Chapter Seven: Consumers, Producers, And The Efficiency Of Markets

Front 1

Welfare Economics is the study of how

Back 1

the allocation of resources affects economic well-being

Front 2

The maximum price that a buyer will pay for a good is called the

Back 2

willingness to pay

Front 3

A consumer's willingness to pay directly measures

Back 3

how much a buyer values a good

Front 4

Consumer surplus

Back 4

is measured using the demand curve for a product

Front 5

Consumer Surplus is

Back 5

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

Front 6

On a graph, the area below a demand curve and above the price measures

Back 6

consumer surplus

Front 7

Refer to the figure above.
If the price of the product is $15.00, then who would be willing to purchase the product?

Back 7

Zach, Audrey, and Lori

Front 8

Refer to the figure above.
If the price of the product is $22.00, then who would be willing to purchase the product?

Back 8

Audrey and Lori

Front 9

Refer to the figure above.
If the price of the product is $51.00, then who would be willing to purchase the product?

Back 9

no one

Front 10

Refer to the figure above.
If the price of the product is $18.00, then the total consumer surplus is

Back 10

$46.00

Front 11

Refer to the figure above.
If the price of the product is $30.00, then the total consumer surplus is

Back 11

$20.00

Front 12

Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $350. His consumer surplus is

Back 12

$50.00

Front 13

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?
a. for the three individuals together, consumer surplus amounts to $35.00
b. Having bought the cell phone, Kristen is better off than she would have been had she not bought it
c. Had the price of the cellphone been $95 rather than $80, Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer
d. The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone

Back 13

a. for the three individuals together, consumer surplus amounts to $35.00

Front 14

Refer to the figure above.
If the price of the good is $250.00, then consumer surplus amounts to

Back 14

$50.00

Front 15

Refer to the figure above.
If the price of the good is $150.00, then consumer surplus amounts to

Back 15

$250.00

Front 16

Refer to the figure above.
If the price of the good is $50.00, then consumer surplus amounts to

Back 16

$600.00

Front 17

Refer to the figure above.
If the price of the good is $60.00, then

Back 17

consumer surplus is $150.00

Front 18

Refer to the figure above.
If the price of the good is $200, then

Back 18

consumer surplus is $150.00

Front 19

Refer to the figure above.
The value of the good to consumers minus the cost of the good to consumers amounts to $325 if the price of the good is

Back 19

$125.00

Front 20

Refer to the figure above.
When the price is P1, consumer surplus is

Back 20

A+B+C

Front 21

Refer to the figure above.
When the price is P2, consumer surplus is

Back 21

A

Front 22

Refer to the figure above.
When the price rises from P1 to P2, consumer surplus

Back 22

decrease by an amount equal to B+C

Front 23

Refer to the figure above.
Area C represents

Back 23

consumer surplus to new customers who enter the market when the price falls from P2 to P1

Front 24

Refer to the figure above.
When the price rises from P1 to P2, which of the following statements is not true?
a. The buyers who still buy the good are worse off because they now pay more
b. Some buyers leave the market because they are not willing to buy the good at the higher price
c. Buyers place a higher value on the good after the price increase
d. Consumer surplus in the market falls

Back 24

c. Buyers place a higher value on the good after the price increase

Front 25

Refer to the figure above.
At the equilibrium price, consumer surplus is

Back 25

$300.00

Front 26

Refer to the figure above.
If the government imposes a price floor of $120.00 in this market, then consumer surplus will decrease by

Back 26

$225.00

Front 27

Refer to the figure above.
What is the consumer surplus if the price is $100.00?

Back 27

$2,500

Front 28

Refer to the figure above.
What happens to the consumer surplus if the price rises from $100 to $150?

Back 28

The new consumer surplus is 25% of the original consumer surplus

Front 29

A seller's opportunity cost measures the

Back 29

value of everything she must give up to produce a good

Front 30

Cost is a measure of

Back 30

seller's willingness to sell

Front 31

A supply curve can be used to measure producer surplus because it reflects

Back 31

sellers' costs

Front 32

Producer Surplus is

Back 32

the amount a seller is paid minus the cost of production

Front 33

Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $155 per tuning. One particular week, Tom is willing to tune the first piano for $120, the second piano for $125, the third piano for $140, and the fourth piano for $160. Assume Tom is rational in deciding how many pianos to tune. His producer surplus is

Back 33

$80.00

Front 34

David tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $135 per tuning. One particular week, David is willing to tune the first piano for $115, the second piano for $125, the third piano for $140, and the fourth piano for $175. Assume David is rational in deciding how many pianos to tune. His producer surplus is

Back 34

$30.00

Front 35

Refer to the figure above.
If the market price is $1,000, the producer surplus in the market is

Back 35

$750.00

Front 36

Refer to the figure above.
If the market price is $900, the producer surplus in the market is

Back 36

$550.00

Front 37

Refer to the figure above.
If the market price is $1,100, the combined total cost of all participating sellers is

Back 37

$2,250

Front 38

Refer to the figure above.
If the price is $1,000,

Back 38

Dianne is an eager seller

Front 39

Refer to the figure above.
If the price is $775, who would be willing to supply the product?

Back 39

Dianne and Evalina

Front 40

Refer to the figure above.
Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 3 if the price is

Back 40

$1,170

Front 41

Refer to the figure above.
Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 4 if the price is

Back 41

$1,370

Front 42

Refer to the figure above.
Who is a marginal seller when the price is $1,200

Back 42

Bobby

Front 43

Refer to the figure above.
If the price of the good is $9.50, then producer surplus is

Back 43

$10.00

Front 44

Refer to the figure above.
If the price of the good is $14, then producer surplus is

Back 44

$25.00

Front 45

Refer to the figure above.
If producer surplus is $14, then the price of the good is

Back 45

$11.00

Front 46

Refer to the figure above.
Which area represents producer surplus when the price is P1?

Back 46

BCG

Front 47

Refer to the figure above.
Which area represents producer surplus when the price is P2?

Back 47

ACH

Front 48

Refer to the figure above.
Which area represents the increase in producer surplus when the price rises from P1 to P2?

Back 48

AHGB

Front 49

Refer to the figure above.
When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers

Back 49

ABGD

Front 50

Refer to the figure above.
Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

Back 50

DGH

Front 51

Refer to the figure above.
At the equilibrium price, producer surplus is

Back 51

$200

Front 52

Refer to the figure above.
If the government imposes a price ceiling of $70 in this market, then the new producer surplus will be

Back 52

$50

Front 53

Refer to the figure above.
If the government imposes a price ceiling of $70 in this market, then the producer surplus will decrease by

Back 53

$50

Front 54

Refer to the figure above.
If the price of the good is $300, then producer surplus amounts to

Back 54

$200

Front 55

Refer to the figure above.
If the price of the good is $500, then producer surplus amounts to

Back 55

$700

Front 56

Refer to the figure above.
If the price of the good is $600, then producer surplus amounts to

Back 56

$1,000

Front 57

Refer to the figure above.
If the price of the good is $600, then

Back 57

producer surplus is $1,000

Front 58

Refer to the figure above.
Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to

Back 58

$300

Front 59

Refer to the figure above.
Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus is

Back 59

$350, and on the second unit of the good that is sold, the producer surplus is $150

Front 60

Refer to the figure above.
Producer surplus amounts to $300 if the price of the good is

Back 60

$350

Front 61

Refer to the figure above.
Sellers will be unwilling to sell more than

Back 61

1 unit of the good its its price is below $200

Front 62

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

Back 62

consumer and producer surplus

Front 63

Economists typically measure efficiency using

Back 63

total surplus

Front 64

Total Surplus

Back 64

can be used to measure a market's efficiency, is the sum of consumer and producer surplus, and is the value to buyers minus the cost to selelrs

Front 65

Total Surplus is

Back 65

the total value of the good to buyers minus the cost to sellers of providing the good

Front 66

Total Surplus is

Back 66

equal to producer surplus plus consumer surplus

Front 67

Efficiency in a market is achieved when

Back 67

the sum of producer surplus and consumer surplus is maximized

Front 68

Refer to the figure above.
At the equilibrium price, consumer surplus is

Back 68

$150

Front 69

Refer to the figure above.
At the equilibrium price, producer surplus is

Back 69

$100

Front 70

Refer to the figure above.
At the equilibrium price, total surplus is

Back 70

$250

Front 71

Refer to the figure above.
If the government imposes a price ceiling of $60 in this market, then total surplus will be

Back 71

$250

Front 72

Refer to the figure above.
If the government imposes a price floor of $60 in this market, then total surplus will be

Back 72

lower by $62.50 than it would be without the price floor

Front 73

Refer to the figure above.
If the government imposes a price floor of $60 in this market, then total surplus will be

Back 73

$187.50

Front 74

Refer to the figure above.
The equilibrium price is

Back 74

P2

Front 75

Refer to the figure above.
At equilibrium, consumer surplus is represented by the area

Back 75

A+B+C

Front 76

Refer to the figure above.
If the price were P3, consumer surplus would be represented by the area

Back 76

A

Front 77

Refer to the figure above.
At equilibrium, producer surplus is represented by the area

Back 77

D+H+F

Front 78

Refer to the figure above.
If the price were P1, producer surplus would be represented by the area

Back 78

F

Front 79

Refer to the figure above.
At equilibrium, total surplus is represented by the area

Back 79

A+B+C+D+H+F

Front 80

Refer to the figure above.
The efficient price-quantity combination is

Back 80

P2 and Q2