
c.
Total surplus is measured as the area below the demand curve and above the supply curve, up to the
equilibrium quantity.
d.
All of the above are correct.
14. We can say that the allocation of resources is efficient if
a.
producer surplus is maximized.
b.
consumer surplus is maximized.
c.
total surplus is maximized.
d.
sellers’ costs are minimized.
15. Efficiency in a market is achieved when
a.
a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and
sellers' costs.
b.
the sum of producer surplus and consumer surplus is maximized.
c.
all firms are producing the good at the same low cost per unit.
d.
no buyer is willing to pay more than the equilibrium price for any unit of the good.
16. At the equilibrium price of a good, the good will be purchased by those buyers who
a.
value the good more than price.
b.
value the good less than price.
c.
have the money to buy the good.
d.
consider the good a necessity.
17. At the equilibrium price of a good, the good will be sold by those sellers
a.
whose cost is more than price.
b.
whose cost is less than price.
c.
that can produce the good.
d.
enter the market first.
18. Which of the following statements is not correct about a market in equilibrium?
a.
The price determines which buyers and which sellers participate in the market.
b.
Those buyers who value the good more than the price choose to buy the good.
c.
Those sellers whose costs are less than the price choose to produce and sell the good.
d.
Consumer surplus will be equal to producer surplus.
19. Efficiency is attained when
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.
20. The distinction between efficiency and equality can be described as follows:
a.
Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing
the gains from trade among buyers and sellers.
b.
Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade
among buyers and sellers.
c.
Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least
possible cost.
d.
Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among
members of society.
21. If an allocation of resources is efficient, then
a.
consumer surplus is maximized.
b.
producer surplus is maximized.
c.
all potential gains from trade among buyers are sellers are being realized.
d.
the allocation achieves equality as well.
22. Moving production from a high-cost producer to a low-cost producer will
a.
lower total surplus.
b.
raise total surplus.
c.
lower producer surplus.
d.
raise producer surplus but lower consumer surplus.
23. Which of the following is correct?
a.
Efficiency deals with the size of the economic pie, and equality deals with how fairly the pie is sliced.
b.
Equality can be judged on positive grounds whereas efficiency requires normative judgments.
c.
Efficiency is more difficult to evaluate than equality.
d.
Equality and efficiency are both maximized in a society when total surplus is maximized.
Table 7-16
Price
Quantity
Demanded
Quantity
Supplied
$12.00
0
36
$10.00
3
30
$ 8.00
6
24
$ 6.00
9
18
$ 4.00
12
12
$ 2.00
15
6
$ 0.00
18
0
24. Refer to Table 7-16. The equilibrium price is
a.
$10.00.
b.
$8.00.
c.
$6.00.
d.
$4.00.
25. Refer to Table 7-16. At a price of $2.00, total surplus is
a.
larger than it would be at the equilibrium price.
b.
smaller than it would be at the equilibrium price.
c.
the same as it would be at the equilibrium price.
d.
There is insufficient information to make this determination.
26. Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus
is
a.
$24.
b.
$36.
c.
$42.
d.
$48.
27. Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. At equilibrium, producer surplus
is
a.
$24.
b.
$32.
c.
$48.
d.
$64.
28. Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. At equilibrium, total surplus is
a.
$44.
b.
$56.
c.
$72.
d.
$96.
29. Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units
are bought and sold, consumer surplus will be
a.
$21.
b.
$28.
c.
$36.
d.
$42.
30. Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units
are bought and sold, producer surplus will be
a.
$16.
b.
$18.
c.
$24.
d.
$26.
31. Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units
are bought and sold, total surplus will be
a.
$42.
b.
$48.
c.
$54.
d.
$60.
32. Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. If 6 units are bought and sold,
then total surplus is
a.
$18 lower than it would be if the equilibrium number of units were bought and sold.
b.
$22 lower than it would be if the equilibrium number of units were bought and sold.
c.
$26 lower than it would be if the equilibrium number of units were bought and sold.
d.
$6 higher than it would be if the equilibrium number of units were bought and sold.
Figure 7-18
33. Refer to Figure 7-18. Suppose the willingness to pay of the marginal buyer of the 3rd unit is $125. Then total surplus
is maximized if
a.
1 unit of the good is produced and sold.
b.
2 units of the good are produced and sold.
c.
3 units of the good are produced and sold.
d.
4 units of the good are produced and sold.
34. Refer to Figure 7-18. If total surplus is $240 and consumer surplus is
a.
$100, then the price of the good is $130.
b.
$130, then the price of the good is $120.
c.
$160, then the price of the good is $100.
d.
$120, then the price of the good is $90.
35. Refer to Figure 7-18. Total surplus amounts to $500 if consumer surplus amounts to
a.
$290 and if the price of the good is $150.
b.
$300 and if the price of the good is $130.
c.
$275 and if the price of the good is $160.
d.
$400 and if the price of the good is $100.
Figure 7-19
36. Refer to Figure 7-19. At the equilibrium price, consumer surplus is
a.
$100.
b.
$200.
c.
$50.
d.
$450.
37. Refer to Figure 7-19. At the equilibrium price, producer surplus is
a.
$300.
b.
$150.
c.
$450.
d.
$125.
38. Refer to Figure 7-19. At the equilibrium price, total surplus is
a.
$125.
b.
$450.
c.
$250.
d.
$500.
39. Refer to Figure 7-19. If the government imposes a price ceiling of $55 in this market, then total surplus will be
a.
$187.50.
b.
$125.00.
c.
$250.00.
d.
$266.67.
40. Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be
a.
$100.00 higher than it would be without the price floor.
b.
$50.00 lower than it would be without the price floor.
c.
$125.00 lower than it would be without the price floor.
d.
$62.50 lower than it would be without the price floor.
41. Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be
a.
$137.50.
b.
$125.00.
c.
$187.50.
d.
$275.00.
42. Refer to Figure 7-20. Total surplus can be measured as the area
a.
JNK.
b.
JNML.
c.
JRL.
d.
JNL.
43. Refer to Figure 7-20. For quantities less than M, the value to the marginal buyer is
a.
greater than the cost to the marginal seller, so increasing the quantity increases total surplus.
b.
less than the cost to the marginal seller, so increasing the quantity increases total surplus.
c.
greater than the cost to the marginal seller, so decreasing the quantity increases total surplus.
d.
less than the cost to the marginal seller, so decreasing the quantity increases total surplus.
44. Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer is
a.
greater than the cost to the marginal seller, so increasing the quantity increases total surplus.
b.
less than the cost to the marginal seller, so increasing the quantity increases total surplus.
c.
greater than the cost to the marginal seller, so decreasing the quantity increases total surplus.
d.
less than the cost to the marginal seller, so decreasing the quantity increases total surplus.
Figure 7-21
45. Refer to Figure 7-21. Which area represents consumer surplus when the price is P1?
a.
A
b.
B
c.
C
d.
D
46. Refer to Figure 7-21. When the price is P1, area B represents
a.
total surplus.
b.
producer surplus.
c.
consumer surplus.
d.
profits.
47. Refer to Figure 7-21. Which area represents producer surplus when the price is P1?
a.
A
b.
B
c.
C
d.
D
48. Refer to Figure 7-21. When the price is P1, area C represents
a.
total benefit.
b.
producer surplus.
c.
consumer surplus.
d.
None of the above is correct.
49. Refer to Figure 7-21. When the price is P1, area A represents
a.
total benefit.
b.
producer surplus.
c.
consumer surplus.
d.
None of the above is correct.
CUSTOM ID:
049.07.3 - MC - MANK08
50. Refer to Figure 7-21. When the price is P1, area B+C represents
a.
total surplus.
b.
producer surplus.
c.
consumer surplus.
d.
None of the above is correct.
51. Refer to Figure 7-21. Which area represents total surplus in the market when the price is P1?
a.
A+B
b.
B+C
c.
C+D
d.
A+B+C+D
52. Refer to Figure 7-22. At the equilibrium price, consumer surplus is
a.
$1,000.
b.
$2,000.
c.
$3,500.
d.
$500.
53. Refer to Figure 7-22. If the price decreases from $80 to $70 due to a shift in the supply curve, consumer surplus
increases by
a.
$250.
b.
$750.
c.
$1000.
d.
$500.
54. Refer to Figure 7-22. At the equilibrium price, producer surplus is
a.
$5,000.
b.
$2,500.
c.
$3,500.
d.
$1,750.
55. Refer to Figure 7-22. At the equilibrium price, total surplus is
a.
$2,500.
b.
$1,000.
c.
$3,500.
d.
$7,000.
56. Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The
increase in producer surplus due to new producers entering the market would be
a.
$400.
b.
$800.
c.
$1,200.
d.
$900.
57. Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The
increase in producer surplus to producers already in the market would be
a.
$1,600.
b.
$600.
c.
$800.
d.
$1,200.
58. Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The
increase in producer surplus would be
a.
$2,500.
b.
$900.
c.
$800.
d.
$1,600.
59. Refer to Figure 7-22. The efficient price is
a.
$80, and the efficient quantity is 50.
b.
$70, and the efficient quantity is 60.
c.
$70, and the efficient quantity is 100.
d.
$50, and the efficient quantity is 60.
60. Refer to Figure 7-22. If 110 units of the good are bought and sold, then
a.
the marginal cost to sellers is equal to the marginal value to buyers.
b.
the marginal value to buyers is greater than the marginal cost to sellers.
c.
the marginal cost to buyers is greater than marginal value to sellers.
d.
producer surplus is greater than consumer surplus.
61. Refer to Figure 7-22. If 40 units of the good are bought and sold, then
a.
the marginal cost to sellers is equal to the marginal value to buyers.
b.
the marginal value to buyers is greater than the marginal cost to sellers.
c.
the marginal cost to sellers is greater than the marginal value to buyers.
d.
producer surplus would be greater than consumer surplus.
Figure 7-23
62. Refer to Figure 7-23. The equilibrium price is
a.
P1.
b.
P2.
c.
P3.
d.
P4.
63. Refer to Figure 7-23. At equilibrium, consumer surplus is represented by the area
a.
A.
