Question 1

When there is a technological advance in the pork industry, consumer surplus in that market will

Accepted Answer

Technological advance in the pork industry would lead to an increase in the supply of pork, which would result in a decrease in the market price of pork. As a result, the consumer surplus would increase as consumers would be able to purchase pork at a lower price than before.

Question 2

Denise values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $350. Denise's consumer surplus is

Accepted Answer

Denise's consumer surplus can be calculated by subtracting the price she paid ($350) from the value she placed on the dishwasher ($500): $500 - $350 = $150. This is the amount of value Denise received from the purchase that she did not have to pay for, or in other words, the benefit she gained from the transaction. Therefore, the correct answer is A) $150.

Question 3

All else equal, what happens to consumer surplus if the price of a good increases?

Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay. If the price of a good increases, then consumers are paying more for the same amount of satisfaction they were receiving before. This means that the consumer surplus decreases as consumers are no longer getting as much surplus because they are paying more.

Question 4

Jeff decides that he would pay as much as $2,000 for a new laptop computer. He buys the computer and realizes a consumer surplus of $300. How much did Jeff pay for his computer?

Accepted Answer

Jeff's consumer surplus is the difference between what he was willing to pay ($2,000) and what he actually paid. Therefore, his actual payment must have been $1,700 ($2,000 - $300 = $1,700).

Question 5

Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Jeff pay for his computer?

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay for a good/service and what they actually pay. In this case, Jeff was willing to pay $3,000 but received it for less, resulting in a consumer surplus of $700. This means that he paid $2,300 for the laptop (the amount he was willing to pay minus the consumer surplus he received). Therefore, the correct answer is B.

Question 6

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price paid. In this case, Cameron was willing to pay $750, but he only paid $575, so his consumer surplus is $750 - $575 = $175. Therefore, the best choice is A.

Question 7

Denise values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is $650. Denise

Accepted Answer

The answer of Denise values a stainless steel dishwasher for...

Question 8

All else equal, what happens to consumer surplus if the price of a good decreases?

Accepted Answer

When the price of a good decreases, consumers are able to purchase the same quantity of the good at a lower price than previously. As a result, they are able to retain more of their income and may even be able to afford to purchase additional units of the good. This increase in consumer welfare leads to an increase in consumer surplus.

Question 9

Which of the following will cause a decrease in consumer surplus?

Accepted Answer

The imposition of a binding price floor in the market will cause a decrease in consumer surplus since the price will be higher than what consumers are willing to pay. Choice A will increase competition and potentially lead to lower prices, increasing consumer surplus. Choice B will decrease the price of the good, increasing consumer surplus. Choice C may cause consumers to delay purchases, which could lead to lower prices and an increase in consumer surplus in the future.

Question 10

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

Accepted Answer

Both existing and new customers benefit from the lower prices, therefore the increase in consumer surplus comes from both groups.

Question 11

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

Accepted Answer

The answer of Ray buys a new tractor for $118,000....

Question 12

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

Accepted Answer

A technological improvement in the production of the good will lower the cost of production, which will lead to a decrease in price for the consumers. This decrease in price will allow consumers to purchase the good at a lower price, increasing their consumer surplus.

Question 13

Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons?

Accepted Answer

The reduced size of the lemon crop will result in a decrease in supply, causing an increase in price. This will lead to a decrease in consumer surplus as consumers will now have to pay higher prices to purchase lemons.

Question 14

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

Accepted Answer

Billie Jo's willingness to pay for the dishwasher is the maximum amount she values it at, which is $500. Since she succeeds in buying it for $425, we know that she values it more than what she paid for it, but her willingness to pay remains at $500. Therefore, the correct answer is C.

Question 15

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then

Accepted Answer

The marginal buyer is the buyer who is willing to pay exactly the market price for the good, which in this case is $25 for the 100th unit. This does not imply anything about the sum, average, or minimum willingness to pay of all buyers, just the willingness to pay of the buyer at the margin.

Question 16

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is

Accepted Answer

Michael's willingness to pay is the highest amount he is willing to spend on the item, which is the same as the value he places on it - in this case, $3,500.

Question 17

Suppose your own demand curve for tomatoes slopes downward. Suppose also that, for the last tomato you bought this week, you paid a price exactly equal to your willingness to pay. Then

Accepted Answer

Since the price of the last tomato was exactly equal to your willingness to pay, there is no additional consumer surplus. Therefore, the consumer surplus on the last tomato you bought is zero. This does not necessarily mean that you should buy more or have already bought too many tomatoes this week. The question only provides information about the last tomato you bought and does not give any indication of how many tomatoes you should buy in total.

Question 18

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay and what the consumer actually pays. If these two amounts are equal, the consumer surplus is zero.

Question 19

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's consumer surplus is

Accepted Answer

Michael's consumer surplus is the difference between the maximum value (what he was willing to pay) and the actual price he paid. Therefore, his consumer surplus is $3,500 - $3,000 = $500.

Question 20

If the cost of producing sofas decreases, then consumer surplus in the sofa market will

Accepted Answer

When the cost of producing sofas decreases, the supply curve of sofas shifts to the right, resulting in a lower equilibrium price. As a result, consumers can purchase sofas at a lower price, which increases consumer surplus in the sofa market.

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