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Page 1
1.
A consumer's willingness to pay reflects:
A)
the maximum price at which he or she would buy the good or service.
B)
the minimum price at which he or she would buy the good or service.
C)
the cost of producing the good or service.
D)
the equilibrium price of the good or service.
2.
A consumer's willingness to pay depends on:
A)
the cost of producing the good or service.
B)
the expected additional benefit of consuming the good or service.
C)
the size of the shortage of the good or service.
D)
the size of the surplus of the good or service.
Use the following to answer questions 3-8:
3.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for
Basketball Sneakers shows each player's willingness to pay for basketball sneakers.
Assume that each player wants to buy at most, one pair of sneakers. If the price of
basketball sneakers is $145, which player will purchase sneakers?
A)
Jamichael
B)
Corey
C)
Rudy
D)
Ray
4.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for
Basketball Sneakers shows each player's willingness to pay for basketball sneakers.
Assume that each player wants to buy at most, one pair of sneakers. If the price of
basketball sneakers is $125, which players will purchase sneakers?
A)
Jamichael and Javon
B)
Jamichael and Corey
C)
Jamichael, Corey, and Rudy
D)
Jamichael, Corey, Rudy, and Ray
Page 2
5.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for
Basketball Sneakers shows each player's willingness to pay for basketball sneakers.
Assume that each player wants to buy at most, one pair of sneakers. If the price of
basketball sneakers is $180, how many pairs will be purchased?
A)
none
B)
one
C)
two
D)
three
6.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for
Basketball Sneakers shows each player's willingness to pay for basketball sneakers.
Assume that each player wants to buy at most, one pair of sneakers. If the price of
basketball sneakers is $130, how many pairs will be purchased?
A)
none
B)
one
C)
two
D)
three
7.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for
Basketball Sneakers shows each player's willingness to pay for basketball sneakers.
Assume that each player wants to buy at most, one pair of sneakers. If the price of
basketball sneakers is $100, how many pairs will be purchased?
A)
one
B)
two
C)
three
D)
four
8.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for
Basketball Sneakers shows each player's willingness to pay for basketball sneakers.
Assume that each player wants to buy at most, one pair of sneakers. If the price of
basketball sneakers is $60, how many pairs will be purchased?
A)
five
B)
four
C)
three
D)
two
9.
Consumers' willingness to pay for a good is used to derive the _____ for that good.
A)
producer surplus
B)
cost of production
C)
supply curve
D)
demand curve
Page 3
10.
The total consumer surplus for good X can be calculated in all ways EXCEPT as:
A)
the sum of the individual consumer surpluses for all buyers of X.
B)
the area below the demand curve for X and above the price of X.
C)
the area bounded by the demand curve for X and the two axes.
D)
the sum, for all buyers of X, of the difference between what each buyer is willing
to pay for X and the amount actually paid.
Use the following to answer questions 11-13:
11.
(Table: Consumer Surplus and Phantom Tickets) The table Consumer Surplus and
Phantom Tickets shows each student's willingness to pay for a Phantom of the Opera
ticket. Assume that each student wants to buy one ticket. If the price of a ticket to see
Phantom of the Opera is $50, then Robert's consumer surplus is:
A)
$60.
B)
$50.
C)
$10.
D)
$240.
12.
(Table: Consumer Surplus and Phantom Tickets) The table shows Consumer Surplus
and Phantom Tickets each student's willingness to pay for a Phantom of the Opera
ticket. Assume that each student wants to buy one ticket. If the box office price of a
ticket to see Phantom of the Opera is $50 and there is no other market for tickets, the
total consumer surplus for the five students is:
A)
$100.
B)
$175.
C)
$230.
D)
$240.
Page 4
13.
(Table: Consumer Surplus and Phantom Tickets) The table Consumer Surplus and
Phantom Tickets shows each student's willingness to pay for a Phantom of the Opera
ticket. Assume that each student wants to buy one ticket. If the box office price of a
ticket to see Phantom of the Opera is $130 and there is no other market for tickets, the
total consumer surplus for the five students is:
A)
$150.
B)
$125.
C)
$20.
D)
$0.
Use the following to answer questions 14-20:
14.
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$50, Lois's consumer surplus is:
A)
$60.
B)
$50.
C)
$15.
D)
$240.
15.
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$50, Narum's consumer surplus is:
A)
$60.
B)
$50.
C)
$15.
D)
$240.
Page 5
16.
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$75, Lois's consumer surplus is:
A)
$25.
B)
$60.
C)
$75.
D)
$100.
17.
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$75, Miguel's consumer surplus is:
A)
$60.
B)
$50.
C)
$15.
D)
$240.
18.
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$50 and there is no other market for tickets, total consumer surplus for the five students
is:
A)
$105.
B)
$130.
C)
$270.
D)
$320.
19.
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$75 and there is no other market for tickets, the total consumer surplus for the five
students is:
A)
$190.
B)
$125.
C)
$40.
D)
$0.
20.
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the tickets to The Nutty Nutcracker are free and there
is no other market for tickets, the total consumer surplus for the five students is:
A)
$0.
B)
$100.
C)
$150.
D)
$320.
Page 6
21.
We can measure total consumer surplus for good X as:
A)
the sum of the individual consumer surpluses for all buyers of X.
B)
the area above the demand curve for X and below the price of X.
C)
the area bounded by the demand curve for X and the two axes.
D)
the area above the supply curve for X.
22.
Consumer surplus for an individual buyer is equal to:
A)
the consumer's willingness to pay for the good minus the marginal cost of
producing the good.
B)
the price of the good minus the marginal cost of producing the good.
C)
the consumer's willingness to pay for the good minus the price of the good.
D)
the marginal cost of the good minus the consumer's willingness to pay for the good.
23.
Consumer surplus can be found by computing the area _____ the _____ curve and
_____ the price.
A)
above; supply ; below
B)
below; supply; above
C)
below; demand; above
D)
below; demand; below
Use the following to answer question 24:
24.
(Table: Music Downloads) Two consumers, Eli and Madison, like to download songs to
their iPhones, and the table Music Downloads represents their willingness to pay for
each downloaded song. If an individual song can be downloaded for $1, what is the total
consumer surplus received by these consumers?
A)
$19.25
B)
$18
C)
$10
D)
$11
Page 7
Use the following to answer question 25:
25.
(Table: Economics Textbooks) The table Economics Textbooks shows how much
money four consumers would be willing to pay for a new economics textbook. If the
price of the textbook is $100, what is the total consumer surplus received by these
consumers?
A)
$125
B)
$500
C)
$100
D)
$75
Use the following to answer question 26:
Figure: Monthly Demand for Ice Cream Cones
Page 8
26.
(Figure: Monthly Demand for Ice Cream Cones) The graph Monthly Demand for Ice
Cream Cones shows one individual's monthly demand for ice cream cones. At $5 per
cone, this individual will consume 10 cones in a month. How much consumer surplus
does this consumer receive?
A)
$100
B)
$50
C)
$150
D)
$500
27.
Ashley bought a new pair of jeans. When she walked out of the store, she thought, “I got
such a great deal; I would have paid $40 more for these jeans!” This best represents the
concept of:
A)
consumer surplus.
B)
producer surplus.
C)
total surplus.
D)
equilibrium.
28.
Mark and Rasheed are at the bookstore buying new calculators for the semester. Mark is
willing to pay $75 and Rasheed is willing to pay $100 for a graphing calculator. The
price for a calculator at the bookstore is $65. How much is their total consumer surplus?
A)
$10
B)
$35
C)
$45
D)
$60
29.
Mark and Rasheed are at the bookstore buying new calculators for the semester. Mark is
willing to pay $75 and Rasheed is willing to pay $100 for a graphing calculator. The
price for a calculator at the bookstore is $65. How much is Mark's individual consumer
surplus?
A)
$10
B)
$25
C)
$35
D)
$75
30.
Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to
pay $90 and Aleiyah is willing to pay $50 for a pair of jeans. If the price of jeans is $59,
how much total consumer surplus is achieved in this market?
A)
$0
B)
$9
C)
$31
D)
$40
Page 9
31.
Consumer surplus is represented by the area _____ the demand curve and _____ the
market price.
A)
above; below
B)
above; above
C)
below; above
D)
below; below
32.
Jeanette is willing to pay $100 for the first pair of shoes, $80 for the second pair, $50 for
the third, and $30 for the fourth. If shoes cost $50, Jeanette will buy _____ pairs of
shoes and her total consumer surplus equals _____.
A)
four; $110
B)
three; $230
C)
three; $80
D)
four; $80
33.
Adie wants to take some online classes this semester. She is willing to pay $1,000 for
the first class, $800 for the second, $700 for the third, and $500 for the fourth. If online
classes cost $750, Adie will take _____ online classes, and her consumer surplus will
equal _____.
A)
three; $350
B)
four; $600
C)
two; $400
D)
two; $300
Page 10
Use the following to answer question 34:
Figure: Wireless Mouse Market
34.
(Figure: Wireless Mouse Market) Use the graph to calculate consumer surplus when the
market is at equilibrium.
A)
$4,000
B)
$5,000
C)
$2,000
D)
$3,000
Use the following to answer question 35:
Figure: Market Demand
Page 11
35.
(Figure: Market Demand) Look at the figure Market Demand. The amount by which the
total benefits to consumers exceed their total expenditure is called _____, and if the
price is B, is depicted by the area _____.
A)
producer surplus; BCD
B)
consumer surplus; 0CDE
C)
consumer surplus; BCD
D)
net benefit; 0BDE
36.
Along a given downward-sloping demand curve, an increase in the price of a good will
_____ consumer surplus.
A)
increase
B)
decrease
C)
not change
D)
The answer cannot be determined without information about the supply curve.
37.
Which situation would most likely cause a DECREASE in consumer surplus in the toy
market?
A)
The cost of shipping increases because of higher oil prices.
B)
Consumer income increases.
C)
There is an unexpected baby boom.
D)
A new assembly line design increases worker productivity.
38.
Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to
pay $90 and Aleiyah is willing to pay $50 for a pair of jeans. What is the gain in total
consumer surplus when the price decreases from $59 to $40?
A)
$10
B)
$29
C)
$31
D)
$60
39.
Some smaller retailers often go out of business when Walmart opens a new store. The
most likely reason for this development is that:
A)
Walmart practices unfair pricing methods that reduce consumer surplus over time.
B)
consumers in those areas receive no consumer surplus from Walmart.
C)
consumers in those areas receive a larger consumer surplus from shopping at
Walmart than from the smaller stores.
D)
smaller stores increase prices to compete.
Page 12
40.
An increase in the consumer surplus in the market for milkshakes may result from a(n)
_____ in the _____ of milkshakes.
A)
increase; price
B)
increase; supply
C)
decrease; demand
D)
decrease; supply
41.
Along a given downward-sloping demand curve, an increase in the price of a good will:
A)
increase consumer surplus.
B)
decrease consumer surplus.
C)
have no effect on consumer surplus.
D)
decrease producer surplus.
42.
Suppose the United States removes sugar quotas and the market price of sugar drops. If
the demand curve for candy bars is downward-sloping, in the candy bar market we
would expect:
A)
the consumer surplus to increase.
B)
the consumer surplus to decrease.
C)
the consumer surplus to be unchanged.
D)
the deadweight loss to increase.
43.
If the demand curve for ice cream is downward-sloping and the supply of it decreases,
there is _____ in consumer surplus.
A)
an increase
B)
a decrease
C)
no change
D)
It's impossible to tell what will happen to consumer surplus.
44.
When there is a bountiful harvest of grapefruit, assuming that the demand curve for
grapefruit is downward-sloping, total consumer surplus in the grapefruit market:
A)
will increase.
B)
will decrease.
C)
will remain the same.
D)
may change, but we can't tell how.
Page 13
45.
Along a given downward-sloping demand curve, a decrease in the price of a good will
_____ consumer surplus.
A)
increase
B)
decrease
C)
have no effect on
D)
It's impossible to tell what will happen to consumer surplus.
46.
Which of the following is most likely to INCREASE consumer surplus in the market for
cotton T-shirts?
A)
Weather provides for a bountiful cotton harvest.
B)
Consumer incomes fall and cotton T-shirts are normal goods.
C)
The price of polyester T-shirts falls.
D)
The price of industrial sewing machines used to produce garments increases.
47.
The number of seats in a football stadium is fixed at 70,000. The team raises the price of
a ticket from $30, at which 70,000 are sold, to $40, and it sells 60,000 tickets. The price
change caused a change in the consumer surplus of:
A)
–$10.
B)
–$650,000
C)
–$100,000
D)
–$10,000
Use the following to answer questions 48-50:
Figure: Market for Hamburgers
Page 14
48.
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the
weekly market for hamburgers in Irvine, Kentucky. If the price of a hamburger is $1 and
200 hamburgers are supplied, producer surplus will equal:
A)
$60.
B)
$65.
C)
$50.
D)
$360.
49.
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the
weekly market for hamburgers in Irvine, Kentucky. If 400 hamburgers are sold,
producer surplus will equal:
A)
$650.
B)
$400.
C)
$510.
D)
$200.
50.
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the
weekly market for hamburgers in Irvine, Kentucky. If the price of burgers falls from
$1.50 to $1.00, there is a loss in producer surplus. How much of the loss accrues
because of the change in the quantity supplied?
A)
$50
B)
$45
C)
$75
D)
$90
Page 15
Use the following to answer questions 51-53:
Figure: Producer Surplus
51.
(Figure: Producer Surplus) Look at the figure Producer Surplus. When the price falls
from $45 to $35, producer surplus _____ for a total producer surplus of _____.
A)
increases by $10; $140
B)
decreases by $40; $60
C)
increases by $35; $180
D)
decreases by $10; $140
52.
(Figure: Producer Surplus) Look at the figure Producer Surplus. When the price rises
from $25 to $35, producer surplus _____ for a total producer surplus of _____.
A)
increases by $10; $30
B)
decreases by $10; $30
C)
increases by $30; $60
D)
decreases by $35; $100
53.
(Figure: Producer Surplus) Look at the figure Producer Surplus. Total producer surplus
is _____ when the price is $40.
A)
$40
B)
$60
C)
$80
D)
$85
Page 16
Use the following to answer questions 54-57:
Figure: Producer Surplus II
54.
(Figure: Producer Surplus II) Look at the figure Producer Surplus II. At a price of P1,
producer surplus equals the area:
A)
LMK.
B)
P1K0.
C)
P2M0.
D)
P2P1KM.
55.
(Figure: Producer Surplus II) Look at the figure Producer Surplus II. At a price of P2,
producer surplus equals the area:
A)
LMK.
B)
P1K0.
C)
P2M0.
D)
P2P1KM.
56.
(Figure: Producer Surplus II) Look at the figure Producer Surplus II. If the price falls
from P2 to P1, producer surplus decreases by the area:
A)
LMK.
B)
P1K0.
C)
P2M0.
D)
P2P1KM.
Page 17
57.
(Figure: Producer Surplus II) Look at the figure Producer Surplus II. If the price rises
from P1 to P2, producer surplus increases by the area:
A)
LMK.
B)
P1K0.
C)
P2M0.
D)
P2P1KM.
Use the following to answer questions 58-61:
Figure: Producer Surplus III
58.
(Figure: Producer Surplus III) Look at the figure Producer Surplus III. If the price of the
good is $2, producer surplus will equal:
A)
$20.
B)
$40.
C)
$60.
D)
$80.
59.
(Figure: Producer Surplus III) Look at the figure Producer Surplus III. If the price of the
good is $4, producer surplus will equal:
A)
$20.
B)
$40.
C)
$60.
D)
$80.
Page 18
60.
(Figure: Producer Surplus III) Look at the figure Producer Surplus III. If the price of the
good increases from $3 to $4, producer surplus will increase by:
A)
$5.
B)
$15.
C)
$25.
D)
$35.
61.
(Figure: Producer Surplus III) Look at the figure Producer Surplus III. If the price of the
good decreases from $2 to $1, producer surplus will decrease by:
A)
$5.
B)
$15.
C)
$25.
D)
$35.
62.
Anna is willing to sell her 20-year-old boat, but not for less than $2,300. For Anna, the
cost of selling this boat is _____ $2,300.
A)
more than
B)
less than
C)
equal to
D)
There is not enough information to answer the question.
Use the following to answer questions 63-66:
63.
(Table: Producer Surplus and Phantom Tickets) The table Producer Surplus and
Phantom Tickets shows the minimum price at which each of the students is willing to
sell a ticket to Phantom of the Opera. Assume that each student has only one ticket to
sell. If the price for Phantom tickets is $55, which student has the highest individual
producer surplus?
A)
Tim
B)
Laura
C)
Rick
D)
Ralph
Page 19
64.
(Table: Producer Surplus and Phantom Tickets) The table Producer Surplus and
Phantom Tickets shows the minimum price at which each of the students is willing to
sell a ticket to Phantom of the Opera. Assume that each student has only one ticket to
sell. If the price for Phantom tickets is $140 and there is no other market for tickets,
total producer surplus for these five students is:
A)
$139.
B)
$110.
C)
$40.
D)
$379.
65.
(Table: Producer Surplus and Phantom Tickets) The table Producer Surplus and
Phantom Tickets shows the minimum price at which each of the students is willing to
sell a ticket to Phantom of the Opera. Assume that each student has only one ticket to
sell. Given the information in the table, if the price for Phantom tickets is $55, total
producer surplus for the five students is:
A)
$54.
B)
$79.
C)
$84.
D)
$64.
66.
(Table: Producer Surplus and Phantom Tickets) The table Producer Surplus and
Phantom Tickets shows the minimum price at which each of the students is willing to
sell a ticket to Phantom of the Opera. Assume that each student has only one ticket to
sell. Given the information in the table, if these students can sell their Phantom tickets
for only $5, then:
A)
Tim will be the only student not to sell his ticket.
B)
Laura, Whitney, Ralph, and Rick will sell their tickets.
C)
the total producer surplus for the five students will be $4.
D)
the total producer surplus for the five students will be $330.
67.
The total producer surplus in the Wisconsin milk market is:
A)
the sum of the individual producer surpluses in this market.
B)
the sum of all prices paid multiplied by the number of gallons of milk sold.
C)
the total revenue of the milk producers in Wisconsin.
D)
the total cost of selling milk in Wisconsin.
Page 20
68.
The total producer surplus for a good can be calculated in all of the following ways
EXCEPT as:
A)
the sum of the individual producer surpluses for all sellers of the good.
B)
the area below the supply curve for the good up to the quantity of the good sold.
C)
the area above the supply curve and below the price at which the good is being
sold.
D)
the sum, for all sellers of the good, of the difference between what each seller
receives and the minimum amount he or she is willing to accept for selling the
good.
Use the following to answer questions 69-75:
69.
(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to
see The Nutty Nutcracker is $50, then Francisco's producer surplus is:
A)
$0.
B)
$40.
C)
$90.
D)
$240.
70.
(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to
see The Nutty Nutcracker is $50, then Dudley's producer surplus is:
A)
$0.
B)
$25.
C)
$60.
D)
$240.
Page 21
71.
(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to
see The Nutty Nutcracker is $75, then Caitlin's producer surplus is:
A)
$0.
B)
$74.
C)
$75.
D)
$100.
72.
(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to
see The Nutty Nutcracker is $75, then Dudley's producer surplus is:
A)
$15.
B)
$25.
C)
$50.
D)
$240.
73.
(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to
see The Nutty Nutcracker is $50 and there is no other market for tickets, then total
producer surplus for the five students is:
A)
$50.
B)
$74.
C)
$100.
D)
$276.
74.
(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to
see The Nutty Nutcracker is $75 and there is no other market for tickets, the total
producer surplus for the five students is:
A)
$190.
B)
$139.
C)
$75.
D)
$40.
75.
(Table: Producer Surplus) Look at the table Producer Surplus. If the tickets to The Nutty
Nutcracker are free and there is no other market for tickets, the total producer surplus
for the five students is:
A)
$276.
B)
$100.
C)
$74.
D)
$0.
Page 22
76.
We can measure total producer surplus for good X as:
A)
the sum of the individual producer surpluses for all buyers of X.
B)
the area below the supply curve for X and above the price of X.
C)
the area bounded by the supply curve for X and the two axes.
D)
the area between the demand curve for X and the supply curve for X.
Use the following to answer question 77:
Figure: Monthly Supply of Bread
77.
(Figure: Monthly Supply of Bread) The figure Monthly Supply of Bread represents the
monthly supply of bread at a local bakery. At $3 per loaf, the bakery produces 120
loaves per month. The producer surplus received by this bakery is equal to:
A)
$120.
B)
$60.
C)
$360.
D)
$180.
78.
Producer surplus for an individual seller is equal to:
A)
the price of the good minus the cost of producing the good.
B)
the cost of the good minus the willingness to pay for the good.
C)
the willingness to pay for the good minus the price of the good.
D)
the cost of the good minus the price of the good.
79.
Maria wants to get rid of her bookshelf. She is willing to give it away, but her neighbor
offers to pay $30 for it. Maria takes a:
A)
consumer surplus gain.
B)
consumer surplus loss.
C)
producer surplus gain.
D)
producer surplus loss.
Page 23
80.
Producer surplus is represented by the area _____ the supply curve and _____ the price.
A)
above; above
B)
above; below
C)
below; above
D)
below; below
81.
Mountain River Adventures offers whitewater rafting trips down the Colorado River. It
costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third,
and $160 for the fourth. If the market price for a raft trip is $150, Mountain River
Adventures will offer _____ trips per day and will have producer surplus equal to
_____.
A)
three; $90
B)
three; $10
C)
two; $220
D)
four; $80
82.
Luis is willing to sell his pool table for no less than $600, but if he gets $840, the
producer surplus Luis receives is:
A)
$600.
B)
$840.
C)
$240.
D)
$1,440.
Use the following to answer question 83:
Figure: Gain in Producer Surplus
Page 24
83.
(Figure: Gain in Producer Surplus) Look at the figure Gain in Producer Surplus. Which
of the following areas represent producer surplus when the price is equal to P2?
A)
D, E, and F
B)
B and C
C)
D and E
D)
A, B, and C
Use the following to answer question 84:
Figure: Producer Surplus and Supply
84.
(Figure: Producer Surplus and Supply) Look at the figure Producer Surplus and Supply.
The difference between the total revenue received by sellers and their total cost is called
_____ surplus, which is depicted by area _____ if the amount sold is E.
A)
consumer; ABD
B)
producer; 0BDE
C)
net; 0ADE
D)
producer; ABD
85.
Mountain River Adventures offers whitewater rafting trips down the Colorado River. It
costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third,
and $160 for the fourth. If the market price for a raft trip was $120 but has now
increased to $150, the gain in producer surplus is equal to:
A)
$20.
B)
$70.
C)
$80.
D)
$90.
Page 25
86.
Along a given supply curve, an increase in the price of a good will:
A)
increase producer surplus.
B)
decrease producer surplus.
C)
increase consumer surplus.
D)
decrease producer surplus and increase consumer surplus.
87.
Assuming that the supply curve of cupcakes is upward-sloping and demand for
cupcakes decreases, there is a(n) _____ in _____ surplus.
A)
increase; producer
B)
increase; consumer
C)
increase; total
D)
decrease; producer
88.
Along the upward-sloping supply curve for brownies, a decrease in the price of
brownies will:
A)
increase producer surplus.
B)
decrease producer surplus.
C)
increase consumer surplus.
D)
increase producer surplus and consumer surplus.
89.
Peanut butter and jelly are complements in consumption. Assuming that the supply
curve of peanut butter is upward-sloping, if there is a decrease in the price of jelly,
producer surplus in the peanut butter market:
A)
will increase.
B)
will decrease.
C)
will not change.
D)
may change, but it is impossible to tell whether it will increase or decrease.
90.
Equilibrium in the market for peanut butter is disturbed by an increase in the price of
peanuts. Assuming that the supply curve of peanut butter is upward-sloping, producer
surplus in the peanut butter market:
A)
will increase.
B)
will decrease.
C)
will not change.
D)
may change, but we cannot determine the change without more information.
Page 26
91.
If the supply curve of ice cream is upward-sloping and demand for it decreases, there
will be _____ in producer surplus.
A)
an increase
B)
a decrease
C)
no change
D)
It's impossible to tell what will happen to producer surplus.
92.
When a new medical report extols the health advantages of grapefruit, assuming an
upward-sloping supply curve, producer surplus in the grapefruit market:
A)
will increase.
B)
will decrease.
C)
will remain the same.
D)
may change, but we can't tell how.
93.
Along a given upward-sloping supply curve, a decrease in the price of a good will
_____ producer surplus.
A)
increase
B)
decrease
C)
have no effect on
D)
It's impossible to tell what will happen to producer surplus.
94.
If the price of a good rises along an upward-sloping supply curve, then producer
surplus:
A)
will increase.
B)
will decrease.
C)
will remain the same.
D)
may change, but we can't tell how.
95.
Along a given upward-sloping supply curve, a decrease in price will cause producer
surplus to:
A)
increase.
B)
decrease.
C)
stay the same.
D)
We cannot determine what producer surplus will do without information about the
demand curve.
Page 27
96.
If the cost to download a song from the Internet falls from $0.99 to $0.50 along an
upward-sloping supply curve, producer surplus in the market for MP3 players is likely
to:
A)
increase.
B)
decrease.
C)
not change.
D)
We cannot determine what producer surplus will do without information about
consumer surplus.
97.
Total surplus is:
A)
the difference between price and the cost to the seller.
B)
the sum of consumer and producer surplus.
C)
equal to the area below the demand curve.
D)
always more for consumers than producers.
98.
Maximum total surplus in the market for chocolate occurs when:
A)
total net gain to producers is minimized.
B)
all consumers who value chocolate can buy chocolate.
C)
all producers can sell their chocolate.
D)
the market is in equilibrium.
99.
The total surplus in a market is:
A)
the excess supply due to a price above the equilibrium price.
B)
the surplus that accrues when a good is not scarce, defined as the total amount (if
any) by which quantity supplied exceeds quantity demanded at a zero price.
C)
the net benefit to consumers, defined as the excess of consumer surplus over
producer surplus.
D)
the sum of consumer surplus and producer surplus.
Page 28
Use the following to answer question 100:
Figure: The Market for Hamburgers
100.
(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers.
The maximum total surplus for the market is _____, and it occurs at a price equal to
_____.
A)
$550; $1.50
B)
$600; $1.50
C)
$1,050; $2
D)
Not enough information is provided to answer this question, since the maximum
total surplus could occur anywhere.
101.
Suppose you pay $8 to see Tom Cruise in his next movie. Suppose Mr. Cruise receives
$21 million to work in this movie. This means that:
A)
you would have been better off being more self-reliant in the movie market.
B)
Tom Cruise received a producer surplus of $21 million.
C)
you received a consumer surplus of $8.
D)
you and Tom Cruise benefited from this transaction.
102.
Total surplus is:
A)
the sum of consumer and producer surplus.
B)
measured as the area between the supply and demand curves from their beginnings
to their ends.
C)
the total net gain to consumers from trading in the market.
D)
the total net gain to producers from trading in the market.
Page 29
Use the following to answer question 103:
Figure: The Market for Sandwiches
103.
(Figure: The Market for Sandwiches) Look at the figure The Market for Sandwiches. At
the competitive price of $5, 10 sandwiches are sold. At this competitive price, consumer
surplus equals _____ and producer surplus equals _____.
A)
$50; $50
B)
$100; $50
C)
$50; $25
D)
$100; $25
104.
Alex is willing to buy the last ticket to the Billy Bragg concert for $15, while Jake is
willing to pay $25. Alex is first in line and buys a ticket for $15. He then resells his
ticket to Jake for $20. By reselling the ticket instead of going to the concert himself,
Alex caused:
A)
the sum of the consumer and producer surplus to increase.
B)
the sum of the consumer and producer surplus to decrease.
C)
a deadweight loss of $5.
D)
consumer surplus to decrease and producer surplus to increase.
105.
Suppose the equilibrium rent for apartments in Boston is $1,600. If the city of Boston
imposes a price ceiling of $1,200, there will be:
A)
an increase in producer surplus for each landlord.
B)
a surplus of new apartments in Boston.
C)
an increase in consumer surplus for Bostonians who can find apartments for
$1,200.
D)
an increase in total surplus.
Page 30
106.
When a market is in equilibrium and there is no outside intervention to change the
equilibrium price:
A)
total surplus is minimized.
B)
inefficiency is maximized.
C)
no mutually beneficial trades are missed.
D)
some mutually beneficial trades may be missed.
107.
If the market for grapefruit is in equilibrium without any outside intervention to change
the equilibrium price:
A)
total surplus is minimized.
B)
there is some deadweight loss.
C)
a few mutually beneficial trades are missed.
D)
consumer and producer surplus are maximized.
108.
A competitive market for cell phone chargers is in equilibrium. If the price temporarily
falls below the equilibrium price:
A)
producer surplus will rise.
B)
producer surplus will fall.
C)
the change in producer surplus is indeterminate.
D)
there will be no change in producer surplus.
109.
When a market is efficient:
A)
there is no way to make some people better off without making other people worse
off.
B)
consumers who value buying a good the least are the ones who can purchase the
good.
C)
producers whose willingness to accept a price above the market price can sell their
good.
D)
there are ways to make everyone better off.
110.
If the government intervened in the market by lowering the price of a good below the
equilibrium price, which of the following would NOT occur?
A)
Some consumers would receive an increase in consumer surplus.
B)
Producers would likely lose some producer surplus.
C)
The outcome would be efficient.
D)
Total surplus would be lower.
Page 31
111.
Which of the following is a key factor in the effectiveness of well-functioning markets?
A)
outcomes that are equitable for consumers and producers
B)
the role of the government to deliver economic signals to consumers and producers
C)
a significant degree of government intervention to maximize efficiency
D)
your right to use and dispose of your private property as you see fit
112.
Property rights are an important feature of an effective market because they:
A)
lead to the development of government control over prices.
B)
prevent harm to the environment from pollution.
C)
give owners of goods and services the right to use and dispose of those goods and
services as they choose.
D)
are the basis for an equitable tax system.
113.
The lack of property rights and inaccuracy of prices as economic signals often lead to:
A)
too much competition in markets.
B)
an increase in consumer surplus and a decrease in producer surplus.
C)
an increase in total surplus.
D)
market failure.
114.
Market failure refers to a situation in which:
A)
markets fail to reach a fair outcome.
B)
markets establish a high price for necessities.
C)
market-determined wages are not high enough to raise all workers above the
poverty line.
D)
markets fail to reach an efficient outcome.
115.
All of the following are possible reasons for market failure EXCEPT:
A)
monopoly firms.
B)
buyers and sellers not having access to the same information regarding a good or
service.
C)
public goods.
D)
extremely high prices for medical care.
116.
Assume that the supply curve for corn is upward-sloping. In the market for corn, a
primary input in the production of ethanol, total surplus _____ when the price of ethanol
increases.
A)
increases
B)
decreases
C)
does not change
D)
The answer cannot be determined without information about the supply curve.
Page 32
Use the following to answer questions 117-118:
Figure: Gain in Consumer Surplus
117.
(Figure: Gain in Consumer Surplus) Look at the figure Gain in Consumer Surplus.
Identify the area or areas that represent the gain in consumer surplus to consumers
already participating in the market when the price falls from P1 to P2.
A)
A and B
B)
B
C)
B and C
D)
C
118.
(Figure: Gain in Consumer Surplus) Look at the figure Gain in Consumer Surplus.
Identify the area or areas that represent the total change in consumer surplus when the
price falls from P1 to P2.
A)
A and B
B)
B and C
C)
D and E
D)
A, B, and C
Page 33
Use the following to answer questions 119-120:
Figure: The Wireless Mouse Market
119.
(Figure: Wireless Mouse Market) Look at the figure Wireless Mouse Market. Calculate
producer surplus when the market is in equilibrium.
A)
$4,000
B)
$2,000
C)
$8,000
D)
$1,000
120.
(Figure: Wireless Mouse Market) Look at the figure Wireless Mouse Market. Calculate
the change in producer surplus when the price increases from $10 to $15.
A)
$250
B)
$1,000
C)
$625
D)
$1,125
Page 34
Use the following to answer questions 121-122:
Figure: Change in the Total Surplus
121.
(Figure: Change in Total Surplus) Look at the figure Change in Total Surplus. Which of
the following areas represent the change in total surplus when the price falls from P1 to
P2?
A)
A, B, and C
B)
B and C
C)
B, C, D, and E
D)
C and E
122.
(Figure: Change in Total Surplus) Look at the figure Change in Total Surplus. Which of
the following areas represent the change in total surplus when the price falls from P2 to
P3?
A)
A, B, and C
B)
B and C
C)
B, C, D, and E
D)
C and E
Page 35
Use the following to answer questions 123-127:
Figure: Consumer Surplus I
123.
(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. At a price of P1,
consumer surplus equals the area:
A)
ABP2.
B)
AFP1.
C)
AQ30.
D)
P1P2BF.
124.
(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. At a price of P2,
consumer surplus equals the area:
A)
ABP2.
B)
AFP1.
C)
AQ30.
D)
P1P2BF.
125.
(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. If the good is free,
consumer surplus equals the area:
A)
ABP2.
B)
AFP1.
C)
BGF.
D)
AQ30.
Page 36
126.
(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. If the price falls
from P2 to P1, consumer surplus increases by the area:
A)
ABP2.
B)
AFP1.
C)
BGF.
D)
P1P2BF.
127.
(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. If the price rises
from P1 to P2, consumer surplus decreases by the area:
A)
ABP2.
B)
AFP1.
C)
BGF.
D)
P1P2BF.
Use the following to answer questions 128-131:
Figure: Consumer Surplus II
128.
(Figure: Consumer Surplus II) Look at the figure Consumer Surplus II. If the price of
the good is $2, consumer surplus will equal:
A)
$30.
B)
$45.
C)
$60.
D)
$90.
Page 37
129.
(Figure: Consumer Surplus II) Look at the figure Consumer Surplus II. If the price of
the good is $4, consumer surplus will equal:
A)
$5.
B)
$10.
C)
$20.
D)
$40.
130.
(Figure: Consumer Surplus II) Look at the figure Consumer Surplus II. If the price of
the good increases from $3 to $4, consumer surplus will decrease by:
A)
$5.
B)
$10.
C)
$15.
D)
$20.
131.
(Figure: Consumer Surplus II) Look at the figure Consumer Surplus II. If the price of
the good decreases from $2 to $1, consumer surplus will increase by:
A)
$5.
B)
$10.
C)
$25.
D)
$35.
Use the following to answer questions 132-134:
Figure: The Market for Hamburgers
Page 38
132.
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the
weekly market for hamburgers in Tuscaloosa. If the price of a burger is $2, consumer
surplus will equal:
A)
$650.
B)
$400.
C)
$225.
D)
$450.
133.
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the
weekly market for hamburgers in Tuscaloosa. If 400 hamburgers are sold, consumer
surplus will equal:
A)
$650.
B)
$400.
C)
$225.
D)
$450.
134.
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the
weekly market for hamburgers in Tuscaloosa. If the price of a hamburger falls from
$2.00 to $1.50, the gain in consumer surplus to consumers who are persuaded to buy at
the lower price (and who were not buying when the price was $2.00) is equal to:
A)
$100.
B)
$75.
C)
$50.
D)
$25.
Page 39
Use the following to answer questions 135-137:
Figure: Consumer Surplus III
135.
(Figure: Consumer Surplus III) In the figure Consumer Surplus III, when the price falls
from $30 to $25, consumer surplus _____ for a total consumer surplus of _____.
A)
increases by $25; $74
B)
decreases by $15; $34
C)
increases by $15; $64
D)
increases by $5; $54
136.
(Figure: Consumer Surplus III) In the figure Consumer Surplus III, when the price rises
from $30 to $35, consumer surplus _____ for a total consumer surplus of _____.
A)
decreases by $15; $34
B)
increases by $15; $64
C)
increases by $25; $74
D)
decreases by $5; $44
137.
(Figure: Consumer Surplus III) In the figure Consumer Surplus III, total consumer
surplus is _____ when the price is $10.
A)
$50
B)
$59
C)
$124
D)
$144
Page 40
Use the following to answer questions 138-157:
Table: Pumpkin Market
Quantity of
Pumpkins
Andy's
willingness to pay
Ben's willingness
to pay
Cindy's cost
Diane's cost
1st pumpkin
$12
$11
$ 3
$ 4
2nd pumpkin
10
9
5
6
3rd pumpkin
8
7
8
9
4th pumpkin
6
5
10
11
138.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is:
A)
$12.
B)
$10.
C)
$8.
D)
$6.
139.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium quantity of pumpkins is:
A)
two.
B)
three.
C)
four.
D)
five.
140.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, Andy buys _____ pumpkins and his consumer
surplus is_____.
A)
four; $2
B)
three; $6
C)
two; $8
D)
one; $4
Page 41
141.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, Ben buys _____ pumpkins, and his consumer surplus
is_____.
A)
four; $2
B)
three; $6
C)
two; $4
D)
one; $3
142.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, total consumer surplus is:
A)
$10.
B)
$8.
C)
$6.
D)
$0.
143.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, Cindy sells _____ pumpkins, and her producer
surplus is_____.
A)
four; $2
B)
three; $8
C)
two; $3
D)
one; $5
144.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, Diane sells _____ pumpkins, and her producer
surplus is_____.
A)
four; $11
B)
three; $8
C)
two; $6
D)
one; $4
Page 42
145.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, total producer surplus is:
A)
$0.
B)
$8.
C)
$11.
D)
$14.
146.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, total surplus is:
A)
$40.
B)
$36.
C)
$24.
D)
$8.
147.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is five. If
Andy consumes one more pumpkin and Ben consumes one fewer pumpkin than in
equilibrium, total surplus will _____ by _____.
A)
increase; $17
B)
increase; $15
C)
decrease; $8
D)
decrease; $3
148.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Andy consumes one fewer pumpkin and Ben consumes one more pumpkin than in
equilibrium, total surplus will _____ by _____.
A)
increase; $17
B)
increase; $15
C)
decrease; $8
D)
decrease; $3
Page 43
149.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Cindy sells one more pumpkin and Diane sells one fewer pumpkin than in equilibrium,
total surplus will _____ by _____.
A)
increase; $16
B)
increase; $14
C)
decrease; $4
D)
decrease; $2
150.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Cindy sells one fewer pumpkin and Diane sells one more pumpkin than in equilibrium,
total surplus will _____ by _____.
A)
increase; $16
B)
increase; $14
C)
decrease; $4
D)
decrease; $2
151.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Andy buys one more pumpkin and Cindy sells one fewer pumpkin than in equilibrium,
total surplus will _____ by _____.
A)
increase; $16
B)
increase; $14
C)
decrease; $4
D)
decrease; $2
Page 44
152.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Andy buys one more pumpkin and Diane sells one fewer pumpkin than in equilibrium,
total surplus will _____ by _____.
A)
increase; $16
B)
increase; $14
C)
decrease; $4
D)
decrease; $3
153.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Andy buys one fewer pumpkin and Diane sells one more pumpkin than in equilibrium,
total surplus will _____ by _____.
A)
increase; $16
B)
increase; $10
C)
decrease; $4
D)
decrease; $3
154.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Ben buys one more pumpkin and Cindy sells one fewer pumpkin than in equilibrium,
total surplus will _____ by _____.
A)
increase; $14
B)
increase; $12
C)
decrease; $12
D)
decrease; $3
Page 45
155.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Ben buys one fewer pumpkin and Cindy sells one more pumpkin than in equilibrium,
total surplus will _____ by _____.
A)
increase; $15
B)
increase; $12
C)
decrease; $15
D)
decrease; $3
156.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Ben buys one more pumpkin and Diane sells one fewer pumpkin than in equilibrium,
total surplus will _____ by _____.
A)
decrease; $3
B)
decrease; $13
C)
increase; $16
D)
increase; $3
157.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Ben buys one fewer pumpkin and Diane sells one more pumpkin than in equilibrium,
total surplus will _____ by _____.
A)
decrease; $3
B)
decrease; $2
C)
increase; $18
D)
increase; $3
158.
Which of the following is TRUE concerning the relationship between efficiency and
equity?
A)
Policies designed to increase efficiency will also increase equity.
B)
Policies designed to increase equity will also increase efficiency.
C)
Policies designed to increase efficiency will decrease equity.
D)
There is no trade-off between efficiency and equity if policies are fair.
Page 46
159.
If there is an increase in demand, assuming a positively sloped supply curve and a
negatively sloped demand curve, total surplus:
A)
will increase.
B)
will decrease.
C)
will remain the same.
D)
may change, but we can't tell how.
160.
If there is an increase in supply, assuming a positively sloped supply curve and a
negatively sloped demand curve, total surplus:
A)
will increase.
B)
will decrease.
C)
will remain the same.
D)
may change, but we can't tell how.
161.
If there is a decrease in demand, assuming a positively sloped supply curve and a
negatively sloped demand curve, total surplus:
A)
will increase.
B)
will decrease.
C)
will remain the same.
D)
may change, but we can't tell how.
162.
If there is a decrease in supply, assuming a positively sloped supply curve and a
negatively sloped demand curve, total surplus:
A)
will increase.
B)
will decrease.
C)
will remain the same.
D)
may change, but we can't tell how.
163.
If total surplus falls, there may have been a(n) _____ in demand or a(n) _____ in supply.
A)
increase; decrease
B)
increase; increase
C)
decrease; decrease
D)
decrease; increase
164.
If total surplus rises, there may have been a(n) _____ in demand or a(n) _____ in
supply.
A)
increase; decrease
B)
increase; increase
C)
decrease; decrease
D)
decrease; increase
Page 47
Use the following to answer questions 165-167:
Figure: The Gains from Trade
165.
(Figure: The Gains from Trade) Look at the figure The Gains from Trade. What is the
total surplus in this market when the demand curve is D1 and the market is in
equilibrium?
A)
$25.00
B)
$31.25
C)
$62.50
D)
$90.00
166.
(Figure: The Gains from Trade) Look at the figure The Gains from Trade. What is the
total surplus in this market when the demand curve is D2 and the market is in
equilibrium?
A)
$31.25
B)
$45.00
C)
$62.50
D)
$90.00
167.
(Figure: The Gains from Trade) Look at the figure The Gains from Trade. When
demand increases from D1 to D2, equilibrium total surplus:
A)
decreases by $10.00.
B)
increases by $12.75.
C)
decreases by $15.00.
D)
increases by $27.50.
Page 48
168.
Coffee and tea are substitutes in consumption. If there is an increase in the price of
coffee, assuming a positively sloped supply curve and a negatively sloped demand
curve, total surplus in the tea market:
A)
will increase.
B)
will decrease.
C)
will not change.
D)
may change, but we cannot determine the change without more information.
169.
If a frost destroys much of the grapefruit crop, assuming a positively sloped supply
curve and a negatively sloped demand curve, total surplus:
A)
will increase.
B)
will decrease.
C)
will not change.
D)
may change, but we cannot determine the change without more information.
170.
If the price is above the equilibrium price in the market for grapefruit, assuming a
positively sloped supply curve and a negatively sloped demand curve, total surplus:
A)
will increase.
B)
will decrease.
C)
will not change.
D)
may change, but we cannot determine the change without more information.
171.
If the price is below the equilibrium price in the market for grapefruit, assuming a
positively sloped supply curve and a negatively sloped demand curve, total surplus:
A)
will increase.
B)
will decrease.
C)
will not change.
D)
may change, but we cannot determine the change without more information.
172.
Suppose a competitive market has a downward-sloping demand curve and a horizontal
supply curve. If the supply curve shifts downward, equilibrium price will _____,
equilibrium quantity will _____, consumer surplus will _____, and producer surplus
will _____.
A)
decrease; increase; increase; decrease
B)
decrease; decrease; increase; not change
C)
decrease; increase; increase; not change
D)
decrease; increase; not change; increase
Page 49
Use the following to answer questions 173-175:
Figure: Consumer and Producer Surplus
173.
(Figure: Consumer and Producer Surplus) Look at the figure Consumer and Producer
Surplus. If the price is held above equilibrium, consumer surplus _____ and total
surplus _____.
A)
increases; decreases
B)
decreases; stays the same
C)
increases; stays the same
D)
decreases; decreases
174.
(Figure: Consumer and Producer Surplus) Look at the figure Consumer and Producer
Surplus. If the price is held below equilibrium, producer surplus _____ and total surplus
_____.
A)
decreases; decreases
B)
increases; stays the same
C)
decreases; stays the same
D)
increases; decreases
175.
(Figure: Consumer and Producer Surplus) Look at the figure Consumer and Producer
Surplus. An increase in supply will:
A)
increase consumer surplus.
B)
decrease producer surplus.
C)
increase total surplus.
D)
increase consumer surplus and total surplus.
Page 50
176.
Peanut butter is an inferior good. If there is an increase in income, total surplus in the
peanut butter market:
A)
will increase.
B)
will decrease.
C)
will not change.
D)
may change, but we cannot determine the change without more information.
177.
If the technology of producing peanuts improves, total surplus in the peanut butter
market:
A)
will increase.
B)
will decrease.
C)
will not change.
D)
may change, but we cannot determine the change without more information.
178.
A consumer's willingness to pay for a surfboard is the minimum price at which he or she
would buy the surfboard.
A)
True
B)
False
179.
Gehrig is willing to pay $90 for a cap made of raccoon skin. Suppose he finds such a
cap for $71 on eBay. If Gehrig buys the cap for $71, he will have an individual
consumer surplus of $71.
A)
True
B)
False
180.
Consumer surplus is the amount buyers actually pay for a good minus the maximum
amount they are willing to pay for it.
A)
True
B)
False
181.
One way to measure the gain to consumers from a drug that has the potential to reduce
obesity is to measure what people are willing to pay for the good and subtract the
amount they have to pay.
A)
True
B)
False
Page 51
182.
If the cost of soybeans (the major ingredient in tofu) decreases, consumer surplus in the
market for tofu will decrease.
A)
True
B)
False
183.
Floyd's cost of selling haircuts is the lowest price at which he is willing to sell haircuts.
A)
True
B)
False
184.
For calculating producer surplus, it is important to distinguish between the minimum
price at which a seller is willing to sell a good and the seller's cost.
A)
True
B)
False
185.
Producer surplus is the amount sellers receive from the sale of a good minus the
minimum amount they are willing to accept for supplying the good.
A)
True
B)
False
186.
All else equal, when the supply curve shifts left, the producer surplus increases.
A)
True
B)
False
187.
Assuming that gasoline and cars are complements in consumption, if the price of
gasoline rises, the producer surplus of auto manufacturers decreases.
A)
True
B)
False
188.
The total surplus generated in the market for blackberries is the total net gain to
consumers in that market.
A)
True
B)
False
189.
Total surplus is the excess of consumer surplus over producer surplus.
A)
True
B)
False
Page 52
190.
The gains from trade are the reason that consumers and producers are better off
participating in a market economy than they would be if each tried to be self-sufficient.
A)
True
B)
False
191.
Total surplus shows the total benefit to society from production and consumption of a
good.
A)
True
B)
False
192.
Total surplus in a market is the excess of the number of consumers above the optimum
number.
A)
True
B)
False
193.
Total surplus in a market is the number of extra consumers and producers that are not
needed for the market to come to an equilibrium price and quantity.
A)
True
B)
False
194.
When there is a positive amount of total surplus in a market, it means that the cost of
producing the good is zero.
A)
True
B)
False
195.
If the market for smartphones is initially in equilibrium at a price of $250 and
consumption is reallocated so that Amanda, who values a phone at $300, is required to
give it to Brent, who values a phone at $225, total surplus in the smartphone market will
increase.
A)
True
B)
False
196.
If the market for tickets to the World Series is in equilibrium but owners of tickets who
would have sold their tickets are not allowed to sell, while fans who would not sell their
tickets are required to sell, total surplus would decrease.
A)
True
B)
False
Page 53
197.
If the market for concert tickets is in equilibrium and the fire marshal tries to reduce the
number of tickets sold, all other things equal, total surplus will decrease.
A)
True
B)
False
198.
If the market for concert tickets is in equilibrium and the concert promoter tries to
increase the number of tickets sold, all other things constant, total surplus will increase.
A)
True
B)
False
199.
Efficiency exists when there is no way to make someone better off without making
someone else worse off.
A)
True
B)
False
200.
Prices above equilibrium on agricultural products like milk exist to maximize the
consumer surplus.
A)
True
B)
False
201.
There is a trade-off between equity and efficiency in that policies designed to promote
equity often come at the cost of decreased efficiency.
A)
True
B)
False
202.
Policies designed to promote efficiency will never decrease equity; however, policies
designed to promote equity will usually decrease efficiency.
A)
True
B)
False
203.
Efficiency deals with helping society decide what its goals should be.
A)
True
B)
False
204.
Efficiency addresses the best way to achieve a goal once it has been determined.
A)
True
B)
False
Page 54
205.
Property rights and the role of prices as economic signals are two features that make
markets function effectively.
A)
True
B)
False
206.
If property rights are restricted by government regulation, many more mutually
beneficial transactions will occur.
A)
True
B)
False
207.
Property rights benefit sellers of goods much more than they benefit consumers.
A)
True
B)
False
208.
Prices are important economic signals because they convey information about how
much consumers are willing to pay for a good and how much it costs sellers to produce
a good.
A)
True
B)
False
209.
Prices are important economic signals because they convey information about how
much producers are willing to pay for a good and how much it costs consumers to
produce a good.
A)
True
B)
False
210.
Market failure occurs when a market fails to be efficient.
A)
True
B)
False
211.
When a monopolist prevents mutually beneficial trades from occurring, total surplus
increases.
A)
True
B)
False
Page 55
212.
Externalities affect the welfare of others not involved in the production or consumption
of a good or service in ways that markets don't take into account.
A)
True
B)
False
213.
A price below the equilibrium price will cause a reduction in consumer surplus.
A)
True
B)
False
Use the following to answer questions 214-215:
214.
(Table: Workouts) Look at the table Workouts. Several times each week Eli works out
at a health club, but because he is not a member, he pays $10 each time he uses the club
facilities. How many times per week will Eli use the health club for a workout, and how
much consumer surplus does he receive?
215.
(Table: Workouts) Look at the table Workouts. Suppose that Eli receives an offer from
the club for a weekly membership fee of $50 that allows him to use the club as much as
he wants. Assuming Eli joins the club, how many times will Eli use the club per week,
and how much consumer surplus will he receive?
Page 56
Use the following to answer questions 216-217:
Figure: Demand for Cincinnati Reds Games Tickets
216.
(Figure: Demand for Cincinnati Reds Games Tickets) The figure Demand for Cincinnati
Red Games Tickets represents Jeff's annual demand for tickets to Cincinnati Reds
baseball games. At $20, Jeff will purchase five tickets. How much consumer surplus
does Jeff receive?
217.
(Figure: Demand for Cincinnati Reds Games Tickets) The figure Demand for Cincinnati
Red Games Tickets represents Jeff's annual demand for tickets to Cincinnati Reds
baseball games. Suppose the Reds required all fans to purchase a $12 parking pass for
each game. This effectively raises the price of a ticket to $32, and Jeff will decrease his
quantity demanded for Reds baseball by one ticket this year. How much consumer
surplus has Jeff lost?
Page 57
Use the following to answer questions 218-219:
Figure: The Market for Books
218.
(Figure: The Market for Books) Look at the figure The Market for Books. At the
equilibrium price of $24, find the total surplus in the market for books.
219.
(Figure: Market for Books) Look at the figure The Market for Books. Suppose the price
is temporarily $18. Do consumers gain or lose from this price, and by how much? Do
producers gain or lose from this price control, and by how much? How is total surplus
affected?
220.
Molly must drive across a bridge over a river eight times each week. Because the bridge
is narrow and traffic is congested, Molly's willingness to pay for the eighth and final
weekly trip is $0.50. Now the governor has promised to refurbish this old bridge and
widen it to lessen the congestion and increase traffic flow over the river. Molly will
have to pay extra taxes to finance the repair, but the toll for crossing the bridge will fall,
and she expects to make 10 trips instead of just 8. How would you figure out how much
Molly is willing to pay in taxes for the bridge repair?
Page 58
Use the following to answer questions 221-223:
Table: Coffee Shops
Cups of Coffee
(hundreds per
hour)
The Buzz
Costs
Jo'Mama Costs
Trembles Costs
1
$0.25
$0.75
$0.90
2
0.50
1.00
1.50
3
0.75
1.50
1.90
4
1.00
2.00
2.50
5
1.50
2.50
2.90
6
2.00
3.00
3.50
7
2.50
3.50
3.90
221.
(Table: Coffee Shops) Look at the table Coffee Shops. The three coffee shops in a small
town supply cups of coffee at slightly different costs. Use the table to construct the
supply schedule for coffee at prices of $0, $1, $2, and $3.
222.
(Table: Coffee Shops) Look at the table Coffee Shops. If the price of coffee is $1.75,
how many cups will be supplied and how much producer surplus will be earned by
coffee shops in the town?
223.
(Table: Coffee Shops) Look at the table Coffee Shops. Assume the price of coffee is
$1.75. Show how total producer surplus decreases at any number of cups that differs
from the equilibrium (price is $1.75 and quantity is 10 cups).
Use the following to answer questions 224-228:
Page 59
224.
(Table: Willingness to Pay for Peanuts) Using the table Willingness to Pay for Peanuts,
if the price of a bag of peanuts is $4, what is the value of George's consumer surplus?
A)
$4
B)
$3
C)
$6
D)
$10
225.
(Table: Willingness to Pay for Peanuts) Using the table Willingness to Pay for Peanuts,
if the price of a bag of peanuts is $6, what is the total value of consumer surplus?
A)
$4
B)
$3
C)
$6
D)
$10
226.
(Table: Willingness to Pay for Peanuts) Using the table Willingness to Pay for Peanuts,
if the price of a bag of peanuts is $9, who will purchase a bag?
A)
George
B)
All of the consumers
C)
Dave
D)
Alvin and Theodore
227.
(Table: Willingness to Pay for Peanuts) Using the table Willingness to Pay for Peanuts,
if the price of a bag of peanuts is $3, the total value of consumer surplus is equal to:
A)
$12.
B)
$26.
C)
$10.
D)
$21.
228.
(Table: Willingness to Pay for Peanuts) Using the table Willingness to Pay for Peanuts,
if the price of a bag of peanuts is $2:
A)
all of the consumers would purchase a bag.
B)
everyone except Dave would purchase a bag.
C)
everyone except George would purchase a bag.
D)
no one would purchase a bag.
Page 60
229.
Suppose the market demand for TV remotes is given by the equation Qd = 100 – 2P,
where P is the price and Qd is the number of TV remotes. If the market price of TV
remotes is $40, then the quantity demanded equals _____ and the value of consumer
surplus is _____.
A)
20; $100
B)
100; $20
C)
40; $200
D)
2; $40
230.
Suppose the market demand curve for TV remotes is given by the equation Qd = 100 –
2P, where P is the price and Qd is the number of TV remotes demanded. If the market
price of TV remotes is $10, then the quantity demanded equals _____ and the value of
consumer surplus is _____.
A)
20; $100
B)
80; $200
C)
80; $1,600
D)
20; $1,600
Use the following to answer question 231:
231.
(Table: Quantity Supplied and Quantity Demanded) Using the table Quantity Supplied
and Quantity Demanded, if this market is in equilibrium and the demand and supply
curves are linear, then the value of consumer surplus is:
A)
$1,225.
B)
$2,450.
C)
$4,900.
D)
$1,500.
Page 61
232.
Christine has a linear demand curve for candy. If she wants to see her consumer surplus
_____, she would like to see a(n) _____ in the market price of candy.
A)
increase; decrease
B)
increase; increase
C)
decrease; decrease
D)
not change; decrease
233.
Along a straight-line downward-sloping demand curve, a decrease in the market price of
a good:
A)
will cause no change in consumer surplus.
B)
will increase consumer surplus.
C)
will decrease consumer surplus.
D)
may either decrease or increase consumer surplus.
Use the following to answer questions 234-238:
234.
(Table: Firm's Willingness) The table Firm's Willingness explains the relation between
the number of reports a firm is willing to produce and the lowest price it is willing to
accept to prepare those reports. If the price of a report is $11, what is the value of
producer surplus for this firm?
A)
$11
B)
$17
C)
$27
D)
$40
Page 62
235.
(Table: Firm's Willingness) The table Firm's Willingness explains the relation between
the number of reports a firm is willing to produce and the lowest price it is willing to
accept to prepare those reports. If the price of a report is $12, what is the value of
producer surplus for the firm?
A)
$27
B)
$21
C)
$16
D)
$42
236.
(Table: Firm's Willingness) The table Firm's Willingness explains the relation between
the number of reports a firm is willing to produce and the lowest price it is willing to
accept to prepare those reports. If the price of a report is $6, how many reports will be
produced?
A)
five
B)
four
C)
three
D)
two
237.
(Table: Firm's Willingness) The table Firm's Willingness explains the relation between
the number of reports a firm is willing to produce and the lowest price it is willing to
accept to prepare those reports. Which of the following market prices would result in
four reports being produced?
A)
$2
B)
$6
C)
$8
D)
$11
238.
(Table: Firm's Willingness) The table Firm's Willingness explains the relation between
the number of reports a firm is willing to produce and the lowest price it is willing to
accept to prepare those reports. If the price of reports is $15, how many reports will the
firm produce, and what will the producer surplus be?
A)
one; $0
B)
three; $23
C)
five; $0
D)
five; $33
239.
Well-functioning markets allow:
A)
mutually beneficial trades to take place.
B)
consumers to gain at the expense of producers.
C)
producers to reap greater benefits, since they have greater power in the market.
D)
property rights to be unnecessary components of effective distribution.
Page 63
Use the following to answer questions 240-242:
Figure: A Market in Equilibrium
240.
(Figure: A Market in Equilibrium) Look at the figure A Market in Equilibrium. At the
equilibrium price, this market's consumer surplus is equal to the area:
A)
ABC.
B)
ADI.
C)
DIF.
D)
EHF.
241.
(Figure: A Market in Equilibrium) Look at the figure A Market in Equilibrium. At the
equilibrium price, this market's producer surplus is equal to the area:
A)
ADI.
B)
EHF.
C)
AIF.
D)
DIF.
242.
(Figure: A Market in Equilibrium) Look at the figure A Market in Equilibrium. At the
equilibrium price, this market's total producer and consumer surplus equals the area:
A)
BCDG.
B)
AIF.
C)
DIF.
D)
ADI.
Page 64
243.
Suppose purchases do not occur because the value of the good to the potential seller
exceeds the value to a potential consumer. This situation will occur in:
A)
a market dominated by government regulation.
B)
well-functioning markets.
C)
a market made up of many buyers and sellers.
D)
a centralized market system.
244.
Markets work because they allocate sales to the potential sellers who most value the
right to sell a good, as indicated by their ability to produce the good at the lowest cost.
This statement illustrates:
A)
producer surplus.
B)
consumer surplus.
C)
total surplus.
D)
deadweight loss.
245.
Well-defined property rights:
A)
can allow for mutually beneficial trades.
B)
will result in government regulation.
C)
often result in more market failures.
D)
lead to more centralized decision making.
246.
Economic signals:
A)
result in shortages and surpluses.
B)
interfere with the trades that can be mutually beneficial.
C)
guide decision makers in their transactions in the marketplace.
D)
never provide adequate information to consumers.
247.
Which of the following statements is (are) TRUE about market failures?
I. Property rights are clearly defined.
II. Information is available to all decision makers.
III. External costs are not considered in production decisions by producers.
A)
I
B)
I and II
C)
III
D)
I, II, and III
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