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

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Question 31

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When the demand for a good increases and the supply of the good remains unchanged, consumer surplus

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

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

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Question 32

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Figure 7-10 ​ -Refer to Figure 7-10. If the market equilibrium price is $120, how much is total consumer surplus?

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Question 33

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Suppose you sell a kayak for $600, but you were willing to sell it for $450. The buyer was willing to pay $650. The total surplus is $200.

As a result of a decrease in price,

Mike and Sarah sell lemonade on the corner for $2.10 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $40. How many cups did Mike and Sarah sell?

Steak and chicken are substitutes. A sharp reduction in the supply of steak would

Figure 7-4 -Refer to Figure 7-4. When the price rises from P₁ to P₂, which area represents the increase in producer surplus due to new producers entering the market?

Producer surplus directly measures

Figure 7-2 -Refer to Figure 7-2. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

All else equal, an increase in demand will cause an increase in producer surplus.

Which of the following will cause a decrease in consumer surplus?

Figure 7-5 -Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the change in producer surplus?

Consumer surplus measures the benefit to buyers of participating in a market.

Which of the following is true when the price of a good or service falls?

Table 7-12 The following table shows the willingness to pay for a good for the only four consumers in a market. $\begin{array} { | l | l | } \hline \text { Consumer } & \text { Willingness to Pay } \\\hline \text { A } & \$ 25 \\\hline B & \$ 40 \\\hline \text { C } & \$ 15 \\\hline \text { D } & \$ 30 \\\hline\end{array}$ -Refer to Table 7-12. If the price of the good is $20, how much is the total consumer surplus?

Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to $Q ^ { S } = P$ How much total consumer surplus goes to new consumers who enter the market after the supply curve shifts?

Figure 7-3 -Refer to Figure 7-3. If the price of the good is $13.00, then producer surplus is

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

Tammy loves donuts. The table shown reflects the value Tammy places on each donut she eats: ​ $\begin{array} { | l | l | } \hline \text { Value of first donut } & \$ 0.60 \\\hline \text { Value of second donut } & \$ 0.50 \\\hline \text { Value of third donut } & \$ 0.40 \\\hline \text { Value of fourth donut } & \$ 0.30 \\\hline \text { Value of fifth donut } & \$ 0.20 \\\hline \text { Value of sixth donut } & \$ 0.10 \\\hline\end{array}$ 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.

Market power and externalities are examples of market failures.