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

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Question 91

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Figure 7-14 ​ -Refer to Figure 7-14. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total producer surplus assuming those producers with the lowest cost are the ones who supply the market?

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Total producer surpl...

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Question 92

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If an allocation of resources is efficient, then

A) consumer surplus is maximized.
B) producer surplus is maximized.
C) all potential gains from trade among buyers are sellers are being realized.
D) the allocation achieves equality as well.

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

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Question 93

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Given the following two equations: Show how equation (1) can be used to derive equation (2). 1) Total Surplus = Consumer Surplus + Froducer Surplus 2) Total Surplus = Value to Buyers - Cost to Sellers

Figure 7-1 -Refer to Figure 7-1. Suppose that the price falls from P₂ to P_1. Area C represents the

Table 7-5 ​ ​ $\begin{array} { | c | c | } \hline \text { Buyer } & \begin{array} { c } \text { Willingness to Pay } \\\text { (Dollars) }\end{array} \\\hline \text { Charisse } & 450 \\\hline \text { Keira } & 350 \\\hline \text { Eric } & 300 \\\hline \text { Earvin } & 250 \\\hline\end{array}$ -Refer to Table 7-5. You are selling extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. Which of the following graphs represents the market demand curve?

Figure 7-14 ​ -Refer to Figure 7-14. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place?

Answer each of the following questions about supply and producer surplus. a.What is producer surplus, and how is it measured? b.What is the relationship between the cost to sellers and the supply curve? c.Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $45.

If the cost of producing chairs decreases causing the price of chairs to decrease, consumer surplus in the chair market will

Table 7-8 ​ ​ $\begin{array} { | c | c | } \hline \text { Seller } & \begin{array} { c } \text { Cost } \\\text { (Dollars) }\end{array} \\\hline \text { Evan } & 50 \\\hline \text { Selena } & 100 \\\hline \text { Angie } & 150 \\\hline \text { Kris } & 200 \\\hline\end{array}$ -Refer to Table 7-8. If the sellers bid against each other for the right to sell the good to a consumer, then the good will sell for

Welfare economics is the study of the welfare system.

Figure 7-12 ​ -Refer to Figure 7-12. At what price will total surplus be maximized in this market?

Figure 7-10 ​ -Refer to Figure 7-10. If the market equilibrium price falls from $120 to $80, how much is the change in total consumer surplus in the market?

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

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 increase in producer surplus due to new producers entering the market?

A good weather in Spain results in good crop of oranges causing the prices of both oranges and orange juice to fall. As a result, the consumer surplus in the market for oranges

In a competitive market, sales go to those producers who are willing to supply the product at the lowest price.

What happens to consumer surplus in the smart watch market if smart watches are normal goods and income of the smart watch buyers falls?

Larry purchases a book for $10, and his consumer surplus is $3. How much is Larry willing to pay for the book?

Which of the following will cause an increase in producer surplus?