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

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Question 231

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Figure 7-15 -Refer to Figure 7-15.If the government imposes a price floor of $60 in this market,then total surplus will be

A) $110.50.
B) $125.00.
C) $187.50.
D) $225.25..

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

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Question 232

Multiple Choice

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You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field.Assume the ticket has no resale value.Willie Nelson is performing on the same night,and his concert is your next-best alternative activity.Tickets to see Willie Nelson cost $40.On any given day,you would be willing to pay up to $50 to see and hear Willie Nelson perform.Assume there are no other costs of seeing either event.Based on this information,at a minimum,how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?

A) $0
B) $10
C) $40
D) $50

E) A) and D)
F) A) and B)

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Question 233

Multiple Choice

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Figure 7-12 -Refer to Figure 7-12.When the price falls from P2 to P1,which of the following would not be true?

Figure 7-17 -Refer to Figure 7-17.When the price is P1,area B+C represents

Producer surplus is the cost of production minus the amount a seller is paid.

Figure 7-16 -Refer to Figure 7-16.For quantities greater than M,the value to the marginal buyer is

Pat bought a new car for $15,500 but was willing to pay $24,000.The consumer surplus is

Table 7-11 -Refer to Table 7-11.Both the demand curve and the supply curve are straight lines.At equilibrium,total surplus is

Answer each of the following questions about demand and consumer surplus. a.What is consumer surplus,and how is it measured? b.What is the relationship between the demand curve and the willingness to pay? c.Other things equal,what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve. d.In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve,what else must be considered to determine consumer surplus?

Suppose that Firms A and B each produce high-resolution computer monitors,but Firm A can do so at a lower cost.Cassie and David each want to purchase a high-resolution computer monitor,but David is willing to pay more than Cassie.If Firm A produces a monitor that Cassie buys but David does not,then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to the buyers who value them most highly,as measured by their willingness to pay. (ii) Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

Connie can clean windows in large office buildings at a cost of $1 per window.The market price for window-cleaning services is $3 per window.If Connie cleans 100 windows,her producer surplus is $100.

Donald produces nails at a cost of $200 per ton.If he sells the nails for $350 per ton,his producer surplus per ton is

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3.Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22?

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Economists normally assume people's preferences should be

Producer surplus directly measures

Donald produces nails at a cost of $350 per ton.If he sells the nails for $500 per ton,his producer surplus is

If a consumer places a value of $15 on a particular good and if the price of the good is $17,then the

Figure 7-22 -Refer to Figure 7-22.At the quantity Q2,the marginal value to buyers

Josh is willing to pay $40 for a haircut,but he is able to pay $25 at the local salon.His consumer surplus is