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Exam 7: Consumers, Producers, and the Efficiency of Markets

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Question 1

Multiple Choice

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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.

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A

Question 2

Multiple Choice

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Figure 7-11 -Refer to Figure 7-11. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus?

A) $625
B) $1,250
C) $2,500
D) $5,000

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Question 3

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Figure 7-16 -Refer to Figure 7-16. Producer surplus amounts to $300 if the price of the good is

The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.

Table 7-20 -Refer to Table 7-20. How much is total consumer surplus at the equilibrium price in this market?

Answer each of the following questions about demand and consumer surplus. a. What is consumer surplus, and how is it measured? b. What is the relationship between the demand curve and the willingness to pay? c. Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve. d. In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve, what else must be considered to determine consumer surplus?

Figure 7-33 -Refer to Figure 7-33. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total surplus in this market at the new equilibrium price?

Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her purchase if her willingness to pay is

Figure 7-33 -Refer to Figure 7-33. How much is total producer surplus in this market at the equilibrium price?

Figure 7-24 -Refer to Figure 7-24. At equilibrium, consumer surplus is measured by the area

Figure 7-19 -Refer to Figure 7-19. If the government imposes a price ceiling of $55 in this market, then total surplus will be

Figure 7-32 -Refer to Figure 7-32. If the government imposed a price floor at $35 in this market, how much is consumer surplus?

Figure 7-12 -Refer to Figure 7-12. If the equilibrium price is $350, what is the producer surplus?

Suppose you buy an iPod for $100. If your consumer surplus is $30, your willingness to pay is $70.

Consumer surplus is the

Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. -Refer to Table 7-2. If the market price is $3.80,

Figure 7-12 -Refer to Figure 7-12. If the equilibrium price is $200, what is the producer surplus?

Jeff decides that he would pay as much as $2,000 for a new laptop computer. He buys the computer and realizes a consumer surplus of $300. How much did Jeff pay for his computer?

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,

Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market