Consumers, Producers, and the Efficiency of Markets 1793
137.
Refer to Figure 7-8. If the government imposes a price floor of $100 in this market, then
consumer surplus will
decrease by
a. $150.
b. $325.
c. $650.
d. $675.
138.
Refer to Figure 7-8. If the government imposes a price ceiling of $80 in this market, then,
assuming those with
the highest willingness to pay purchase the good, consumer surplus will be
a. $900.
b. $1,200.
c. $1,500.
d. $1,600.
139.
When the supply of a good decreases and the demand for the good remains unchanged,
consumer surplus
a.
decreases.
b.
is unchanged.
c.
increases.
d.
may increase, decrease, or remain unchanged.
140.
Which of the following is true when the price of a good or service rises?
a.
Buyers who were already buying the good or service are better off.
b.
Some buyers exit the market.
c.
The total consumer surplus in the market increases.
d.
The total value of purchases before and after the price change is the same.
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.
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.
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.
1798 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
1810 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.
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.
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.