Ch 7 Consumers, Producers, Market Efficiency
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. Suppose Chris and Laura 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.
____
2. 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.
____
3. 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.
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.
Alex
Barb
Carlos
First Orange
$2.00
$1.50
$0.75
Second Orange
$1.50
$1.00
$0.25
Third Orange
$0.75
$0.80
$0
____
4. Refer to Table 7-5. If the market price of an orange is $0.70, the market quantity of oranges demanded per
day is
a. 5.
b. 6.
c. 7.
d. 9.
____
5. Refer to Table 7-5. Who experiences the largest loss of consumer surplus when the price of an orange
increases from $0.70 to $1.40?
a. Alex
b. Barb
1
c. Carlos
d. All three individuals experience the same loss of consumer surplus.
____
6. 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.
____
7. 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.
____
8. At Nick's Bakery, the cost to make homemade chocolate cake is $3 per cake. As a result of selling three
cakes, Nick experiences a producer surplus in the amount of $19.50. Nick must be selling his cakes for
a. $6.50 each.
b. $7.50 each.
c. $9.50 each.
d. $10.50 each.
Table 7-6
The following table represents the costs of five possible sellers.
Seller
Abby
Bobby
Carlos
Dianne
Evalina
____
Cost
$1,500
$1,200
$1,000
$750
$500
9. Refer to Table 7-6. If the market price is $900, the combined total cost of all participating sellers is
a. $3,700.
b. $2,700.
c. $2,250.
d. $1,250.
Figure 7-8
2
300
Price
275
250
S'
S
225
200
175
150
125
100
75
50
25
D
25
50
D'
75 100 125 150 175 200
Quantity
____ 10. Refer to Figure 7-8. 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
____ 11. Refer to Figure 7-8. If the demand curve is D and the supply curve shifts from S’ to S, what is the change in
producer surplus?
a. Producer surplus increases by $625.
b. Producer surplus increases by $1,875.
c. Producer surplus decreases by $625.
d. Producer surplus decreases by $1,875.
Figure 7-9
250
Price
S
225
200
175
150
125
100
75
50
25
25
50
75 100 125 150
Quantity
3
____ 12. Refer to Figure 7-9. If the equilibrium price rises from $50 to $200, what is the additional producer surplus
to initial producers?
a. $625
b. $3,750
c. $5,625
d. $10,000
Figure 7-10
Price
170
160
S
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
D
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
____ 13. Refer to Figure 7-10. If the government imposes a price ceiling of $70 in this market, then the new producer
surplus will be
a. $50.
b. $100.
c. $175.
d. $350.
____ 14. Refer to Figure 7-10. If the government imposes a price ceiling of $70 in this market, then producer surplus
will decrease by
a. $50.
b. $125.
c. $150.
d. $200.
Figure 7-11
4
Price
Supply
P2
B
A
P1
C
G
D
Q1
Quantity
Q2
____ 15. Refer to Figure 7-11. When the price is P2, producer surplus is
a. A.
b. A+C.
c. A+B+C.
d. D+G.
____ 16. Economists typically measure efficiency using
a. the price paid by buyers.
b. the quantity supplied by sellers.
c. total surplus.
d. profits to firms.
____ 17. At the equilibrium price of a good, the good will be purchased by those buyers who
a. value the good more than price.
b. value the good less than price.
c. have the money to buy the good.
d. consider the good a necessity.
Table 7-9
Price
$12.00
$10.00
$ 8.00
$ 6.00
$ 4.00
$ 2.00
$ 0.00
Quantity
Demanded
0
4
8
12
16
20
24
Quantity
Supplied
12
10
8
6
4
2
0
____ 18. Refer to Table 7-9. The equilibrium price is
a. $10.00.
b. $8.00.
c. $6.00.
d. $4.00.
5
____ 19. Refer to Table 7-9. At a price of $4.00, total surplus is
a. more than it would be at the equilibrium price.
b. less 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.
Figure 7-13
Price
J
Supply
K
N
Demand
L
M
R
Quantity
____ 20. Refer to Figure 7-13. 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 7-14
6
Price
Supply
P2
A
B
P1
C
D
Demand
Quantity
Q1
____ 21. Refer to Figure 7-14. When the price is P1, area C represents
a. total benefit.
b. producer surplus.
c. consumer surplus.
d. None of the above is correct.
____ 22. Refer to Figure 7-14. 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
Figure 7-16
P4
Price
Supply
A
P3
B
C
D
H
P2
P1
F
I
G
Demand
Q1
Q2
Quantity
____ 23. Refer to Figure 7-16. At equilibrium, total surplus is represented by the area
a. A+B+C.
7
b. A+B+D+F.
c. A+B+C+D+H+F.
d. A+B+C+D+H+F+G+I.
Figure 7-17
Price
K
48
44
Supply
A
40
36
32
F
G
28
24
H
B
Demand
20
16
12
8
C
4
1
2
3
4
5
6
7
8
9
10
11 Quantity
____ 24. Refer to Figure 7-17. At equilibrium, total surplus is measured by the area
a. ACG.
b. AFG.
c. KBG.
d. CFG.
____ 25. Market power refers to the
a. side effects that may occur in a market.
b. government regulations imposed on the sellers in a market.
c. ability of market participants to influence price.
d. forces of supply and demand in determining equilibrium price.
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Ch 7 Consumers, Producers, Market Efficiency
Answer Section
MULTIPLE CHOICE
1. ANS:
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2. ANS:
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3. ANS:
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5. ANS:
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7. ANS:
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11. ANS:
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12. ANS:
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13. ANS:
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14. ANS:
NAT:
MSC:
B
Analytic
Definitional
A
Analytic
Definitional
C
Analytic
Definitional
C
Analytic
Analytical
A
Analytic
Applicative
D
Analytic
Applicative
A
Analytic
Applicative
C
Analytic
Applicative
D
Analytic
Analytical
C
Analytic
Analytical
B
Analytic
Analytical
B
Analytic
Analytical
A
Analytic
Analytical
C
Analytic
Analytical
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 7-1
TOP: Willingness to pay
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-1
TOP: Willingness to pay
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 7-1
TOP: Consumer surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-1
TOP: Market demand
PTS: 1
DIF: 3
LOC: Supply and demand
REF: 7-1
TOP: Consumer surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-1
TOP: Consumer surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-1
TOP: Consumer surplus
PTS: 1
DIF: 3
LOC: Supply and demand
REF: 7-2
TOP: Producer surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-2
TOP: Opportunity cost
PTS: 1
DIF: 3
LOC: Supply and demand
REF: 7-2
TOP: Producer surplus
PTS: 1
DIF: 3
LOC: Supply and demand
REF: 7-2
TOP: Producer surplus
PTS: 1
DIF: 3
LOC: Supply and demand
REF: 7-2
TOP: Producer surplus
PTS: 1
DIF: 3
LOC: Supply and demand
REF: 7-2
TOP: Producer surplus
PTS: 1
DIF: 3
LOC: Supply and demand
REF: 7-2
TOP: Producer surplus
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15. ANS:
NAT:
MSC:
16. ANS:
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17. ANS:
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MSC:
18. ANS:
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MSC:
19. ANS:
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20. ANS:
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21. ANS:
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22. ANS:
NAT:
MSC:
23. ANS:
NAT:
MSC:
24. ANS:
NAT:
MSC:
25. ANS:
NAT:
MSC:
C
Analytic
Applicative
C
Analytic
Interpretive
A
Analytic
Interpretive
B
Analytic
Applicative
B
Analytic
Interpretive
D
Analytic
Interpretive
B
Analytic
Applicative
B
Analytic
Applicative
C
Analytic
Applicative
A
Analytic
Interpretive
C
Analytic
Definitional
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-2
TOP: Producer surplus
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 7-3
TOP: Consumer surplus
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 7-3
TOP: Efficiency
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 7-3
TOP: Efficiency
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-3
TOP: Total surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-3
TOP: Total surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-3
TOP: Producer surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-3
TOP: Total surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-3
TOP: Total surplus
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 7-3
TOP: Total surplus
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 7-4
TOP: Market power
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