Consumers, Producers, and the Efficiency of Markets 1853
97.
Refer to Figure 7-17. If the supply curve is S and the demand curve is D, what is total
producer surplus at the
equilibrium price?
a. $202.50
b. $405
c. $810
d. $1,215
98.
Refer to Figure 7–17. If the demand curve is D and the supply curve shifts left from S to S’,
what is the change
in producer surplus when comparing the new equilibrium with the original equilibrium?
a.
Producer surplus increases by $225.
b.
Producer surplus increases by $675.
c.
Producer surplus decreases by $225.
d.
Producer surplus decreases by $675.
99.
Refer to Figure 7-17. Suppose the market starts out in equilibrium with demand curve D and
supply curve S.
Next, suppose demand shifts left so as to decrease the quantity demanded by 20
units at every price. What is the
change in producer surplus as a result of this demand shift?
a.
$80
b.
$160
c.
$240
d.
$320
100.
Producer surplus equals
a.
Value to buyers – Amount paid by buyers.
b.
Amount received by sellers – Costs of sellers.
c.
Value to buyers – Costs of sellers.
d.
Value to buyers – Amount paid by buyers + Amount received by sellers – Costs of sellers.
101.
Producer surplus is the
a.
area under the supply curve to the left of the amount sold.
b.
amount a seller is paid minus the cost of production.
c.
area between the supply and demand curves, above the equilibrium price.
d.
cost to sellers of participating in a market.
102.
Producer surplus is the area
a.
under the supply curve.
b.
between the supply and demand curves.
c.
below the price and above the supply curve.
d.
under the demand curve and above the price.
103.
Producer surplus is
a.
represented on a graph by the area below the demand curve and above the supply curve.
b.
the amount a seller is paid minus the cost of production.
c.
also referred to as excess supply.
d.
All of the above are correct.
104.
Producer surplus directly measures
a.
the well-being of society as a whole.
b.
the well-being of buyers and sellers.
c.
the well–being of sellers.
d.
sellers’ willingness to sell.
105.
Producer surplus directly measures
a.
the well–being of sellers.
b.
production costs.
c.
excess demand.
d.
unsold inventories.
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.
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.
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
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.
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.
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.
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.
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.
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
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
2.
Economists typically measure efficiency using
a.
the price paid by buyers.
b.
the quantity supplied by sellers.
c.
total surplus.
d.
profits to firms.
3.
Consumer surplus equals the
a.
value to buyers minus the amount paid by buyers.
b.
value to buyers minus the cost to sellers.
c.
amount received by sellers minus the cost to sellers.
d.
amount received by sellers minus the amount paid by buyers.
4.
Producer surplus equals the
a.
value to buyers minus the amount paid by buyers.
b.
value to buyers minus the cost to sellers.
c.
amount received by sellers minus the cost to sellers.
d.
amount received by sellers minus the amount paid by buyers.
5.
Total surplus
a.
can be used to measure a market’s efficiency.
b.
is the sum of consumer and producer surplus.
c.
is the value to buyers minus the cost to sellers.
d.
All of the above are correct.
6.
Total surplus is
a.
the total cost to sellers of providing the good minus the total value of the good to buyers.
b.
the total value of the good to buyers minus the cost to sellers of providing the good.
c.
the difference between consumer surplus and sellers’ cost.
d.
always smaller than producer surplus.
7.
Total surplus is
a.
equal to consumer surplus minus producer surplus.
b.
equal to the total value to buyers minus the total cost to sellers.
c.
equal to consumers’ willingness to pay plus producers’ cost.
d.
greater than the sum of consumer surplus plus producer surplus.
8.
Total surplus is equal to
a.
value to buyers – profit to sellers.
b.
value to buyers – cost to sellers.
c.
consumer surplus x producer surplus.
d.
(consumer surplus + producer surplus) x equilibrium quantity.
9.
Total surplus in a market is equal to
a.
value to buyers – amount paid by buyers.
b.
amount received by sellers – costs of sellers.
c.
value to buyers – costs of sellers.
d.
amount received by sellers – amount paid by buyers.
10.
Total surplus in a market is equal to
a.
consumer surplus + producer surplus.
b.
value to buyers – amount paid by buyers.
c.
amount received by sellers – costs of sellers.
d.
producer surplus – consumer surplus.
11.
Total surplus is represented by the area
a.
under the demand curve and above the price.
b.
above the supply curve and up to the price.
c.
under the supply curve and up to the price.
d.
between the demand and supply curves up to the point of equilibrium.
12.
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