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

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Question 1

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Figure 7-28 -Refer to Figure 7-28. 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.

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

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Question 2

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Figure 7-1 -Refer to Figure 7-1. If the price of the good is $200, then

A) consumer surplus is $150.
B) consumer surplus is $650.
C) producer surplus is $650.
D) producer surplus is $750.

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

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Question 3

Multiple Choice

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Figure 7-15 -Refer to Figure 7-15. When the price falls from P2 to P1, producer surplus

Figure 7-21 -Refer to Figure 7-21. Which area represents total surplus in the market when the price is P1?

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?

Table 7-12 The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality. Seller Cost Marcia $200 Jan $250 Cindy $350 Greg $400 Peter $700 Bobby $800 -Refer to Table 7-12. You wish to purchase 10 piano lessons, so you take bids from each of the sellers. The bids are required to be rounded to the nearest dollar. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. Your parents have given you $450 to spend on piano lessons. You believe that the sellers with higher opportunity costs offer higher quality lessons. You want the highest quality lessons that you can afford, but you can spend any remaining money on dinner with friends. From whom will you take lessons, and how much money will you spend?

Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay for it.

If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $90.

Table 7-15 The following table represents the costs of five possible sellers. Seller Cost ($) Quentin 10 Ruby 30 Sandra 60 Thomas 100 Ursula 150 -Refer to Table 7-15. If each producer has one unit available for sale, and if the market equilibrium price is $80 per unit, how much is the total producer surplus in this market?

Inefficiency exists in an economy when a good is

Table 7-8 During the last two days, Chad purchased a latte from two different stores. The table below shows Chad's willingness to pay on each day and his consumer surplus from each purchase. -Refer to Table 7-8. The price that Chad paid for a latte on the second day is

Figure 7-16 -Refer to Figure 7-16. Sellers will be unwilling to sell more than

Figure 7-8 -Refer to Figure 7-8. If the government imposes a price ceiling of $80 in this market, then, assuming those with the highest willingness to pay purchase the good, consumer surplus will be

If the government allowed a free market for transplant organs such as kidneys to exist, the

The area below the demand curve and above the supply curve measures the producer surplus in a market.

Consumer surplus

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 Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. -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?

If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $35.

Tammy loves donuts. The table shown reflects the value Tammy places on each donut she eats: a.Use this information to construct Tammy's demand curve for donuts. b.If the price of donuts is $0.20, how many donuts will Tammy buy? c.Show Tammy's consumer surplus on your graph. How much consumer surplus would she have at a price of $0.20? d.If the price of donuts rose to $0.40, how many donuts would she purchase now? What would happen to Tammy's consumer surplus? Show this change on your graph.

Figure 7-5 -Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is