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Scenario 7-1 Suppose market demand is given by the equation Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the change in total consumer surplus in the market? -Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the change in total consumer surplus in the market?

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Consumer surplus decreases by $75.

Table 7-11 The only four producers in a market have the following costs: Table 7-11 The only four producers in a market have the following costs: -Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the good will sell for A) $50 or slightly more. B) $100 or slightly less. C) $150 or slightly less. D) $200 or slightly more. -Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the good will sell for


A) $50 or slightly more.
B) $100 or slightly less.
C) $150 or slightly less.
D) $200 or slightly more.

E) A) and C)
F) A) and B)

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Efficiency in a market is achieved when


A) a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs.
B) the sum of producer surplus and consumer surplus is maximized.
C) all firms are producing the good at the same low cost per unit.
D) no buyer is willing to pay more than the equilibrium price for any unit of the good.

E) A) and D)
F) All of the above

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If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $10.

A) True
B) False

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


A) decreases.
B) is unchanged.
C) increases.
D) may increase, decrease, or remain unchanged.

E) A) and B)
F) C) and D)

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Table 7-10 The following table represents the costs of five possible sellers. Table 7-10 The following table represents the costs of five possible sellers. -Refer to Table 7-10. If the market price is $1,200, the producer surplus in the market is A) $100. B) $800. C) $400. D) $500. -Refer to Table 7-10. If the market price is $1,200, the producer surplus in the market is


A) $100.
B) $800.
C) $400.
D) $500.

E) C) and D)
F) A) and C)

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

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Total surp...

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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. 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. -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 -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

E) C) and D)
F) B) and C)

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Figure 7-25 Figure 7-25 -Refer to Figure 7-25. Suppose the government imposes a price floor of $28 in this market. If the sellers with the lowest cost are the ones who sell the good and the government does not purchase any excess units produced, then total surplus will be A) $400. B) $800. C) $1,120. D) $1,184. -Refer to Figure 7-25. Suppose the government imposes a price floor of $28 in this market. If the sellers with the lowest cost are the ones who sell the good and the government does not purchase any excess units produced, then total surplus will be


A) $400.
B) $800.
C) $1,120.
D) $1,184.

E) B) and D)
F) None of the above

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Inefficiency can be caused in a market by the presence of


A) market power.
B) externalities.
C) imperfectly competitive markets.
D) All of the above are correct.

E) A) and B)
F) B) and C)

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Figure 7-24 Figure 7-24 -Refer to Figure 7-24. At equilibrium, producer surplus is measured by the area A) ABD. B) ABF. C) CDI. D) BDF. -Refer to Figure 7-24. At equilibrium, producer surplus is measured by the area


A) ABD.
B) ABF.
C) CDI.
D) BDF.

E) All of the above
F) B) and D)

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Figure 7-29 Figure 7-29 -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. -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.

E) A) and B)
F) A) and C)

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Market power and externalities are examples of market failures.

A) True
B) False

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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.

E) C) and D)
F) A) and B)

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Figure 7-17 Figure 7-17 -Refer to Figure 7-17. Suppose the market starts out in equilibrium with demand curve D and supply curve S. Next, suppose demand shifts left so as to decrease the quantity demanded by 20 units at every price. What is the change in producer surplus as a result of this demand shift? A) $80 B) $160 C) $240 D) $320 -Refer to Figure 7-17. Suppose the market starts out in equilibrium with demand curve D and supply curve S. Next, suppose demand shifts left so as to decrease the quantity demanded by 20 units at every price. What is the change in producer surplus as a result of this demand shift?


A) $80
B) $160
C) $240
D) $320

E) A) and B)
F) C) and D)

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The current policy on kidney donation effectively sets a price ceiling of zero.

A) True
B) False

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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.

E) A) and B)
F) C) and D)

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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.

E) A) and C)
F) B) and D)

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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.

E) B) and D)
F) B) and C)

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A

Figure 7-16 Figure 7-16 -Refer to Figure 7-16. If the price of the good is $600, then A) consumer surplus is $800. B) consumer surplus is $900. C) producer surplus is $900. D) producer surplus is $1,000. -Refer to Figure 7-16. If the price of the good is $600, then


A) consumer surplus is $800.
B) consumer surplus is $900.
C) producer surplus is $900.
D) producer surplus is $1,000.

E) A) and B)
F) B) and C)

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D

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