Consumers, Producers, and the Efficiency of Markets 1913
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
1914 Consumers, Producers, and the Efficiency of Markets
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 1915
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.
1916 Consumers, Producers, and the Efficiency of Markets
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.
Consumers, Producers, and the Efficiency of Markets 1917
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.
1918 Consumers, Producers, and the Efficiency of Markets
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.
Consumers, Producers, and the Efficiency of Markets 1919
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.
1920 Consumers, Producers, and the Efficiency of Markets
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.
Consumers, Producers, and the Efficiency of Markets 1921
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.
1922 Consumers, Producers, and the Efficiency of Markets
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.
Consumers, Producers, and the Efficiency of Markets 1923
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.
1924 Consumers, Producers, and the Efficiency of Markets
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.
Consumers, Producers, and the Efficiency of Markets 1925
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.
1926 Consumers, Producers, and the Efficiency of Markets
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.
Consumers, Producers, and the Efficiency of Markets 1927
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.
1928 Consumers, Producers, and the Efficiency of Markets
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.
Consumers, Producers, and the Efficiency of Markets 1929
125. Steak and chicken are substitutes. A sharp reduction in the supply of steak would
a. increase consumer surplus in the market for steak and decrease producer surplus in the
market for chicken.
b. increase consumer surplus in the market for steak and increase producer surplus in the market
for chicken.
c. decrease consumer surplus in the market for steak and increase producer surplus in the
market for chicken.
d. decrease consumer surplus in the market for steak and decrease producer surplus in the
market for chicken.
126. Corn chips and potato chips are substitutes. Good weather that sharply increases the corn
harvest would
a. increase consumer surplus in the market for corn chips and decrease producer surplus in the
market for potato chips.
b. increase consumer surplus in the market for corn chips and increase producer surplus in the
market for potato chips.
c. decrease consumer surplus in the market for corn chips and increase producer surplus in the
market for potato chips.
d. decrease consumer surplus in the market for corn chips and decrease producer surplus in the
market for potato chips.
1930 Consumers, Producers, and the Efficiency of Markets
127. PlayStations and PlayStation games are complementary goods. A technological advance in the
production of PlayStations will
a. increase consumer surplus in the market for PlayStations and decrease producer surplus in
the market for PlayStation games.
b. increase consumer surplus in the market for PlayStations and increase producer surplus in the
market for PlayStation games.
c. decrease consumer surplus in the market for PlayStations and increase producer surplus in
the market for PlayStation games.
d. decrease consumer surplus in the market for PlayStations and decrease producer surplus in
the market for PlayStation games.
128. If the current allocation of resources in the market for hammers is inefficient, then it must be
the case that
a. producer surplus exceeds consumer surplus in the market for hammers.
b. consumer surplus exceeds producer surplus in the market for hammers.
c. the sum of consumer surplus and producer surplus could be increased by moving to a different
allocation of resources.
d. the costs that sellers of hammers are incurring could be reduced by moving to a different
allocation of resources.
Consumers, Producers, and the Efficiency of Markets 1931
129. If the current allocation of resources in the market for wallpaper is efficient, then it must be the
case that
a. producer surplus equals consumer surplus in the market for wallpaper.
b. the market for wallpaper is in equilibrium.
c. on the last unit of wallpaper that was produced and sold, the value to buyers exceeded the
cost to sellers.
d. All of the above are correct.
130. Five hundred units of good x are currently bought and sold. The marginal buyer is willing to pay
$40 for the 500th unit, and the cost to the marginal seller is $35 for the 500th unit
. We know that
a. the equilibrium price of good x is somewhere between $35 and $40.
b. the equilibrium quantity of good x exceeds 500 units.
c. 500 units is not an efficient quantity of good x.
d. All of the above are correct.
1932 Consumers, Producers, and the Efficiency of Markets
131. A simultaneous decrease 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.
132. Economists say that a market where goods are not consumed by those valuing the goods most
highly is
a. laissez-faire..
b. unequal.
c. inefficient.
d. rational.