Question 1

Mountain River Adventures offers whitewater rafting trips down the Colorado River.It costs the firm $100 for the first raft trip per day,$120 for the second,$140 for the third,and $160 for the fourth.If the market price for a raft trip was $120 but has now increased to $150,the gain in producer surplus is equal to:
A)$20.
B)$70.
C)$80.
D)$90.

Accepted Answer

The gain in producer surplus is calculated by comparing the additional revenue from the price increase against the cost of additional trips made profitable by the price increase. Initially, at $120, only the first trip is profitable. When the price increases to $150, the second trip also becomes profitable. The gain in producer surplus is the difference in revenue from selling the second trip at the new price ($150) minus its cost ($120), which equals $30, plus the increase in revenue for the first trip, which is the difference between the new price and the old price ($150 - $120 = $30). So, the total gain in producer surplus is $30 (for the second trip) + $30 (increase for the first trip) = $60. However, without considering the costs and revenues for the third and fourth trips, which are not profitable even at the new price, and correcting the calculation mistake, the correct approach is to calculate the gain in producer surplus for the trips that became more profitable due to the price increase. Initially, the mistake in calculation led to an incorrect total. The correct calculation should consider the increase in surplus for each trip that is now profitable or more profitable due to the price increase, taking into account the correct costs and the number of trips now profitable at the new price.

Question 2

Assuming that the supply curve of cupcakes is upward-sloping and demand for cupcakes decreases,there is a(n)_____ in _____ surplus.
A)increase;producer
B)increase;consumer
C)increase;total
D)decrease;producer

Accepted Answer

When demand for cupcakes decreases, the price that consumers are willing to pay also decreases. This leads to a lower equilibrium price and quantity, reducing the area representing producer surplus because producers are receiving less for their goods than before.

Question 3

Total surplus is:
A)the difference between price and the cost to the seller.
B)the sum of consumer and producer surplus.
C)equal to the area below the demand curve.
D)always more for consumers than producers.

Accepted Answer

Total surplus is the sum of consumer and producer surplus, representing the overall benefit that both parties receive from participating in a market transaction. Option A only refers to the seller's benefit, while option C only describes the demand curve. Option D is not always true as it depends on the specific market and equilibrium price.

Question 4

Peanut butter and jelly are complements in consumption.Assuming that the supply curve of peanut butter is upward-sloping,if there is a decrease in the price of jelly,producer surplus in the peanut butter market:
A)will increase.
B)will decrease.
C)will not change.
D)may change,but it is impossible to tell whether it will increase or decrease.

Accepted Answer

Peanut butter and jelly are complements in consumption, meaning they are often consumed together. If the price of jelly decreases, the demand for peanut butter may increase. This increase in demand will cause an increase in the equilibrium price and quantity of peanut butter, resulting in an increase in producer surplus. Therefore, the correct answer is A) will increase.

Question 5

(Figure: Gain in Producer Surplus)Look at the figure Gain in Producer Surplus.Which areas represent producer surplus when the price is equal to P₂? A)D,E,and F B)B and C C)D and E D)A,B,and C

Accepted Answer

The answer of (Figure: Gain in Producer Surplus)Look at the...

Question 6

Maximum total surplus in the market for chocolate occurs when:
A)total net gain to producers is minimized.
B)all consumers who value chocolate can buy chocolate.
C)all producers can sell their chocolate.
D)the market is in equilibrium.

Accepted Answer

At equilibrium, the quantity of chocolate demanded by consumers is equal to the quantity supplied by producers. This means that all consumers who value chocolate at or above the market price can buy it, and all producers who are willing and able to sell chocolate can do so. Any quantity below or above equilibrium would result in a deadweight loss and a decrease in total surplus. Therefore, maximum total surplus in the market for chocolate occurs when the market is in equilibrium.

Question 7

Along a given upward-sloping supply curve,a decrease in the price of a good will _____ producer surplus.
A)increase
B)decrease
C)have no effect on
D)It's impossible to tell what will happen to producer surplus.

Accepted Answer

A decrease in the price of a good along an upward-sloping supply curve reduces producer surplus because producers receive less for each unit sold, diminishing the area between the supply curve and the market price.

Question 8

If the cost to download a song from the Internet falls from $0.99 to $0.50 along an upward-sloping supply curve,producer surplus in the market for MP3 players is likely to:
A)increase.
B)decrease.
C)not change.
D)We cannot determine what producer surplus will do without information about consumer surplus.

Accepted Answer

When the price of a song decreases, the revenue that producers receive for each song also decreases, leading to a decrease in producer surplus along the supply curve.

Question 9

Along a given upward-sloping supply curve,a decrease in price will cause producer surplus to:
A)increase.
B)decrease.
C)stay the same.
D)We cannot determine what producer surplus will do without information about the demand curve.

Accepted Answer

Producer surplus decreases when the price decreases along an upward-sloping supply curve because producers receive less for each unit sold, reducing the area between the price and the supply curve, which represents producer surplus.

Question 10

Use the following to answer question: 
-(Figure: The Market for Hamburgers)Look at the figure The Market for Hamburgers.The maximum total surplus for the market is _____,and it occurs at a price equal to _____.
A)$550;$1.50
B)$600;$1.50
C)$1,050;$2
D)Not enough information is provided to answer this question,since the maximum total surplus could occur anywhere.

Accepted Answer

The maximum total surplus in a market occurs where the supply and demand curves intersect, as this point represents the equilibrium price and quantity, optimizing the total surplus. Without seeing the figure, we typically assume this principle holds. Given the options, the choice that suggests a specific total surplus and price ($600; $1.50) aligns with the concept of an equilibrium maximizing total surplus, assuming this choice reflects the equilibrium point described in the unseen figure.

Question 11

When a new medical report extols the health advantages of grapefruit,assuming an upward-sloping supply curve,producer surplus in the grapefruit market:
A)will increase.
B)will decrease.
C)will remain the same.
D)may change,but we can't tell how.

Accepted Answer

When a new medical report extols the health advantages of grapefruit, there may be an increase in demand for grapefruit, causing the price to increase. As a result, the producer surplus would increase since they can now sell their grapefruits at a higher price.

Question 12

Equilibrium in the market for peanut butter is disturbed by an increase in the price of peanuts.Assuming that the supply curve of peanut butter is upward-sloping,producer surplus in the peanut butter market:
A)will increase.
B)will decrease.
C)will not change.
D)may change,but we cannot determine the change without more information.

Accepted Answer

The answer of Equilibrium in the market for peanut butter...

Question 13

Along the upward-sloping supply curve for brownies,a decrease in the price of brownies will:
A)increase producer surplus.
B)decrease producer surplus.
C)increase consumer surplus.
D)increase producer surplus and consumer surplus.

Accepted Answer

A decrease in the price of brownies will result in a decrease in producer surplus because producers will receive less revenue for each unit sold. This is because the supply curve is upward-sloping, meaning that as the price of brownies decreases, producers are willing to supply fewer units. There is no reason to believe that consumer surplus will increase in this scenario. Therefore, the correct choice is B.

Question 14

If the supply curve of ice cream is upward-sloping and demand for it decreases,there will be _____ in producer surplus.
A)an increase
B)a decrease
C)no change
D)It's impossible to tell what will happen to producer surplus.

Accepted Answer

If demand for ice cream decreases, the market equilibrium price will decrease. As a result, the quantity suppliers are willing to supply will decrease along the upward-sloping supply curve, leading to a decrease in producer surplus.

Question 15

Along a given supply curve,an increase in the price of a good will:
A)increase producer surplus.
B)decrease producer surplus.
C)increase consumer surplus.
D)decrease producer surplus and increase consumer surplus.

Accepted Answer

An increase in the price of a good along a given supply curve will increase the producer surplus. This is because the producer can now charge a higher price for their product, resulting in increased profits. As the price of the good goes up, the quantity supplied will also increase, leading to higher levels of producer surplus.

Question 16

The total surplus in a market is the:
A)excess supply due to a price above the equilibrium price.
B)surplus that accrues when a good is not scarce,defined as the total amount (if any)by which quantity supplied exceeds quantity demanded at a zero price.
C)net benefit to consumers,defined as the excess of consumer surplus over producer surplus.
D)sum of consumer surplus and producer surplus.

Accepted Answer

Total surplus in a market is defined as the sum of consumer surplus and producer surplus. Consumer surplus is the difference between the maximum price consumers are willing to pay for a good and the actual price they pay, while producer surplus is the difference between the actual price producers receive for a good and the minimum price they are willing to accept. Therefore, the correct answer is D.

Question 17

Luis is willing to sell his pool table for no less than $600,but if he gets $840,the producer surplus Luis receives is:
A)$600.
B)$840.
C)$240.
D)$1,440.

Accepted Answer

Producer surplus is the difference between the price at which the good is sold and the minimum price at which the seller is willing to sell it. In this case, Luis is willing to sell the pool table for no less than $600, but he actually receives $840. Therefore, his producer surplus is $840 - $600 = $240. Option C is the correct answer.

Question 18

(Figure: Producer Surplus and Supply)Look at the figure Producer Surplus and Supply.The difference between the total revenue received by sellers and their total cost is called _____,which is depicted by area _____ if the amount sold is E. 
A)consumer surplus;ABD
B)producer surplus;0BDE
C)profit;ABD
D)producer surplus;ABD

Accepted Answer

The difference between the total revenue received by sellers and their total cost is known as producer surplus. According to the figure, the area depicted by ABD represents the producer surplus if the amount sold is E. Therefore, option D, which states that the difference between the total revenue received by sellers and their total cost is called producer surplus and is depicted by area ABD if the amount sold is E, is the correct answer.

Question 19

If the price of a good rises along an upward-sloping supply curve,then producer surplus:
A)will increase.
B)will decrease.
C)will remain the same.
D)may change,but we can't tell how.

Accepted Answer

When the price of a good rises along an upward-sloping supply curve, it means that producers are able to sell their goods at a higher price, which increases their revenue. As a result, producer surplus – which is the difference between the market price and the cost of production – will increase.

Question 20

Mountain River Adventures offers whitewater rafting trips down the Colorado River.It costs the firm $100 for the first raft trip per day,$120 for the second,$140 for the third,and $160 for the fourth.If the market price for a raft trip is $150,Mountain River Adventures will offer _____ trips per day and will have producer surplus equal to _____ per day.
A)three;$90
B)three;$10
C)two;$220
D)four;$80

Accepted Answer

The firm will offer three trips per day because the cost of the first three trips ($100, $120, $140) is below the market price of $150, making them profitable. The fourth trip costs $160, which is above the market price, making it unprofitable. The producer surplus is the difference between the market price and the cost of production for each trip: ($150 - $100) + ($150 - $120) + ($150 - $140) = $50 + $30 + $10 = $90.

Quiz 4: Consumer and Producer Surplus

Assuming that the supply curve of cupcakes is upward-sloping and demand for cupcakes decreases,there is a(n) _ in _ surplus.

Total surplus is:

Peanut butter and jelly are complements in consumption.Assuming that the supply curve of peanut butter is upward-sloping,if there is a decrease in the price of jelly,producer surplus in the peanut butter market:

(Figure: Gain in Producer Surplus) Look at the figure Gain in Producer Surplus.Which areas represent producer surplus when the price is equal to P₂?

Maximum total surplus in the market for chocolate occurs when:

Along a given upward-sloping supply curve,a decrease in the price of a good will _____ producer surplus.

If the cost to download a song from the Internet falls from $0.99 to $0.50 along an upward-sloping supply curve,producer surplus in the market for MP3 players is likely to:

Along a given upward-sloping supply curve,a decrease in price will cause producer surplus to:

Use the following to answer question: -(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers.The maximum total surplus for the market is _,and it occurs at a price equal to _.

When a new medical report extols the health advantages of grapefruit,assuming an upward-sloping supply curve,producer surplus in the grapefruit market:

Equilibrium in the market for peanut butter is disturbed by an increase in the price of peanuts.Assuming that the supply curve of peanut butter is upward-sloping,producer surplus in the peanut butter market:

Along the upward-sloping supply curve for brownies,a decrease in the price of brownies will:

If the supply curve of ice cream is upward-sloping and demand for it decreases,there will be _____ in producer surplus.

Along a given supply curve,an increase in the price of a good will:

The total surplus in a market is the:

Luis is willing to sell his pool table for no less than $600,but if he gets $840,the producer surplus Luis receives is:

(Figure: Producer Surplus and Supply) Look at the figure Producer Surplus and Supply.The difference between the total revenue received by sellers and their total cost is called _,which is depicted by area _ if the amount sold is E.

If the price of a good rises along an upward-sloping supply curve,then producer surplus: