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Chapter 7 Consumers, Producers, and the Efficiency of Markets
MULTIPLE CHOICE
1. Which of the following statements is correct?
a.
Buyers always want to pay less and sellers always want to be paid more.
b.
Buyers always want to pay less and sellers always want to be paid less.
c.
Buyers always want to pay more and sellers always want to be paid more.
d.
Buyers always want to pay more and sellers always want to be paid less.
2. Welfare economics is the study of how
a.
the allocation of resources affects economic well-being.
b.
a price ceiling compares to a price floor.
c.
the government helps poor people.
d.
a consumer’s optimal choice affects her demand curve.
3. Welfare economics is the study of
a.
taxes and subsidies.
b.
how technology is best put to use in the production of goods and services.
c.
government welfare programs for needy people.
d.
how the allocation of resources affects economic well-being.
4. Welfare economics is the study of
a.
the well-being of less fortunate people.
b.
welfare programs in the United States.
c.
how the allocation of resources affects economic well-being.
d.
the effect of income redistribution on work effort.
5. The study of how the allocation of resources affects economic well-being is called
a.
consumer economics.
b.
macroeconomics.
c.
willingness-to-pay economics.
d.
welfare economics.
2 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
6. An example of positive analysis is studying
a.
how market forces produce equilibrium.
b.
whether equilibrium outcomes are fair.
c.
whether equilibrium outcomes are socially desirable.
d.
if income distributions are fair.
7. An example of normative analysis is studying
a.
how market forces produce equilibrium.
b.
surpluses and shortages.
c.
whether equilibrium outcomes are socially desirable.
d.
income distributions.
8. Which of the Ten Principles of Economics does welfare economics explain more fully?
a.
The cost of something is what you give up to get it.
b.
Markets are usually a good way to organize economic activity.
c.
Trade can make everyone better off.
d.
A country’s standard of living depends on its ability to produce goods and services.
9. Which of the Ten Principles of Economics does welfare economics explain more fully?
a.
The cost of something is what you give up to get it.
b.
Rational people think at the margin.
c.
Markets are usually a good way to organize economic activity.
d.
People respond to incentives.
10. One of the basic principles of economics is that markets are usually a good way to organize economic activity.
This principle is explained by the study of
a.
factor markets.
b.
energy markets.
c.
welfare economics.
d.
labor economics.
11. A result of welfare economics is that the equilibrium price of a product is considered to be the best price be-
cause it
a.
maximizes both the total revenue for firms and the quantity supplied of the product.
b.
maximizes the combined welfare of buyers and sellers.
c.
minimizes costs and maximizes output.
d.
minimizes the level of welfare payments.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 3
12. The particular price that results in quantity supplied being equal to quantity demanded is the best price because
it
a.
maximizes costs of the seller.
b.
maximizes tax revenue for the government.
c.
maximizes the combined welfare of buyers and sellers.
d.
minimizes the expenditure of buyers.
13. Welfare economics explains which of the following in the market for DVDs?
a.
The government sets the price of DVDs; firms respond to the price by producing a specific level of
output.
b.
The government sets the quantity of DVDs; firms respond to the quantity by charging a specific
price.
c.
The market equilibrium price for DVDs maximizes the total welfare to DVD buyers and sellers.
d.
The market equilibrium price for DVDs maximizes consumer welfare but minimizes producer
welfare.
CONSUMER SURPLUS
1. The maximum price that a buyer will pay for a good is called the
a.
cost.
b.
willingness to pay.
c.
equity.
d.
efficiency.
2. Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first
movie. Each has in mind a maximum amount that he will bid. This maximum is called
a.
a resistance price.
b.
willingness to pay.
c.
consumer surplus.
d.
producer surplus.
3. Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a
maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called
a.
deadweight loss.
b.
willingness to pay.
c.
consumer surplus.
d.
producer surplus.
4 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
4. Willingness to pay
a.
measures the value that a buyer places on a good.
b.
is the amount a seller actually receives for a good minus the minimum amount the seller is willing
to accept.
c.
is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to
accept.
d.
is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
5. A consumer's willingness to pay directly measures
a.
the extent to which advertising and other external forces have influenced the consumer’s
preferences.
b.
the cost of a good to the buyer.
c.
how much a buyer values a good.
d.
consumer surplus.
6. When a buyer’s willingness to pay for a good is equal to the price of the good, the
a.
buyer’s consumer surplus for that good is maximized.
b.
buyer will buy as much of the good as the buyer’s budget allows.
c.
price of the good exceeds the value that the buyer places on the good.
d.
buyer is indifferent between buying the good and not buying it.
7. In which of the following circumstances would a buyer be indifferent about buying a good?
a.
The amount of consumer surplus the buyer would experience as a result of buying the good is zero.
b.
The price of the good is equal to the buyer’s willingness to pay for the good.
c.
The price of the good is equal to the value the buyer places on the good.
d.
All of the above are correct.
8. A demand curve reflects each of the following except the
a.
willingness to pay of all buyers in the market.
b.
value each buyer in the market places on the good.
c.
highest price buyers are willing to pay for each quantity.
d.
ability of buyers to obtain the quantity they desire.
9. Consumer surplus
a.
is closely related to the supply curve for a product.
b.
is represented by a rectangle on a supply-demand graph when the demand curve is a straight,
downward-sloping line.
c.
is measured using the demand curve for a product.
d.
does not reflect economic well-being in most markets.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 5
10. Consumer surplus is
a.
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
b.
the amount a buyer is willing to pay for a good minus the cost of producing the good.
c.
the amount by which the quantity supplied of a good exceeds the quantity demanded of the good.
d.
a buyer's willingness to pay for a good plus the price of the good.
11. Consumer surplus
a.
is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it.
b.
is represented on a supply-demand graph by the area below the price and above the demand curve.
c.
measures the benefit sellers receive from participating in a market.
d.
measures the benefit buyers receive from participating in a market.
12. Consumer surplus
a.
is the amount of a good that a consumer can buy at a price below equilibrium price.
b.
is the amount a consumer is willing to pay minus the amount the consumer actually pays.
c.
is the number of consumers who are excluded from a market because of scarcity.
d.
measures how much a seller values a good.
13. Consumer surplus is the
a.
amount of a good consumers get without paying anything.
b.
amount a consumer pays minus the amount the consumer is willing to pay.
c.
amount a consumer is willing to pay minus the amount the consumer actually pays.
d.
value of a good to a consumer.
14. Consumer surplus is equal to the
a.
Value to buyers - Amount paid by buyers.
b.
Amount paid by buyers - Costs of sellers.
c.
Value to buyers - Costs of sellers.
d.
Value to buyers - Willingness to pay of buyers.
15. On a graph, the area below a demand curve and above the price measures
a.
producer surplus.
b.
consumer surplus.
c.
deadweight loss.
d.
willingness to pay.
6 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
16. On a graph, consumer surplus is represented by the area
a.
between the demand and supply curves.
b.
below the demand curve and above price.
c.
below the price and above the supply curve.
d.
below the demand curve and to the right of equilibrium price.
17. Consumer surplus in a market can be represented by the
a.
area below the demand curve and above the price.
b.
distance from the demand curve to the horizontal axis.
c.
distance from the demand curve to the vertical axis.
d.
area below the demand curve and above the horizontal axis.
18. Consumer surplus is
a.
a concept that helps us make normative statements about the desirability of market outcomes.
b.
represented on a graph by the area below the demand curve and above the price.
c.
a good measure of economic welfare if buyers' preferences are the primary concern.
d.
All of the above are correct.
19. In a market, the marginal buyer is the buyer
a.
whose willingness to pay is higher than that of all other buyers and potential buyers.
b.
whose willingness to pay is lower than that of all other buyers and potential buyers.
c.
who is willing to buy exactly one unit of the good.
d.
who would be the first to leave the market if the price were any higher.
Table 7-1
Buyer
Willingness To Pay
Lori
$50.00
Audrey
$30.00
Zach
$20.00
Calvin
$10.00
20. Refer to Table 7-1. If the price of the product is $15, then who would be willing to purchase the product?
a.
Lori
b.
Lori and Audrey
c.
Lori, Audrey, and Zach
d.
Lori, Audrey, Zach, and Calvin
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 7
21. Refer to Table 7-1. If the price of the product is $22, then who would be willing to purchase the product?
a.
Lori
b.
Lori and Audrey
c.
Lori, Audrey, and Zach
d.
Lori, Audrey, Zach, and Calvin
22. Refer to Table 7-1. If the price of the product is $51, then who would be willing to purchase the product?
a.
Lori
b.
Lori and Audrey
c.
Lori, Audrey, and Zach
d.
no one
23. Refer to Table 7-1. If the price of the product is $18, then the total consumer surplus is
a.
$38.
b.
$42.
c.
$46.
d.
$72.
24. Refer to Table 7-1. If price of the product is $30, then the total consumer surplus is
a.
$-10.
b.
$-6.
c.
$20.
Table 7-2
This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke.
Buyer
Willingness To Pay
David
$8.50
Laura
$7.00
Megan
$5.50
Mallory
$4.00
Audrey
$3.50
25. Refer to Table 7-2. If the price of Vanilla Coke is $6.90, who will purchase the good?
a.
all five individuals
b.
Megan, Mallory and Audrey
c.
David, Laura and Megan
d.
David and Laura
8 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
26. Refer to Table 7-2. Which of the following is not true?
a.
At a price of $9.00, no buyer is willing to purchase Vanilla Coke.
b.
At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying
one.
c.
At a price of $4.00, total consumer surplus in the market will be $9.00.
d.
All of the above are correct.
27. Refer to Table 7-2. If the market price is $5.50, the consumer surplus in the market will be
a.
$3.00.
b.
$4.50.
c.
$15.50.
d.
$21.00.
28. Refer to Table 7-2. If the market price is $3.80,
a.
David’s consumer surplus is $4.70 and total consumer surplus for the five individuals is $9.50.
b.
Megan’s consumer surplus is $1.70 and total consumer surplus for the five individuals is $9.80.
c.
David, Laura, and Megan will be the only buyers of Vanilla Coke.
d.
the demand curve for Vanilla Coke, taking the five individuals into account, is horizontal.
Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
Buyer
Willingness to Pay
Carlos
$15
Quilana
$25
Wilbur
$35
Ming-la
$45
29. Refer to Table 7-3. If the market price for the good is $20, who will purchase the good?
a.
Ming-la only
b.
Carlos and Quilana only
c.
Quilana and Wilbur only
d.
Quilana, Wilbur, and Ming-la only
30. Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right
to purchase it, then the good will sell for
a.
$15 or slightly less.
b.
$25 or slightly more.
c.
$35 or slightly more.
d.
$45 or slightly less.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 9
31. Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right
to purchase it, then the consumer surplus will be
a.
$0 or slightly more.
b.
$10 or slightly less.
c.
$30 or slightly more.
d.
$45 or slightly less.
32. Refer to Table 7-3. If the price is $20, then consumer surplus in the market is
a.
$20, and Wilbur and Ming-la purchase the good.
b.
$45, and Carlos and Quilana purchase the good.
c.
$45, and Quilana, Wilbur, and Ming-la purchase the good.
d.
$55, and Carlos, Wilbur, and Ming-la purchase the good.
33. Refer to Table 7-3. Who experiences the largest loss of consumer surplus when the price of the good in-
creases from $20 to $22?
a.
Quilana
b.
Wilbur
c.
Ming-la
d.
All three buyers experience the same loss of consumer surplus.
Table 7-4
The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis
Cardinal’s baseball game at Wrigley Field.
Buyer
Willingness to Pay
Jennifer
$10
Bryce
$15
Dan
$20
David
$25
Ken
$50
Lisa
$60
34. Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, what will be the selling price?
a.
$21
b.
$26
c.
$51
d.
$61
10 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
35. Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, who will buy the ticket?
a.
Dan
b.
David
c.
Ken
d.
Lisa
36. Refer to Table 7-4. If tickets sell for $20 each, then what is the total consumer surplus in the market?
a.
$5
b.
$30
c.
$40
d.
$75
37. Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus in the market?
a.
$25
b.
$35
c.
$60
d.
$110
38. Refer to Table 7-4. If you have two (essentially) identical tickets that you sell to the group in an auction,
what will be the selling price for each ticket?
a.
$21
b.
$26
c.
$51
d.
$61
Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three
oranges of the day. Assume Alex, Barb, and Carlos are the only three buyers of oranges, and only three
oranges can be supplied per day.
First Orange
Second Orange
Third Orange
Allison
$2.00
$1.50
$0.75
Bob
$1.50
$1.00
$0.80
Charisse
$0.75
$0.25
$0
39. Refer to Table 7-5. If the market price of an orange is $1.20, then the market quantity of oranges demanded
per day is
a.
1.
b.
2.
c.
3.
d.
4.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 11
40. Refer to Table 7-5. If the market price of an orange is $0.70, then the market quantity of oranges demanded
per day is
a.
5.
b.
6.
c.
7.
d.
9.
41. Refer to Table 7-5. The market quantity of oranges demanded per day is exactly 5 if the price of an orange, P,
satisfies
a.
$1.00 < P < $1.50.
b.
$0.80 < P < $1.50.
c.
$0.80 < P < $1.00.
d.
$0.75 < P < $0.80.
42. Refer to Table 7-5. If the market price of an orange is $1.20, then consumer surplus amounts to
a.
$0.70.
b.
$1.10.
c.
$1.40.
d.
$5.00.
43. Refer to Table 7-5. If the market price of an orange is $0.40, then
a.
6 oranges are demanded per day, and consumer surplus amounts to $4.45.
b.
6 oranges are demanded per day, and consumer surplus amounts to $5.10.
c.
7 oranges are demanded per day, and consumer surplus amounts to $5.35.
d.
7 oranges are demanded per day, and consumer surplus amounts to $5.50.
44. Refer to Table 7-5. If the market price of an orange increases from $0.60 to $1.05, then consumer surplus
a.
increases by $2.90.
b.
decreases by $2.25.
c.
decreases by $2.70.
d.
decreases by $3.85.
45. Refer to Table 7-5. If the market price of an orange increases from $0.70 to $1.40, then consumer surplus
a.
increases by $2.50.
b.
decreases by $0.80.
c.
decreases by $2.60.
d.
decreases by $3.40.
12 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
46. Refer to Table 7-5. Who experiences the largest loss of consumer surplus when the price of an orange in-
creases from $0.70 to $1.40?
a.
Allison
b.
Bob
c.
Charisse
d.
All three individuals experience the same loss of consumer surplus.
47. Refer to Table 7-5. Who experiences the largest gain in consumer surplus when the price of an orange de-
creases from $1.05 to $0.75?
a.
Allison
b.
Bob
c.
Charisse
d.
Allison and Bob experience the same gain in consumer surplus, and Charisse’s gain is zero.
48. Refer to Table 7-5. Which of the following statements is correct?
a.
Neither Bob’s consumer surplus nor Charisse’s consumer surplus can exceed Allison’s consumer
surplus, for any price of an orange.
b.
All three individuals will buy at least one orange only if the price of an orange is less than $0.25.
c.
If the price of an orange is $0.60, then consumer surplus is $4.90.
d.
All of the above are correct.
Table 7-6
Buyer
Willingness to Pay
Michael
$500
Earvin
$400
Larry
$350
Charles
$300
49. Refer to Table 7-6. You have an extra ticket to the Midwest Regional Sweet 16 game in the men’s NCAA
basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a
ticket to the game. You hold an auction to sell the ticket. Who makes the winning bid, and what does he offer
to pay for the ticket?
a.
Michael; $501
b.
Michael; more than $400 but less than or equal to $500
c.
Earvin; $400
d.
Earvin; more than $350 but less than or equal to $400
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 13
50. Refer to Table 7-6. You have an extra ticket to the Midwest Regional Sweet 16 game in the men’s NCAA
basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a
ticket to the game. You hold an auction to sell the ticket. Michael bids $410 for the ticket, and you sell him
the ticket. What is his consumer surplus?
a.
$410
b.
$90
c.
$10
d.
$0
51. Refer to Table 7-6. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game
in the men’s NCAA basketball tournament. The table shows the willingness to pay of the four potential buy-
ers in the market for a ticket to the game. You hold an auction to sell the two tickets. Who makes the winning
bids, and what do they offer to pay for the tickets?
a.
Michael and Earvin; more than $350 but less than or equal to $400
b.
Michael and Earvin; more than $400 but less than or equal to $500
c.
Earvin and Larry; more than $300 but less than or equal to $350
d.
Larry and Charles; less than $300
52. Refer to Table 7-6. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game
in the men’s NCAA basketball tournament. The table shows the willingness to pay of the four potential buy-
ers in the market for a ticket to the game. You hold an auction to sell the two tickets. Michael and Earvin
each offer to pay $360 for a ticket, and you sell them the two tickets. What is the total consumer surplus in the
market?
a.
$720
b.
$180
c.
$140
d.
$40
53. Refer to Table 7-6. You have four essentially identical extra tickets to the Midwest Regional Sweet 16 game
in the men’s NCAA basketball tournament. The table shows the willingness to pay of the four potential buy-
ers in the market for a ticket to the game. You offer to sell the tickets for $400. How many tickets do you
sell, and what is the total consumer surplus in the market?
a.
one ticket; $100
b.
two tickets; $100
c.
two tickets; $0
d.
three tickets; $0
14 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
54. Refer to Table 7-6. You have four essentially identical extra tickets to the Midwest Regional Sweet 16 game
in the men’s NCAA basketball tournament. The table shows the willingness to pay of the four potential buy-
ers in the market for a ticket to the game. You offer to sell the tickets for $325. How many tickets do you
sell, and what is the total consumer surplus in the market?
a.
one ticket; $175
b.
two tickets; $225
c.
three tickets; $225
d.
three tickets; $275
55. Refer to Table 7-6. You are selling extra tickets to the Midwest Regional Sweet 16 game in the men’s
NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the mar-
ket for a ticket to the game. Which of the following graphs represents the market demand curve?
a.
$400
$350
$300
$500
1 2 3 4 Quantity
Price
c.
$400
$350
$300
$500
1 2 3 4 Quantity
Price
b.
$400
$350
$300
$500
1 2 3 4 Quantity
Price
d.
$500
$400
$350
$300
$500
1 2 3 4 Quantity
Price
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 15
56. You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume
the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best
alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up
to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based
on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to
accept the ticket and go to the game?
a.
$0
b.
$10
c.
$40
d.
$50
57. A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the
market for red grapes
a.
increases, and the consumer surplus in the market for red wine increases.
b.
increases, and the consumer surplus in the market for red wine decreases.
c.
decreases, and the consumer surplus in the market for red wine increases.
d.
decreases, and the consumer surplus in the market for red wine decreases.
58. Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog
show at
a.
$5.
b.
$15.
c.
$20.
d.
$35.
59. If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the
a.
consumer has consumer surplus of $2 if he or she buys the good.
b.
consumer does not purchase the good.
c.
market is not a competitive market.
d.
price of the good will fall due to market forces.
60. If a consumer places a value of $20 on a particular good and if the price of the good is $25, then the
a.
consumer has consumer surplus of $5 if he buys the good.
b.
consumer does not purchase the good.
c.
price of the good will rise due to market forces.
d.
market is out of equilibrium.
16 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
61. If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that
consumer, consumer surplus amounts to
a.
$4.
b.
$16.
c.
$20.
d.
$36.
62. Kelly is willing to pay $68 for a pair of shoes for a wedding. She finds a pair at her favorite outlet shoe store
for $58. Kelly's consumer surplus is
a.
$10.
b.
$28.
c.
$58.
d.
$68.
63. Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $350. His consumer surplus is
a.
$50.
b.
$150.
c.
$350.
d.
$400.
64. Josh is willing to pay $40 for a haircut, but he is able to pay $25 at the local salon. His consumer surplus is
a.
$0 because the cost exceeds his maximum willingness to pay.
b.
$15.
c.
$25.
d.
$65.
65. Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's willing-
ness to pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30. Total con-
sumer surplus for these three would be
a.
$15.
b.
$30.
c.
$45.
d.
$90.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 17
66. Suppose Brent, Callie, and Danielle each purchase a particular type of electric pencil sharpener at a price of
$20. Brent’s willingness to pay was $22, Callie’s willingness to pay was $25, and Danielle's willingness to pay
was $30. Which of the following statements is correct?
a.
Had the price of the pencil sharpener been $24 rather than $20, only Danielle would have been a
buyer.
b.
Brent’s consumer surplus is the smallest of the three individual consumer surpluses.
c.
For the three individuals together, consumer surplus amounts to $60.
d.
The fact that all three individuals paid $20 for the same type of pencil sharpener indicates that each
one placed the same value on that pencil sharpener.
67. Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie’s
willingness to pay was $100, Kendra’s willingness to pay was $95, and Kristen's willingness to pay was $80.
Which of the following statements is correct?
a.
For the three individuals together, consumer surplus amounts to $35.
b.
Having bought the cell phone, Kristen is better off than she would have been had she not bought it.
c.
Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have
been buyers and Kristen definitely would not have been a buyer.
d.
The fact that all three individuals paid $80 for the same type of cell phone indicates that each one
placed the same value on that cell phone.
68. Sarah buys a new MP3 player for $135. She receives consumer surplus of $25 on her purchase if her willing-
ness to pay is
a.
$25.
b.
$110.
c.
$135.
d.
$160.
69. Abraham drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.55
per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the
third can, and $0.40 for the fourth can. Assume Abraham is rational in deciding how many cans to buy. His
consumer surplus is
a.
$0.50.
b.
$0.60.
c.
$0.70.
d.
$1.00.
18 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
70. Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the
performance at
a.
$20.
b.
$30.
c.
$50.
d.
$80.
71. Chad is willing to pay $5.00 to get his first cup of morning latté. He buys a cup from a vendor selling latté for
$3.75 per cup. Chad's consumer surplus is
a.
$8.75.
b.
$5.00.
c.
$3.75.
d.
$1.25.
72. Chad is willing to pay $5.00 to get his first cup of morning latté; he is willing to pay $4.50 for a second cup.
He buys his first cup from a vendor selling latté for $3.75 per cup. He returns to that vendor later in the morn-
ing to find that the vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the fol-
lowing statements is correct?
a.
Chad’s willingness to pay for his second cup of latté was smaller than his willingness to pay for his
first cup of latté.
b.
Chad’s consumer surplus on his second cup of latté was larger than his consumer surplus on his
first cup of latté.
c.
Chad is irrational in that he is willing to pay a different price for his second cup of latté than what
he is willing to pay for his first cup of latté.
d.
Chad places a higher value on his second cup of latté than on his first cup of latté.
73. Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price
of bananas falls from 50 cents a pound to 40 cents a pound,
a.
Henry experiences an increase in consumer surplus, but Janine does not.
b.
Janine experiences an increase in consumer surplus, but Henry does not.
c.
both Janine and Henry experience an increase in consumer surplus.
d.
neither Janine nor Henry experiences an increase in consumer surplus.
74. Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ri-
beye steak increases from $9 to $11,
a.
Alex experiences a decrease in consumer surplus, but Bella does not.
b.
Bella experiences a decrease in consumer surplus, but Alex does not.
c.
both Bella and Alex experience a decrease in consumer surplus.
d.
neither Bella nor Alex experiences a decrease in consumer surplus.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 19
75. Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is
a.
$8,500.
b.
$15,500.
c.
$24,000.
d.
$39,500.
76. Dawn’s bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the
benefit of the lower prices to
a.
only existing customers who now get lower prices on the gowns they were already planning to
purchase.
b.
only new customers who enter the market because of the lower prices.
c.
both existing customers who now get lower prices on the gowns they were already planning to
purchase and new customers who enter the market because of the lower prices.
d.
Consumer surplus does not increase; it decreases.
77. Jeff decides that he would pay as much as $2,000 for a new laptop computer. He buys the computer and real-
izes a consumer surplus of $300. How much did Jeff pay for his computer?
a.
$300.
b.
$1,700.
c.
$2,000.
d.
$2,300.
78. Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for
$425. Billie Jo's willingness to pay for the dishwasher is
a.
$150.
b.
$425.
c.
$500.
d.
$850.
79. Denise values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $350.
Denise's consumer surplus is
a.
$150.
b.
$350.
c.
$500.
d.
$850.
20 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
80. Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for
$3,000. Michael's willingness to pay is
a.
$500.
b.
$3,000.
c.
$3,500.
d.
$6,500.
81. Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for
$3,000. Michael's consumer surplus is
a.
$500.
b.
$3,000.
c.
$3,500.
d.
$6,500.
82. Denise values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is
$650. Denise
a.
buys the dishwasher, and on her purchase she experiences a consumer surplus of $150.
b.
buys the dishwasher, and on her purchase she experiences a consumer surplus of $-150.
c.
does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $150.
d.
does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $0.
83. Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willing-
ness to pay is
a.
$13,000.
b.
$105,000.
c.
$118,000.
d.
$131,000.
84. Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and real-
izes consumer surplus of $700. How much did Jeff pay for his computer?
a.
$700
b.
$2,300
c.
$3,000
d.
$3,700
