Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 61
26. Refer to Table 7-11. At a price of $2.00, total surplus is
a.
larger than it would be at the equilibrium price.
b.
smaller than it would be at the equilibrium price.
c.
the same as it would be at the equilibrium price.
d.
There is insufficient information to make this determination.
27. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, consum-
er surplus is
a.
$24.
b.
$36.
c.
$42.
d.
$48.
28. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, producer
surplus is
a.
$24.
b.
$32.
c.
$48.
d.
$64.
29. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, total
surplus is
a.
$44.
b.
$56.
c.
$72.
d.
$96.
30. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only
6 units are bought and sold, consumer surplus will be
a.
$21.
b.
$28.
c.
$36.
d.
$42.
62 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
31. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only
6 units are bought and sold, producer surplus will be
a.
$16.
b.
$18.
c.
$24.
d.
$26.
32. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only
6 units are bought and sold, total surplus will be
a.
$42.
b.
$48.
c.
$54.
d.
$60.
33. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If 6 units are bought and
sold, then total surplus is
a.
$18 lower than it would be if the equilibrium number of units were bought and sold.
b.
$22 lower than it would be if the equilibrium number of units were bought and sold.
c.
$26 lower than it would be if the equilibrium number of units were bought and sold.
d.
$6 higher than it would be if the equilibrium number of units were bought and sold.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 63
Figure 7-14
Supply
1 2 3 4 5 Q
50
100
150
200
250
300
350
P
34. Refer to Figure 7-14. Suppose the willingness to pay of the marginal buyer of the 3rd unit is $225. Then total
surplus is maximized if
a.
1 unit of the good is produced and sold.
b.
2 units of the good are produced and sold.
c.
3 units of the good are produced and sold.
d.
4 units of the good are produced and sold.
35. Refer to Figure 7-14. If total surplus is $750 and consumer surplus is
a.
$500, then the price of the good is $200.
b.
$450, then the price of the good is $200.
c.
$600, then the price of the good is $175.
d.
$500, then the price of the good is $175.
36. Refer to Figure 7-14. Total surplus amounts to $800 if consumer surplus amounts to
a.
$450 and if the price of the good is $250.
b.
$450 and if the price of the good is $300.
c.
$350 and if the price of the good is $300.
d.
$250 and if the price of the good is $325.
64 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
Figure 7-15
Supply
Demand
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Quantity
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
Price
37. Refer to Figure 7-15. At the equilibrium price, consumer surplus is
a.
$150.
b.
$200.
c.
$250.
d.
$350.
38. Refer to Figure 7-15. At the equilibrium price, producer surplus is
a.
$80.
b.
$100.
c.
$120.
d.
$135.
39. Refer to Figure 7-15. At the equilibrium price, total surplus is
a.
$150.
b.
$200.
c.
$250.
d.
$300.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 65
40. Refer to Figure 7-15. If the government imposes a price ceiling of $60 in this market, then total surplus will
be
a.
$187.50.
b.
$212.50.
c.
$250.00.
d.
$266.67.
41. Refer to Figure 7-15. If the government imposes a price floor of $60 in this market, then total surplus will be
a.
higher by $57.50 than it would be without the price floor.
b.
lower by $20.00 than it would be without the price floor.
c.
lower by $45.00 than it would be without the price floor.
d.
lower by $62.50 than it would be without the price floor.
42. Refer to Figure 7-15. If the government imposes a price floor of $60 in this market, then total surplus will be
a.
$110.50.
b.
$125.00.
c.
$187.50.
d.
$225.25..
MSC: Applicative
Figure 7-16
Demand
J
L
Supply
K N
MR
Quantity
Price
43. Refer to Figure 7-16. Total surplus can be measured as the area
a.
JNK.
b.
JNML.
c.
JRL.
d.
JNL.
66 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
44. Refer to Figure 7-16. For quantities less than M, the value to the marginal buyer is
a.
greater than the cost to the marginal seller, so increasing the quantity increases total surplus.
b.
less than the cost to the marginal seller, so increasing the quantity increases total surplus.
c.
greater than the cost to the marginal seller, so decreasing the quantity increases total surplus.
d.
less than the cost to the marginal seller, so decreasing the quantity increases total surplus.
45. Refer to Figure 7-16. For quantities greater than M, the value to the marginal buyer is
a.
greater than the cost to the marginal seller, so increasing the quantity increases total surplus.
b.
less than the cost to the marginal seller, so increasing the quantity increases total surplus.
c.
greater than the cost to the marginal seller, so decreasing the quantity increases total surplus.
d.
less than the cost to the marginal seller, so decreasing the quantity increases total surplus.
Figure 7-17
Quantity
Price
46. Refer to Figure 7-17. Which area represents consumer surplus when the price is P1?
a.
A
b.
B
c.
C
d.
D
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 67
47. Refer to Figure 7-17. When the price is P1, area B represents
a.
total surplus.
b.
producer surplus.
c.
consumer surplus.
d.
profits.
48. Refer to Figure 7-17. Which area represents producer surplus when the price is P1?
a.
A
b.
B
c.
C
d.
D
49. Refer to Figure 7-17. When the price is P1, area C represents
a.
total benefit.
b.
producer surplus.
c.
consumer surplus.
d.
None of the above is correct.
50. Refer to Figure 7-17. When the price is P1, area A represents
a.
total benefit.
b.
producer surplus.
c.
consumer surplus.
d.
None of the above is correct.
51. Refer to Figure 7-17. When the price is P1, area B+C represents
a.
total surplus.
b.
producer surplus.
c.
consumer surplus.
d.
None of the above is correct.
52. Refer to Figure 7-17. Which area represents total surplus in the market when the price is P1?
a.
A+B
b.
B+C
c.
C+D
d.
A+B+C+D
68 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
Figure 7-18
Demand
Supply
10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 Quantity
2
4
6
8
10
12
14
16
18
20
22
24
26
28
Price
53. Refer to Figure 7-18. At the equilibrium price, consumer surplus is
a.
$480.
b.
$640.
c.
$1,120.
d.
$1,280.
54. Refer to Figure 7-18. If the price decreases from $22 to $16 due to a shift in the supply curve, consumer sur-
plus increases by
a.
$120.
b.
$360.
c.
$480.
d.
$600.
55. Refer to Figure 7-18. At the equilibrium price, producer surplus is
a.
$480.
b.
$640.
c.
$1,120.
d.
$1,280.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 69
56. Refer to Figure 7-18. At the equilibrium price, total surplus is
a.
$480.
b.
$640.
c.
$1,120.
d.
$1,280.
57. Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price increases to $22 and equi-
librium quantity increases to 110. The increase in producer surplus due to new producers entering the market
would be
a.
$90.
b.
$210.
c.
$360.
d.
$480.
58. Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price increases to $22 and equi-
librium quantity increases to 110. The increase in producer surplus to producers already in the market would
be
a.
$90.
b.
$210.
c.
$360.
d.
$480.
59. Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price increases to $22 and equi-
librium quantity increases to 110. The increase in producer surplus would be
a.
$210.
b.
$360.
c.
$480.
d.
$570.
60. Refer to Figure 7-18. The efficient price is
a.
$22, and the efficient quantity is 40.
b.
$22, and the efficient quantity is 110.
c.
$16, and the efficient quantity is 80.
d.
$8, and the efficient quantity is 40.
70 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
61. Refer to Figure 7-18. If 110 units of the good are being bought and sold, then
a.
the marginal cost to sellers is equal to the marginal value to buyers.
b.
the marginal value to buyers is greater than the marginal cost to sellers.
c.
the marginal cost to sellers is greater than the marginal value to buyers.
d.
producer surplus is greater than consumer surplus.
62. Refer to Figure 7-18. If 40 units of the good are being bought and sold, then
a.
the marginal cost to sellers is equal to the marginal value to buyers.
b.
the marginal value to buyers is greater than the marginal cost to sellers.
c.
the marginal cost to sellers is greater than the marginal value to buyers.
d.
producer surplus would be greater than consumer surplus.
Figure 7-19
Demand
Supply
Q2Q1
P1
P2
P3
A
B
D
F
G
C
H
I
P4
Quantity
Price
63. Refer to Figure 7-19. The equilibrium price is
a.
P1.
b.
P2.
c.
P3.
d.
P4.
64. Refer to Figure 7-19. At equilibrium, consumer surplus is represented by the area
a.
A.
b.
A+B+C.
c.
D+H+F.
d.
A+B+C+D+H+F.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 71
65. Refer to Figure 7-19. If the price were P3, consumer surplus would be represented by the area
a.
A.
b.
A+B+C.
c.
D+H+F.
d.
A+B+C+D+H+F.
66. Refer to Figure 7-19. At equilibrium, producer surplus is represented by the area
a.
F.
b.
F+G.
c.
D+H+F.
d.
D+H+F+G+I.
67. Refer to Figure 7-19. If the price were P1, producer surplus would be represented by the area
a.
F.
b.
F+G.
c.
D+H+F.
d.
D+H+F+G+I.
68. Refer to Figure 7-19. At equilibrium, total surplus is represented by the area
a.
A+B+C.
b.
A+B+D+F.
c.
A+B+C+D+H+F.
d.
A+B+C+D+H+F+G+I.
69. Refer to Figure 7-19. The efficient price-quantity combination is
a.
P1 and Q1.
b.
P2 and Q2.
c.
P3 and Q1.
d.
P4 and 0.
72 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
Figure 7-20
A
B
C
K
Demand
Supply
F
G
H
1 2 3 4 5 6 7 8 9 10 11 Quantity
4
8
12
16
20
24
28
32
36
40
44
48
Price
70. Refer to Figure 7-20. At equilibrium, consumer surplus is measured by the area
a.
ACG.
b.
AFG.
c.
KBG.
d.
CFG.
71. Refer to Figure 7-20. At equilibrium, consumer surplus is
a.
$36.
b.
$72.
c.
$108.
d.
$144.
72. Refer to Figure 7-20. At equilibrium, producer surplus is measured by the area
a.
ACG.
b.
AFG.
c.
KBG.
d.
CFG.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 73
73. Refer to Figure 7-20. At equilibrium, producer surplus is
a.
$36.
b.
$72.
c.
$108.
d.
$144.
74. Refer to Figure 7-20. At equilibrium, total surplus is measured by the area
a.
ACG.
b.
AFG.
c.
KBG.
d.
CFG.
75. Refer to Figure 7-20. At equilibrium, total surplus is
a.
$36.
b.
$72.
c.
$108.
d.
$144.
76. Refer to Figure 7-20. The equilibrium allocation of resources is
a.
efficient because total surplus is maximized at the equilibrium.
b.
efficient because consumer surplus is maximized at the equilibrium.
c.
inefficient because consumer surplus is larger than producer surplus at the equilibrium.
d.
inefficient because total surplus is maximized when 10 units of output are produced and sold.
77. Refer to Figure 7-20. If 4 units of the good are produced and sold, then
a.
the cost to sellers exceeds the value to buyers.
b.
producer surplus is maximized.
c.
total surplus is minimized.
d.
the allocation of resources is inefficient.
78. Refer to Figure 7-20. If 10 units of the good are produced and sold, then
a.
the marginal cost to sellers exceeds the marginal value to buyers.
b.
producer surplus is maximized.
c.
total surplus is minimized.
d.
the marginal value to buyers exceeds the marginal cost to sellers.
74 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
79. Refer to Figure 7-20. If 6 units of the good are produced and sold, then
a.
consumer surplus is maximized.
b.
producer surplus is maximized.
c.
the sum of consumer surplus and producer surplus is maximized.
d.
the marginal value to buyers exceeds the marginal cost to sellers.
80. Refer to Figure 7-20. If 6 units of the good are produced and sold, then
a.
efficiency is achieved in this market.
b.
the marginal value to buyers equals the marginal cost to sellers.
c.
the sum of consumer surplus and producer surplus is maximized.
d.
All of the above are correct.
Figure 7-21
Supply
Demand
B
A
C
H
K
Q1
P1
Quantity
Price
81. Refer to Figure 7-21. Buyers who value this good more than the equilibrium price are represented by which
line segment?
a.
AC.
b.
CK.
c.
BC.
d.
CH.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 75
82. Refer to Figure 7-21. Buyers who value this good less than the equilibrium price are represented by which
line segment?
a.
AC.
b.
CK.
c.
BC.
d.
CH.
83. Refer to Figure 7-21. Sellers whose costs are less than the equilibrium price are represented by which line
segment?
a.
AC.
b.
CK.
c.
BC.
d.
CH.
84. Refer to Figure 7-21. Sellers whose costs are greater than the equilibrium price are represented by segment
a.
AC.
b.
CK.
c.
BC.
d.
CH.
85. Refer to Figure 7-21. 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.
76 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
Figure 7-22
Demand
Supply
Q1Q2 Q3
P2
P1
P3
Quantity
Price
86. Refer to Figure 7-22. 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.
87. Refer to Figure 7-22. 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.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 77
Figure 7-23
Demand
Supply
Q2 Q3 Q4
Q1
Quantity
Price
88. Refer to Figure 7-23. 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.
89. 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.
90. 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.
91. 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.
78 ❖ Chapter 7/Consumers, Producers, and the Efficiency of Markets
92. 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.
93. 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.
94. 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.
95. 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.
96. 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.
97. 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.
Chapter 7/Consumers, Producers, and the Efficiency of Markets ❖ 79
98. 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.
99. 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.
100. 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.
101. 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.
102. 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.
103. 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.