Deck 4: Markets and Government

Question 1

In the graph, calculate the value of producer surplus in this market.

A) $140
B) $70
C) $60
D) $60

Answer 1

C

Question 2

When the price of running shoes is higher than the market equilibrium price, which of these occurs?

A) consumer surplus rises and deadweight loss falls
B) consumer surplus rises and deadweight loss rises
C) consumer surplus falls and deadweight loss falls
D) consumer surplus falls and deadweight loss rises

Answer 2

D

Question 3

Consumer surplus is defined as the:

A) gap between the demand curve and the market price.
B) gap between the supply curve and the market price.
C) difference between a price floor and the market price.
D) difference between a price ceiling and the market price.

Answer 3

A

Question 4

Consumer surplus is the difference between the:

A) minimum price the buyer is willing to pay and the market price.
B) maximum price the buyer is willing to pay and the market price.
C) minimum price the seller is willing to pay and the market price.
D) maximum price the seller is willing to pay and the market price.

Question 5

If there is a lack of competition in a market, a market failure results because the quantity of goods sold is ___ than the optimal level while prices are ___ than the optimal level.

A) lower; lower
B) higher; higher
C) lower; higher
D) higher; lower

Question 6

In the graph, calculate the value of consumer surplus in this market.

A) $5
B) $50
C) $100
D) $240

Question 7

The gap between the supply curve and the market price is called:

A) consumer surplus.
B) deadweight loss.
C) markup.
D) producer surplus.

Question 8

Producer surplus is the difference between the:

A) minimum price the buyer is willing to accept and the market price.
B) maximum price the buyer is willing to accept and the market price.
C) market price and the minimum price the seller is willing to accept.
D) maximum price the seller is willing to accept and the market price.

Question 9

The gap between the demand curve and the market price is called:

A) consumer surplus.
B) deadweight loss.
C) profit.
D) producer surplus.

Question 10

In the graph, if a price ceiling is set at $4, which of the following would result?

A) a surplus of 20 units
B) a surplus of 40 units
C) a shortage of 20 units
D) a shortage of 40 units

Question 11

An effective price ceiling occurs at a price _____ the equilibrium price and causes a _____.

A) below; shortage
B) below; surplus
C) above; shortage
D) above; surplus

Question 12

Public goods tend to be _____ because the provider of the good cannot prevent someone from enjoying the good without paying for it, which means the good is _____.

A) overproduced; nonexcludable
B) underproduced; nonexcludable
C) overproduced; nonrival
D) underproduced; nonrival

Question 13

While Steve is cleaning out his garage, he finds an old surfboard that he no longer needs. As he walks to the dumpster to throw it out, his neighbor John asks if he could have it. John offers Steve a 6-pack of beer (worth $10) in exchange, which Steve happily accepts. Steve has achieved a producer surplus of:

A) $0, since he was just going to throw out the board.
B) $10, the value of the beer he received.
C) $5, because Steve and John benefited equally from the $10 transaction.
D) $50, because that's what the surfboard was likely worth.

Question 14

Jackie finds a pair of jeans that she likes but the price tag is missing. She is willing to buy it as long as it's not more than $100. The cashier informs Jackie that the price is $72. Jackie buys the jeans, and therefore achieved a consumer surplus of:

A) $100 because that is what she was willing to pay.
B) $72, the price that she actually paid.
C) $28, the difference between what she was willing to pay and the price.
D) $0 because the jeans were not actually discounted.

Question 15

In the graph, if a price floor on soybeans is set at $2 per bushel, the amount of surplus in this market would be _____.

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

Question 16

At the end of the term, Vicky wants to sell her economics textbook for at least $25, otherwise she would keep it. George is looking to buy a textbook because he's taking the class next term, and he is willing to pay at most $60. If Vicky agrees to sell the textbook to George for $45:

A) George's consumer surplus is $15 and Vicky's producer surplus is $20.
B) George's consumer surplus is $45 and Vicky's producer surplus is $45.
C) George's consumer surplus is $60 and Vicky's producer surplus is $25.
D) George's consumer surplus is $20 and Vicky's producer surplus is $15.

Question 17

Getting a flu shot reduces the chances of spreading the illness to one's classmates and friends. Why, then, is this considered a market failure due to external benefits?

A) because the number of people who obtain flu shots is less than the socially optimal quantity
B) because too many people actually get the flu shot
C) because flu shots are not 100% effective
D) because flu shots are priced too high relative to the cost of producing them

Question 18

Which of the following price floors for milk would not cause a surplus in the market if the equilibrium price for milk is $3.60?

A) $3.90
B) $3.80
C) $3.50
D) All price floors cause a surplus.

Question 19

Jessica lists her faulty treadmill for sale on craigslist but does not disclose the problems with it. If Blake buys the treadmill believing that it's problem-free, this is an example of market failure due to:

A) the existence of external costs
B) the existence of public goods
C) the lack of competition
D) asymmetric information

Question 20

Which of these is not a problem caused by an effective price ceiling being placed on the price of electricity?

A) a misallocation of resources
B) a shortage of electricity
C) a reduction in deadweight loss
D) a reduced effort to improve quality of service

Question 21

Suppose that a customer's willingness to pay for a product is $1,480, and the seller's willingness to sell is $1,210. If the negotiated price is $1,300, how much is consumer surplus?

A) $90
B) $180
C) $220
D) $270

Question 22

Suppose that a customer's willingness to pay for a product is $1,480, and the seller's willingness to sell is $1,210. If the negotiated price is $1,479:

A) consumer surplus is nonexistent.
B) consumer surplus is greater than producer surplus.
C) producer surplus is nonexistent.
D) producer surplus is greater than consumer surplus.

Question 23

Suppose that a customer's willingness to pay for a product is $5, and the seller's willingness to sell is $2. If the negotiated price is $4, how much is consumer surplus?

A) $1
B) $2
C) $5
D) $8

Question 24

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $65:

A) consumer surplus is negative.
B) consumer surplus is greater than producer surplus.
C) producer surplus is negative.
D) producer surplus is greater than consumer surplus.

Question 25

Suppose that a customer's willingness to pay for a product is $1,480, and the seller's willingness to sell is $1,210. If the negotiated price is $1,300, how much is producer surplus?

A) $90
B) $210
C) $220
D) $270

Question 26

Suppose that a customer's willingness to pay for a product is $5, and the seller's willingness to sell is $2. If the negotiated price is $4:

A) consumer surplus is negative.
B) consumer surplus is greater than producer surplus.
C) producer surplus is negative.
D) producer surplus is greater than consumer surplus.

Question 27

Suppose that a customer's willingness to pay for a product is $5, and the seller's willingness to sell is $2. If the negotiated price is $3, how much is producer surplus?

A) $1
B) $2
C) $5
D) $8

Question 28

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus?

A) $4
B) $11
C) $15
D) $21

Question 29

Suppose that a customer's willingness to pay for a product is $120, and the seller's willingness to sell is $110. If the negotiated price is $119, how much is consumer surplus?

A) $1
B) $9
C) $10
D) $20

Question 30

Suppose that a customer's willingness to pay for a product is $5, and the seller's willingness to sell is $2. If the negotiated price is $3:

A) consumer surplus is negative.
B) consumer surplus is greater than producer surplus.
C) producer surplus is negative.
D) producer surplus is greater than consumer surplus.

Question 31

Producer surplus is defined as the:

A) gap between the demand curve and the market price.
B) gap between the supply curve and the market price.
C) difference between a price floor and the market price.
D) difference between a price ceiling and the market price.

Question 32

Suppose that a customer's willingness to pay for a product is $5, and the seller's willingness to sell is $2. If the negotiated price is $3, how much is consumer surplus?

A) $1
B) $2
C) $5
D) $8

Question 33

Suppose that a customer's willingness to pay for a product is $120, and the seller's willingness to sell is $110. If the negotiated price is $119:

A) consumer surplus is negative.
B) consumer surplus is greater than producer surplus.
C) producer surplus is negative.
D) producer surplus is greater than consumer surplus.

Question 34

Suppose that a customer's willingness to pay for a product is $5, and the seller's willingness to sell is $4. If the negotiated price is $3, how much is consumer surplus?

A) $1
B) $2
C) $5
D) $8

Question 35

Suppose that a customer's willingness to pay for a product is $1,480, and the seller's willingness to sell is $1,210. If the negotiated price is $1,479, how much is producer surplus?

A) $0
B) $1
C) $210
D) $269

Question 36

Jason purchased a new printer for $150 although he was willing to pay $175. The minimum price acceptable to the seller, Jasmine, was $145. The results of this transaction are a consumer surplus of:

A) $325 and a producer surplus of $295.
B) $25 and a producer surplus of $5.
C) $175 and a producer surplus of $145.
D) $150 and a producer surplus of $150.

Question 37

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is producer surplus?

A) $4
B) $11
C) $15
D) $21

Question 38

Jonathan purchased coffee for $5 at Jennifer's coffee shop; however, he was willing to pay $9. Jennifer was willing to accept $3 for the coffee. The results of this transaction are a consumer surplus of:

A) $12 and a producer surplus of $10.
B) $10 and a producer surplus of $12.
C) $2 and a producer surplus of $4.
D) $4 and a producer surplus of $2.

Question 39

Suppose that a customer's willingness to pay for a product is $1,480, and the seller's willingness to sell is $1,210. If the negotiated price is $1,479, how much is consumer surplus?

A) $0
B) $1
C) $210
D) $269

Question 40

Suppose that a customer's willingness to pay for a product is $1,480, and the seller's willingness to sell is $1,210. If the negotiated price is $1,300:

A) consumer surplus is negative.
B) consumer surplus is greater than producer surplus.
C) producer surplus is negative.
D) producer surplus is greater than consumer surplus.

Question 41

The difference between market price and the price at which sellers would be willing to supply the product is called:

A) an externality.
B) a producer surplus.
C) a consumer surplus.
D) competition.

Question 42

Producer surplus is the area:

A) above the market price and below the supply curve.
B) above the market price.
C) below the supply curve.
D) below the market price and above the supply curve.

Question 43

Producer surplus is the:

A) difference between market price and the price at which firms would be willing to supply the product.
B) surplus of revenue earned by suppliers over the costs incurred to produce the goods.
C) difference between what consumers are willing to pay and the price sellers are willing to sell at.
D) excess of actual revenue over revenue that should be earned.

Question 44

Consumer surplus is shown graphically as the area:

A) under the demand curve and above the market price.
B) under the demand curve and below the market price.
C) above the supply curve and above the market price.
D) above the supply curve and below the market price.

Question 45

If you are willing to sell your old bicycle for $30, but someone offers you $40 for it, the results of the transaction would yield:

A) $10 worth of producer surplus and unknown consumer surplus.
B) $10 worth of consumer surplus and unknown producer surplus.
C) $30 worth of consumer surplus and $10 worth of producer surplus.
D) $30 worth of producer surplus and $10 worth of consumer surplus.

Question 46

(Figure: Determining Surplus) In the graph, which shape represents consumer surplus?

A) the triangle hjk
B) the line hij
C) the line hi
D) the triangle hik

Question 47

All else equal, consumers prefer market outcomes with:

A) more consumer surplus.
B) less consumer surplus.
C) more producer surplus.
D) producer surplus equal to consumer surplus.

Question 48

Suppose the market price is $5. There are three consumers in the market. The consumer who purchases the first unit of output is willing to pay $12; the consumer purchasing the second unit of output is willing to pay $8; and the consumer buying the third unit of output is willing to pay $7. Total consumer surplus across these three consumers is:

A) $27.
B) $11.
C) $12.
D) $32.

Question 49

If a consumer is willing to pay $20 for a pizza, but the price of the pizza is $10, then the amount of consumer surplus resulting from the customer's purchase of that pizza would be:

A) $30.
B) $20.
C) $10.
D) There would be no consumer surplus.

Question 50

Producer surplus is shown graphically as the area:

A) under the demand curve and above the market price.
B) under the demand curve and below the market price.
C) above the supply curve and above the market price.
D) above the supply curve and below the market price.

Question 51

Suppose the actual price for good A is $20. John is willing to pay $30, Susie is willing to pay $28, Joseph is willing to pay $25, Jessica is willing to pay $23, and Jeremy is willing to pay $21. What is total consumer surplus?

A) $23
B) $25
C) $27
D) $30

Question 52

The difference between what the market would be willing to pay and the market price is:

A) an externality.
B) producer surplus.
C) consumer surplus.
D) competition.

Question 53

(Figure: Determining Surplus) In the graph, which shape represents producer surplus?

A) the triangle hik
B) the line ij
C) the line hi
D) the triangle jik

Question 54

Mike really enjoys Bitter Sweet coffee and is willing to pay $10 per cup. The retail price is $3. Which of the following is correct?

A) Mike's consumer surplus is $10 per cup.
B) Mike has a consumer surplus of $7 per cup.
C) The seller can raise the price to $13 and still make a sale to Mike.
D) Mike is getting a poor deal on the coffee.

Question 55

When markets are efficient:

A) the sum of consumer and producer surplus is minimized.
B) the sum of consumer and producer surplus is maximized.
C) consumer surplus is maximized, but producer surplus is minimized.
D) consumer surplus is minimized, but producer surplus is maximized.

Question 56

Suppose the market price is $5. The producer who sells the first unit of output has a willingness-to-sell equal to $1; the producer who sells the second unit of output has a willingness-to-sell equal to $2; and the producer who sells the third unit of output has a willingness-to-sell equal to $4. Total producer surplus across these three producers is:

A) $7.
B) $8.
C) $4.
D) $5.

Question 57

The total of consumer surplus plus producer surplus is maximized at:

A) a price below equilibrium in the market.
B) a price above equilibrium in the market.
C) the market equilibrium price.
D) the price of $0.

Question 58

Suppose the market price is $5. The buyer who buys the first unit of output has a willingness-to-buy equal to $10; the buyer who buys the second unit of output has a willingness-to-buy equal to $9; and the buyer who buys the third unit of output has a willingness-to-buy equal to $8. Total consumer surplus is:

A) $27.
B) $10.
C) $5.
D) $12.

Question 59

In a market, consumers get extra benefits called _____, while businesses receive extra benefits known as _____.

A) producer surplus; consumer surplus
B) consumer surplus; producer surplus
C) opportunity cost; marginal cost
D) demand; supply

Question 60

On a graph with a demand curve, consumer surplus is the area:

A) above the market price and below the demand curve.
B) below the market price.
C) above the market price.
D) below the market price and above the demand curve.

Question 61

(Figure: Determining Surplus 4) In the graph, consumer surplus equals _______.

A) $8
B) $10
C) $13
D) $40

Question 62

(Figure: Determining Surplus 2) In the graph, the producer surplus is equal to _______.

A) $12
B) $15
C) $25
D) $30

Question 63

(Figure: Determining Surplus 4) In the graph, consumer surplus equals _______.

A) $40
B) $80
C) $130
D) $160

Question 64

(Figure: Determining Surplus 3) In the graph, producer surplus equals ________.

A) $30
B) $60
C) $140
D) $280

Question 65

(Figure: Determining Surplus) In the graph, what is the formula for producer surplus?

A) (h - i) × (k - i)
B) (i - j) × (k - i)
C) 0.5 × (h - j) × (k - i)
D) 0.5 × (i - j) × (k - i)

Question 66

(Figure: Determining Surplus 4) In the graph, producer surplus equals _______.

A) $8
B) $5
C) $10
D) $25

Question 67

(Figure: Determining Surplus 4) In the graph, producer surplus equals _______.

A) $25
B) $40
C) $80
D) $160

Question 68

(Figure: Determining Surplus 3) In the graph, producer surplus equals ________.

A) $60
B) $140
C) $200
D) $280

Question 69

(Figure: Determining Surplus 2) In the graph, producer surplus is equal to _______.

A) $12
B) $30
C) $54
D) $60

Question 70

(Figure: Determining Surplus 3) In the graph, producer surplus equals __________.

A) $60
B) $140
C) $160
D) $320

Question 71

(Figure: Determining Surplus 2) In the graph, the consumer surplus is equal to ______.

A) $12
B) $15
C) $25
D) $30

Question 72

(Figure: Determining Surplus 5) According to the graph, consumer surplus is _____ and producer surplus is _____ at equilibrium.

A) $400; $200
B) $800; $400
C) $20; $10
D) 40 units; 40 units

Question 73

(Figure: Determining Surplus 3) In the graph, consumer surplus equals _______.

A) $30
B) $60
C) $140
D) $280

Question 74

(Figure: Determining Surplus 4) In the graph, producer surplus equals _______.

A) $25
B) $40
C) $50
D) $80

Question 75

(Figure: Determining Surplus 2) In the graph, consumer surplus is equal to ________.

A) $15
B) $30
C) $54
D) $60

Question 76

(Figure: Determining Surplus 3) In the graph, consumer surplus equals _______.

A) $6
B) $14
C) $20
D) $60

Question 77

(Figure: Determining Surplus 3) In the graph, consumer surplus equals ________.

A) $60
B) $120
C) $320
D) $440

Question 78

(Figure: Understanding Surplus and Efficiency) In the graph, what is the sum of consumer and producer surplus?

A) $30
B) $140
C) $50
D) $0

Question 79

(Figure: Determining Surplus) In the graph, what is the formula for consumer surplus?

A) (h - j) × (k - i)
B) (i - j) × (k - i)
C) 0.5 × (h - i) × (k-i)
D) 0.5 × (h - j) × (k-i)

Question 80

(Figure: Determining Surplus 4) In the graph, consumer surplus equals _______.

A) $25
B) $40
C) $80
D) $160