Consumers, Producers, and the Efficiency of Markets 1913
88.
Refer to Figure 7-26. At the equilibrium price, producer surplus is
a. $600.
b. $900.
c. $1,200.
d. $1,800.
89.
Refer to Figure 7-26. At the equilibrium price, total surplus is
a. $600.
b. $1,200.
c. $1,500.
d. $1,800.
90.
Refer to Figure 7-26. If the government imposes a price floor of $90 in this market, then
consumer surplus will be
a. $225.
b. $450.
c. $975.
d. $1,350
Figure 7-27
91.
Refer to Figure 7-27. Buyers who value this good more than the equilibrium price are
represented by which line
segment?
a.
AC.
b.
CK.
c.
BC.
d.
CH.
92.
Refer to Figure 7-27. Buyers who value this good less than the equilibrium price are
represented by which line
segment?
a.
AC.
b.
CK.
c.
BC.
d.
CH.
93.
Refer to Figure 7-27. Sellers whose costs are less than the equilibrium price are represented by
which line
segment?
a.
AC.
b.
CK.
c.
BC.
d.
CH.
94.
Refer to Figure 7-27. Sellers whose costs are greater than the equilibrium price are represented
by segment
a.
AC.
b.
CK.
c.
BC.
d.
CH.
95.
Refer to Figure 7-27. If the government mandated a price increase from P1 to a higher price,
then
a.
total surplus would decrease.
b.
consumer surplus would increase.
c.
total surplus would increase, since producer surplus would increase.
d.
total surplus would remain unchanged.
Figure 7-28
96.
Refer to Figure 7-28. At the quantity Q3,
a.
the market is in equilibrium.
b.
consumer surplus is maximized.
c.
the sum of consumer surplus and producer surplus is maximized.
d.
the marginal value to buyers is less than the marginal cost to sellers.
97.
Refer to Figure 7-28. At the quantity Q2, the marginal value to buyers
a.
and the marginal cost to sellers are both P2.
b.
is P2, and the marginal cost to sellers is P3.
c.
and the marginal cost to sellers are both P3.
d.
is P3, and the marginal cost to sellers is P2.
Consumers, Producers, and the Efficiency of Markets 1919
Figure 7-29
98.
Refer to Figure 7-29. Which of the following statements is correct?
a.
The market is in equilibrium at Q1.
b.
At Q2, the cost to sellers exceeds the value to buyers.
c.
At Q4, the value to buyers is less than the cost to sellers.
d.
At Q3, the market is producing too much output.
99.
Inefficiency exists in an economy when a good is
a.
not being consumed by buyers who value it most highly.
b.
not distributed fairly among buyers.
c.
not produced because buyers do not value it very highly.
d.
being produced with less than all available resources.
100.
Inefficiency exists in an economy when a good is
a.
being produced with less than all available resources.
b.
not distributed fairly among buyers.
c.
not being produced by the lowest-cost producers.
d.
being consumed by buyers who value it most highly.
101.
The “invisible hand” refers to
a.
the marketplace guiding the self-interests of market participants into promoting general
economic well-being.
b.
the fact that social planners sometimes have to intervene, even in perfectly competitive
markets, to make
those markets more efficient.
c.
the equality that results from market forces allocating the goods produced in the market.
d.
the automatic maximization of consumer surplus in free markets.
102.
The “invisible hand” is
a.
used to describe the welfare system in the United States.
b.
a concept developed by Adam Smith to describe the virtues of free markets.
c.
a concept used by J.M. Keynes to describe the role of government in guiding the allocation of
resources in
the economy.
d.
a term used by some economists to characterize the role of government in an economy —
inevitable but invisible.
103.
Laissez-faire is a French expression which literally means
a.
to make do.
b.
to get involved.
c.
whatever works.
d.
allow them to do.
104.
The French expression used by free-market advocates, which literally translates as “allow them
to do,” is
a.
laissez-faire.
b.
je ne sais pas.
c.
si’l vous plait.
d.
tête-à-tête.
105.
If the government allowed a free market for transplant organs such as kidneys to exist, the
a.
shortage of organs would be eliminated, and there would be no surplus of organs.
b.
shortage of organs would be eliminated, but a surplus of organs would develop.
c.
shortage of organs would persist.
d.
overall well-being of society would remain unchanged.
106.
If the government allowed a free market for transplant organs such as kidneys to exist, critics
argue that such a
market would
a.
not reduce the shortage of organs.
b.
benefit rich people but not poor people.
c.
be inefficient because markets are not good at allocating scarce resources.
d.
be inferior to a plan imposed by a benevolent dictator.
107.
If the government allowed a free market in organs for transplant there would be
a.
a decrease in the shortage of organs for transplant.
b.
a decrease in producer surplus.
c.
an decrease in consumer surplus
d.
an increase in the waiting period for transplant organs.
108.
At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes
a.
consumer surplus but not producer surplus.
b.
producer surplus but not consumer surplus.
c.
both consumer and producer surplus.
d.
neither consumer nor producer surplus.
109.
If the United States changed its laws to allow for the legal sale of a kidney, which of the
following is likely to
occur?
a.
The price of kidneys would rise to balance supply and demand.
b.
The gains from trade would make both buyers and sellers better off.
c.
Thousands of lives would be saved.
d.
All of the above are correct.
110.
If the United States changed its laws to allow for the legal sale of a kidney, which of the
following is least likely to
occur?
a.
The supply of kidneys would increase.
b.
The shortage of kidneys would decrease.
c.
Many lives would be saved.
d.
The allocation of kidneys would be fair.
111.
According to many economists, government restrictions on ticket scalping do all of the following
except
a.
inconvenience the public.
b.
reduce the audience for cultural and sports events.
c.
waste police officers’ time.
d.
keep the cost of tickets to all consumers low.
112.
Economists tend to see ticket scalping as
a.
a way for a few to profit without producing anything of value.
b.
an inequitable interference in the orderly process of ticket distribution.
c.
a way of increasing the efficiency of ticket distribution.
d.
an unproductive activity which should be made illegal everywhere.
113.
Many economists believe that restrictions against ticket scalping result in each of the following
except
a.
a smaller audience for cultural and sporting events.
b.
shorter lines at cultural and sporting events.
c.
less tax revenue for the state.
d.
an increase in ticket prices.
114.
The 2005 Boston Globe article discussing ticket scalping points out that the price people will pay
for tickets will
rise when
a.
supply and demand are both limited.
b.
supply is limited and demand is not limited.
c.
supply is limited and demand is not limited.
d.
supply and demand are both not limited.
115.
Suppose that the equilibrium price in the market for widgets is $5. If a law increased the
minimum legal price for
widgets to $6, producer surplus
a.
would necessarily increase even if the higher price resulted in a surplus of widgets.
b.
would necessarily decrease because the higher price would create a surplus of widgets.
c.
might increase or decrease.
d.
would be unaffected.
116.
Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced
the maximum legal
price for tomatoes to $2 per pound,
a.
any possible increase in consumer surplus would be larger than the loss of producer surplus.
b.
any possible increase in consumer surplus would be smaller than the loss of producer surplus.
c.
the resulting increase in producer surplus would be larger than any possible loss of consumer
surplus.
d.
the resulting increase in producer surplus would be smaller than any possible loss of consumer
surplus.
117.
Suppose that the equilibrium price in the market for widgets is $5. If a law increased the
minimum legal price for
widgets to $6,
a.
the resulting increase in consumer surplus would be larger than any possible loss of producer
surplus.
b.
the resulting increase in consumer surplus would be smaller than any possible loss of producer
surplus.
c.
any possible increase in producer surplus would be larger than the loss of consumer surplus.
d.
any possible increase in producer surplus would be smaller than the loss of consumer surplus.
118.
Total surplus in a market will increase when the government
a.
imposes a binding price floor or a binding price ceiling on that market.
b.
imposes a tax on that market.
c.
Both a and b are correct.
d.
Neither a nor b is correct.
119.
Total surplus in a market will increase when the government
a.
imposes a tax on that market.
b.
imposes a binding price floor on that market.
c.
removes a binding price ceiling from that market.
d.
None of the above is correct.
120.
If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in
demand will
a.
increase producer surplus.
b.
reduce producer surplus.
c.
not affect producer surplus.
d.
Any of the above are possible.
121.
If a market is allowed to move freely to its equilibrium price and quantity, then an increase in
supply will
a.
increase consumer surplus.
b.
reduce consumer surplus.
c.
not affect consumer surplus.
d.
Any of the above are possible.
122.
A simultaneous increase in both the demand for MP3 players and the supply of MP3 players
would imply that
a.
both the value of MP3 players to consumers and the cost of producing MP3 players has
increased.
b.
both the value of MP3 players to consumers and the cost of producing MP3 players has
decreased.
c.
the value of MP3 players to consumers has decreased, and the cost of producing MP3 players
has
increased.
d.
the value of MP3 players to consumers has increased, and the cost of producing MP3 players
has
decreased.
123.
Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of
tomatoes will
a.
increase consumer surplus in the market for tomato sauce and decrease producer surplus in
the market for
spaghetti noodles.
b.
increase consumer surplus in the market for tomato sauce and increase producer surplus in
the market for
spaghetti noodles.
c.
decrease consumer surplus in the market for tomato sauce and increase producer surplus in
the market for
spaghetti noodles.
d.
decrease consumer surplus in the market for tomato sauce and decrease producer surplus in
the market for
spaghetti noodles.
124.
Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot
dogs buns will
a.
increase consumer surplus in the market for hot dog buns and decrease producer surplus in
the market for
hot dogs.
b.
increase consumer surplus in the market for hot dogs and increase producer surplus in the
market for hot dog
buns.
c.
decrease consumer surplus in the market for hot dog buns and increase producer surplus in
the market for
hot dogs.
d.
decrease consumer surplus in the market for hot dog buns and decrease producer surplus in
the market for
hot dogs.