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Consumers, Producers, and the Efficiency of Markets 1793
141. Oil is used to produce gasoline. If the price of oil increases, consumer surplus in the gasoline
market
a. decreases.
b. is unchanged.
c. increases.
d. may increase, decrease, or remain unchanged.
142. What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of
iPods experience an increase in income?
a. Consumer surplus decreases.
b. Consumer surplus remains unchanged.
c. Consumer surplus increases.
d. Consumer surplus may increase, decrease, or remain unchanged.
1794 Consumers, Producers, and the Efficiency of Markets
143. As a result of a decrease in price,
a. new buyers enter the market, increasing consumer surplus.
b. new buyers enter the market, decreasing consumer surplus.
c. existing buyers exit the market, increasing consumer surplus.
d. existing buyers exit the market, decreasing consumer surplus.
144. Economists normally assume people’s preferences should be
a. respected.
b. adjusted.
c. overruled.
d. ignored.
Consumers, Producers, and the Efficiency of Markets 1795
145. Consumer surplus is a good measure of economic welfare if policymakers want to
a. maximize total benefit.
b. minimize deadweight loss.
c. respect the preferences of sellers.
d. respect the preferences of buyers.
146. When policymakers are considering a particular action, they can use consumer surplus as a(n)
a. objective measure of the benefits to buyers as determined by policymakers.
b. measure of the benefits to buyers as the buyers perceive them.
c. potentially flawed measure of the benefits to buyers if the buyers are not rational.
d. Both b) and c) are correct.
1796 Consumers, Producers, and the Efficiency of Markets
Multiple Choice – Section 02: Producer Surplus
1. A seller’s opportunity cost measures the
a. value of everything she must give up to produce a good.
b. amount she is paid for a good minus her cost of providing it.
c. consumer surplus.
d. out of pocket expenses to produce a good but not the value of her time.
2. Cost is a measure of the
a. seller's willingness to sell.
b. seller's producer surplus.
c. producer shortage.
d. seller's willingness to buy.
Consumers, Producers, and the Efficiency of Markets 1797
3. Justin builds fences for a living. Justin’s out-of-pocket expenses (for wood, paint, etc.) plus the
value that he places
a. producer surplus.
b. producer deficit.
c. cost of building fences.
d. profit.
4. A supply curve can be used to measure producer surplus because it reflects
a. the actions of sellers.
b. quantity supplied.
c. sellers' costs.
d. the amount that will be purchased by consumers in the market.
1798 Consumers, Producers, and the Efficiency of Markets
5. A seller is willing to sell a product only if the seller receives a price that is at least as great as the
a. seller’s producer surplus.
b. seller’s cost of production.
c. seller’s profit.
d. average willingness to pay of buyers of the product.
6. Producer surplus is
a. measured using the demand curve for a good.
b. always a negative number for sellers in a competitive market.
c. the amount a seller is paid minus the cost of production.
d. the opportunity cost of production minus the cost of producing goods that go unsold.
Consumers, Producers, and the Efficiency of Markets 1799
7. Producer surplus measures the
a. benefits to sellers of participating in a market.
b. costs to sellers of participating in a market.
c. price that buyers are willing to pay for sellers’ output of a good or service.
d. benefit to sellers of producing a greater quantity of a good or service than buyers demand.
8. A seller’s willingness to sell is
a. measured by the seller’s cost of production.
b. related to her supply curve, just as a buyer’s willingness to buy is related to his demand curve.
c. less than the price received if producer surplus is a positive number.
d. All of the above are correct.
1800 Consumers, Producers, and the Efficiency of Markets
9. Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to
pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is
willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and
the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her
producer surplus is
a. $0.95.
b. $1.15.
c. $1.30.
d. $1.85.
10. Allen tutors in his spare time for extra income. Buyers of his service are willing to pay $40 per
hour for as many hours Allen is willing to tutor. On a particular day, he is willing to tutor the first
hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. Assume
Allen is rational in deciding how many hours to tutor. His producer surplus is
a. $40.
b. $64.
c. $12.
d. $56.
Consumers, Producers, and the Efficiency of Markets 1801
11. Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $155
per tuning. One particular week, Tom is willing to tune the first piano for $120, the second piano
for $125, the third piano for $140, and the fourth piano for $160. Assume Tom is rational in
deciding how many pianos to tune. His producer surplus is
a. $95.
b. $80.
c. $75.
d. $60.
12. David tunes pianos in his spare time for extra income. Buyers of his service are willing to pay
$135 per tuning. One particular week, David is willing to tune the first piano for $115, the second
piano for $125, the third piano for $140, and the fourth piano for $175. Assume David is rational
in deciding how many pianos to tune. His producer surplus is
a. $-15.
b. $20.
c. $30.
d. $75.
1802 Consumers, Producers, and the Efficiency of Markets
13. George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16
per dozen. His producer surplus per dozen cupcakes is
a. $6.
b. $10.
c. $16.
d. $26.
14. Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer
surplus per ton is
a. $150.
b. $200.
c. $350.
d. $550.
Consumers, Producers, and the Efficiency of Markets 1803
15. If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must have
been
a. $48.
b. $32.
c. $8.
d. $40.
16. Ronnie operates a lawn-care service. On each day, the cost of mowing the first lawn is $15, the
cost of mowing the second lawn is $25, and the cost of mowing the third lawn is $40. His
producer surplus on the first three lawns of the day is $100. If Ronnie charges all customers the
same price for lawn mowing, that price is
a. $20.
b. $60.
c. $80.
d. $180.
1804 Consumers, Producers, and the Efficiency of Markets
17. At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten
danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his
danishes for
a. $2.00 each.
b. $0.50 each.
c. $3.50 each.
d. $5.00 each.
18. Kristi sells purses. Her cost is $35 per purse. On a certain day, she sells 12 purses, and her
producer surplus for that day amounts to $180. Kristi sold each purse for
a. $65.
b. $50.
c. $45.
d. $53.
Consumers, Producers, and the Efficiency of Markets 1805
19. Kristi and Rebecca sell lemonade on the corner. It costs them 7 cents to make each cup. On a
certain day, they sell 40 cups. Their producer surplus for that day amounts to $19.20. Kristi &
Rebecca sold each cup for
a. 31 cents.
b. 38 cents.
c. 45 cents.
d. 55 cents.
20. Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make
each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca
sell?
a. 40.
b. 200.
c. 8.
d. 50.
1806 Consumers, Producers, and the Efficiency of Markets
21. Bill created a new software program he is willing to sell for $200. He sells his first copy and
enjoys a producer surplus of $150. What is the price paid for the software?
a. $50.
b. $150.
c. $200.
d. $350.
22. Bill created a new software program he is willing to sell for $300. He sells his first copy and
enjoys a producer surplus of $250. What is the price paid for the software?
a. $50.
b. $250.
c. $300.
d. $550.
Consumers, Producers, and the Efficiency of Markets 1807
23. Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer
surplus is
a. $150.
b. $350.
c. $500.
d. $850.
24. At Nick’s Bakery, the cost to make homemade chocolate cake is $4 per cake. As a result of
selling five cakes,
Nick experiences a producer surplus in the amount of $17.50. Nick must be selling his cakes for
a. $6.50 each.
b. $7.50 each.
c. $9.50 each.
d. $10.50 each.
1808 Consumers, Producers, and the Efficiency of Markets
Table 7-11
The following table represents the costs of five possible sellers.
Seller
Cost
Abby
$1,600
Bobby
$1,300
Dianne
$1,100
Evaline
$900
Carlos
$800
25. Refer to Table 7-11. If the market price is $1,000, the producer surplus in the market is
a. $1000.
b. $300.
c. $1,700.
d. $700.
Consumers, Producers, and the Efficiency of Markets 1809
26. Refer to Table 7-11. If the market price is $1,200, the producer surplus in the market is
a. $100.
b. $800.
c. $400.
d. $500.
27. Refer to Table 7-11. If the market price is $1,100, the combined total cost of all participating
sellers is
a. $2,800.
b. $2,900.
c. $1,700.
d. $4,000.
1810 Consumers, Producers, and the Efficiency of Markets
28. Refer to Table 7-11. If the market price is $1,400, the combined total cost of all participating
sellers is
a. $5,700.
b. $1,500.
c. $1,400.
d. $4,100.
29. Refer to Table 7-11. If the price is $1,000,
a. Bobby is an eager supplier.
b. Dianne is an eager supplier.
c. Evaline’s producer surplus is $100.
d. All of the above are correct.
Consumers, Producers, and the Efficiency of Markets 1811
30. Refer to Table 7-11. If the price is $1,l50, who would be willing to supply the product?
a. Abby and Bobby
b. Abby, Bobby, and Dianne
c. Carlos, Dianne, and Evaline
d. Dianne and Evaline only
31. Refer to Table 7-11. Suppose each of the five sellers can supply at most one unit of the good.
The market quantity supplied is exactly 2 if the price is
a. $1,700.
b. $1,100.
c. $1,650.
d. $1,050.
1812 Consumers, Producers, and the Efficiency of Markets
32. Refer to Table 7-11. Suppose each of the five sellers can supply at most one unit of the good.
The market quantity supplied is exactly 4 if the price is
a. $860.
b. $1,050.
c. $1,650.
d. $1,400.
33. Refer to Table 7-11. Who is a marginal seller when the price is $1,100?
a. Dianne
b. Bobby and Abby
c. Carlos, Dianne, and Evaline
d. Carlos, Dianne, Evaline, and Bobby
