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Consumers, Producers, and the Efficiency of Markets 1853
106. The marginal seller is the seller who
a. cannot compete with the other sellers in the market.
b. would leave the market first if the price were any lower.
c. can produce at the lowest cost.
d. has the largest producer surplus.
107. The marginal seller is the seller
a. for whom the marginal cost of producing one more unit of output is the lowest among all
sellers, and the marginal buyer is the buyer for whom the marginal benefit of one more unit of
the good is the highest among all buyers.
b. who supplies the smallest quantity of the good among all sellers, and the marginal buyer is the
buyer who demands the smallest quantity of the good among all buyers.
c. who would leave the market first if the price were any lower, and the marginal buyer is the
buyer who would leave the market first if the price were any higher.
d. who has the largest producer surplus, and the marginal buyer is the buyer who has the largest
consumer surplus.
1854 Consumers, Producers, and the Efficiency of Markets
108. Another way to think of the marginal seller is the seller who
a. will accept the lowest price of any seller in the market.
b. requires the highest price of any potential seller in the market.
c. would leave the market first if the price were any lower.
d. would leave the market last if the price falls.
109. Suppose the demand for peanuts increases. What will happen to producer surplus in the market
for peanuts?
a. It increases.
b. It decreases.
c. It remains unchanged.
d. It may increase, decrease, or remain unchanged.
Consumers, Producers, and the Efficiency of Markets 1855
110. Suppose the demand for peaches decreases. What will happen to producer surplus in the market
for peaches?
a. It increases.
b. It decreases.
c. It remains unchanged.
d. It may increase, decrease, or remain unchanged.
111. Which of the following will cause an increase in producer surplus?
a. the imposition of a binding price ceiling in the market
b. buyers expect the price of the good to be lower next month
c. the price of a substitute increases
d. income increases and buyers consider the good to be inferior
1856 Consumers, Producers, and the Efficiency of Markets
112. If the demand for leather decreases, producer surplus in the leather market
a. increases.
b. decreases.
c. remains the same.
d. may increase, decrease, or remain the same.
113. If the demand for light bulbs increases, producer surplus in the market for light bulbs
a. increases.
b. decreases.
c. remains the same.
d. may increase, decrease, or remain the same.
Consumers, Producers, and the Efficiency of Markets 1857
114. The Surgeon General announces that eating chocolate increases tooth decay. As a result, the
equilibrium price of chocolate
a. increases, and producer surplus increases.
b. increases, and producer surplus decreases.
c. decreases, and producer surplus increases.
d. decreases, and producer surplus decreases.
115. Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of
grass seed will
a. decrease, and producer surplus in the industry will decrease.
b. increase, and producer surplus in the industry will increase.
c. decrease, and producer surplus in the industry will increase.
d. increase, and producer surplus in the industry will decrease.
1858 Consumers, Producers, and the Efficiency of Markets
116. Which of the following statements is not correct?
a. A seller would be eager to sell her product at a price higher than her cost.
b. A seller would refuse to sell her product at a price lower than her cost.
c. A seller would be indifferent about selling her product at a price equal to her cost.
d. Since sellers cannot set the price for their product, they must be willing to sell their product at
any price.
117. Which of the following events would increase producer surplus?
a. Sellers' costs stay the same and the price of the good increases.
b. Sellers' costs increase and the price of the good stays the same.
c. Sellers' costs increase and the price of the good decreases.
d. All of the above are correct.
Consumers, Producers, and the Efficiency of Markets 1859
118. Which of the following will cause a decrease in producer surplus?
a. the imposition of a binding price ceiling in the market
b. an increase in the number of buyers of the good
c. income increases and buyers consider the good to be normal
d. the price of a complement decreases
119. ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ Company incurs
a cost of 70 cents to produce a dozen eggs. Which of the following price increases would cause
both companies to experience an increase in producer surplus?
a. The price of a dozen eggs increases from 40 cents to 55 cents.
b. The price of a dozen eggs increases from 55 cents to 70 cents.
c. The price of a dozen eggs increases from 55 cents to 75 cents.
d. All of these price increases would cause both companies to experience a loss in producer
surplus.
1860 Consumers, Producers, and the Efficiency of Markets
120. The welfare of sellers is measured by
a. consumer surplus.
b. producer surplus.
c. total surplus.
d. price.
121. The Surgeon General announces that eating apples promotes healthy teeth. As a result, the
equilibrium price of apples
a. increases, and producer surplus increases.
b. increases, and producer surplus decreases.
c. decreases, and producer surplus increases.
d. decreases, and producer surplus decreases.
Consumers, Producers, and the Efficiency of Markets 1861
122. Which of the following will cause a decrease in producer surplus?
a. the imposition of a nonbinding price ceiling in the market
b. buyers expect the price of a good to be higher next month
c. the price of a substitute increases
d. income increases and buyers consider the good to be inferior
123. Which of the following will cause no change in producer surplus?
a. the imposition of a nonbinding price ceiling in the market
b. buyers expect the price of a good to be higher next month
c. the price of a substitute increases
d. income increases and buyers consider the good to be inferior
1862 Consumers, Producers, and the Efficiency of Markets
124. Suppose that the market price for pizzas increases. The increase in producer surplus comes from
the benefit of the higher prices to
a. only existing sellers who now receive higher prices on the pizzas they were already selling.
b. only new sellers who enter the market because of the higher prices.
c. both existing sellers who now receive higher prices on the pizzas they were already selling
and new sellers who enter the market because of the higher prices.
d. Producer surplus does not increase; it decreases.
Multiple Choice – Section 03: Market Efficiency
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
Consumers, Producers, and the Efficiency of Markets 1863
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.
1864 Consumers, Producers, and the Efficiency of Markets
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.
Consumers, Producers, and the Efficiency of Markets 1865
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.
1866 Consumers, Producers, and the Efficiency of Markets
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.
Consumers, Producers, and the Efficiency of Markets 1867
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.
1868 Consumers, Producers, and the Efficiency of Markets
12. Which of the following equations is not valid?
a. Consumer surplus = Value to buyers - Amount paid by buyers
b. Producer surplus = Amount received by sellers - Cost to sellers
c. Total surplus = Value to buyers - Amount paid by buyers + Amount received by sellers - Costs
of sellers
d. Total surplus = Value to sellers - Cost to sellers
13. Which of the following equations is valid?
a. Consumer surplus = Total surplus - Cost to sellers
b. Producer surplus = Total surplus - Consumer surplus
c. Total surplus = Value to buyers - Amount paid by buyers
d. Total surplus = Amount received by sellers - Cost to sellers
Consumers, Producers, and the Efficiency of Markets 1869
14. 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.
15. 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.
1870 Consumers, Producers, and the Efficiency of Markets
16. 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.
17. 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.
Consumers, Producers, and the Efficiency of Markets 1871
18. 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.
19. 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.
1872 Consumers, Producers, and the Efficiency of Markets
20. 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.
21. 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.
