Question 1

A demand curve reflects each of the following EXCEPT the:
A)ability of buyers to obtain the quantity they desire
B)willingness to pay of all buyers in the market
C)value each buyer in the market places on the good
D)highest price buyers are willing to pay for each quantity

Accepted Answer

The demand curve reflects the willingness of buyers to pay for a good or service at each price level, not necessarily their ability to obtain the quantity they desire. Factors such as income and availability of substitutes can affect a buyer's ability to purchase a good, but these are not directly reflected in the demand curve.

Question 2

The area below a demand curve and above the price measures:
A)willingness to pay
B)total surplus
C)consumer surplus
D)producer surplus

Accepted Answer

The area below a demand curve and above the price measures the consumer surplus, which is the difference between the maximum price that consumers are willing to pay for a product and the actual price they pay. Therefore, the correct choice is C, consumer surplus.

Question 3

Graph 7-2 
-Refer to Graph 7-2.When the price is P₁, consumer surplus is:
A)A
B)A + B
C)A + B + C
D)A + B + D

Accepted Answer

Consumer surplus is the area between the demand curve and the price paid by the consumer. At price P₁, consumer surplus is given by the area A + B + C.

Question 4

Suppose hail storms damage vineyards in South Australia.The supply of grapes to local winemakers declines.What happens to consumer surplus in the market for South Australian wine?
A)it increases
B)there is no change to the consumer surplus
C)it decreases
D)the overall effect is ambiguous as consumer surplus could rise or fall

Accepted Answer

With the decrease in supply of grapes, the price of South Australian wine is likely to increase, leading to a decrease in consumer surplus. This is because consumers would have to pay more to purchase the same quantity of wine as before the hailstorm. Hence, the consumer surplus is expected to decrease.

Question 5

Graph 7-1 
-Refer to Graph 7-1.What area represents producer surplus when the price is P₁?
A)A
B)B
C)C
D)D

Accepted Answer

The answer of Graph 7-1 
-Refer to Graph 7-1.What area...

Question 6

If you pay a price exactly equal to your willingness to pay, then:
A)your willingness to pay is less than your consumer surplus
B).your consumer surplus is negative
C)you have no consumer surplus
D)you place little value on the good

Accepted Answer

Consumer surplus is the difference between your willingness to pay and the price you actually pay. If you pay a price exactly equal to your willingness to pay, then your consumer surplus would be zero, and therefore you have no consumer surplus.

Question 7

Graph 7-1 
-Refer to Graph 7-1.What area represents total surplus in the market when the price is P₁?
A)A + B
B)B + C
C)C + D
D)A + B + C + D

Accepted Answer

The area representing total surplus in the market when the price is P₁ is the sum of consumer surplus (area B) and producer surplus (area C). Therefore, the correct choice is B, as it represents the total surplus for the given price.

Question 8

Amy buys a new computer for her studies for $1500.She receives consumer surplus of $250 from the purchase.How much does Amy value her computer?
A)$250
B)$1500
C)$1250
D)$1750

Accepted Answer

Amy values her computer at $1750 because consumer surplus is the difference between what a consumer is willing to pay and what they actually pay. Since she paid $1500 and received a consumer surplus of $250, she values the computer at $1500 + $250 = $1750.

Question 9

Cameron visits a sporting goods store to buy a new set of golf clubs.He has willing to pay $950 for the clubs but buys them on sale for $425.Cameron's consumer surplus from the purchase is:
A)$425
B)$525
C)$950
D)$1375

Accepted Answer

The answer of Cameron visits a sporting goods store to...

Question 10

Table 7-1
This table refers to five possible buyers' willingness to pay for good Z. $\begin{array}{|c|c|}
\hline \text { Buyer } & \text { Willingness to pay ( } \$ \text { ) } \
\hline \text { Cassie } & 15.00 \
\hline \text { Jamie } & 11.00 \
\hline \text { John } & 9.50 \
\hline \text { Jeremy } & 6.00 \
\hline \text { Sarah } & 4.50 \
\hline
\end{array}$
-Refer to Table 7-1.If the price of good Z is $9.99, who will not purchase the good?
A)Jeremy and Sarah
B)John, Jeremy and Sarah
C)Cassie, Jamie and John
D)Cassie and Jamie

Accepted Answer

According to the table, the maximum willingness to pay is $9 for John, $8 for Jeremy and Sarah, $6 for Cassie and Jamie. As the price of good Z is $9.99, John, Jeremy and Sarah will not purchase the good. Therefore, the best choice is B.

Question 11

Gayle decides that she would pay as much as $900 for a new laptop computer.She buys the computer and realises a consumer surplus of $600.How much did Gayle pay for her computer?
A)$900
B)$600
C)$1500
D)$300

Accepted Answer

Gayle paid $300 for her computer because consumer surplus is the difference between what a consumer is willing to pay ($900) and what the consumer actually pays ($300), resulting in a surplus of $600.

Question 12

Table 7-1
This table refers to five possible buyers' willingness to pay for good Z. $\begin{array}{|c|c|}
\hline \text { Buyer } & \text { Willingness to pay ( } \$ \text { ) } \
\hline \text { Cassie } & 15.00 \
\hline \text { Jamie } & 11.00 \
\hline \text { John } & 9.50 \
\hline \text { Jeremy } & 6.00 \
\hline \text { Sarah } & 4.50 \
\hline
\end{array}$
-Refer to Table 7-1.If the market price is $6.00, the consumer surplus in the market will be:
A)$1.50
B)$17.50
C)$6.00
D)$0

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the actual price they pay. In this case, the maximum price that consumers are willing to pay range from $15 to $6. If the market price is $6, then all consumers who are willing to pay $6 or more will purchase the good, resulting in a consumer surplus of $17.50 (($15-$6) + ($10-$6) + ($8-$6) + ($7-$6) + ($6-$6) = $17.50).

Question 13

The cost of producing digital cameras decreases.As a result, the consumer surplus associated with digital cameras:
A)decreases
B)increases
C)doesn't change
D)could increase or decrease but the overall effect is ambiguous

Accepted Answer

When the cost of production decreases, the price of digital cameras is likely to decrease. This decrease in price would lead to an increase in consumer surplus, as consumers would be able to purchase the cameras at a lower price than previously possible. Therefore, the consumer surplus associated with digital cameras would increase.

Question 14

Table 7-1
This table refers to five possible buyers' willingness to pay for good Z. $\begin{array}{|c|c|}
\hline \text { Buyer } & \text { Willingness to pay ( } \$ \text { ) } \
\hline \text { Cassie } & 15.00 \
\hline \text { Jamie } & 11.00 \
\hline \text { John } & 9.50 \
\hline \text { Jeremy } & 6.00 \
\hline \text { Sarah } & 4.50 \
\hline
\end{array}$
-Refer to Table 7-1.Which of the following is NOT true?
A)the table is the demand schedule for good Z
B)the demand schedule represented by the table shows the willingness to pay of the marginal buyer
C)at a price of $8.00, total consumer surplus in the market will be $11.50
D)when the price is $5.50, each person will have a positive consumer surplus

Accepted Answer

The statement in D is not true because at a price of $5.50, the person willing to pay exactly $5.50 for good Z would have a consumer surplus of $0, not a positive consumer surplus. Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. If someone is willing to pay exactly the price, their surplus is zero.

Question 15

Consumer surplus equals the:
A)value to buyers less the amount paid by buyers
B)amount received by sellers less the costs of sellers
C)value to buyers plus the amount paid by buyers
D)amount received by sellers plus the costs of sellers

Accepted Answer

Consumer surplus is the difference between the value that buyers place on a good or service and the amount that they actually pay for it. This means that it is the value to buyers (or what they are willing to pay) minus the amount paid by buyers (or the market price).

Question 16

Other things being equal, if the price of a good falls, the consumer surplus:
A)decreases
B)increases
C)is unchanged
D)may increase, decrease or remain unchanged

Accepted Answer

When the price of a good falls, the consumer surplus increases as consumers can now buy more of the good at a lower price, resulting in a greater total value gained.

Question 17

Graph 7-1 
-Refer to Graph 7-1.What area represents consumer surplus when the price is P₁?
A)A
B)B
C)C
D)D

Accepted Answer

The answer of Graph 7-1 
-Refer to Graph 7-1.What area...

Question 18

Economists generally agree that the goal in developing the concept of consumer surplus is to:
A)make positive judgments about the desirability of market outcomes
B)make normative judgments about the desirability of market outcomes
C)measure the profit of firms producing the good
D)assess the forgone value when the price is too high

Accepted Answer

The concept of consumer surplus is used to make normative judgments about the desirability of market outcomes. It measures the benefit to consumers in terms of the difference between what they are willing to pay for a good or service versus what they actually pay. This allows economists to assess the welfare or satisfaction consumers derive from market transactions, thus making normative judgments about whether market outcomes are desirable or not.

Question 19

Consumer surplus is the:
A)quantity of a good consumers get free
B)amount a consumer has to pay less the amount the consumer was willing to pay
C)amount a consumer is willing to pay less the amount the consumer actually pays
D)total value of a good to a consumer

Accepted Answer

Consumer surplus is the difference between the amount a consumer is willing to pay for a good or service and the actual price they pay for it. This measures the value that consumers receive beyond what they actually pay. Therefore, choice C is the correct answer.

Question 20

If the cost of producing automobiles increases, consumer surplus will:
A)increase
B)decrease
C)remain constant
D)increase, then decrease

Accepted Answer

When the cost of producing automobiles increases, the seller's supply will decrease leading to an increase in the price of automobiles. This will result in a decrease in consumer surplus as consumers will have to pay more for the same product, reducing the difference between the maximum amount they are willing to pay and the price they actually pay.

Quiz 7: Consumers, Producers and the Efficiency of Markets

A demand curve reflects each of the following EXCEPT the:

The area below a demand curve and above the price measures:

Graph 7-2 -Refer to Graph 7-2.When the price is P₁, consumer surplus is:

Suppose hail storms damage vineyards in South Australia.The supply of grapes to local winemakers declines.What happens to consumer surplus in the market for South Australian wine?

Graph 7-1 -Refer to Graph 7-1.What area represents producer surplus when the price is P₁?

If you pay a price exactly equal to your willingness to pay, then:

Graph 7-1 -Refer to Graph 7-1.What area represents total surplus in the market when the price is P₁?

Amy buys a new computer for her studies for $1500.She receives consumer surplus of $250 from the purchase.How much does Amy value her computer?

Cameron visits a sporting goods store to buy a new set of golf clubs.He has willing to pay $950 for the clubs but buys them on sale for $425.Cameron's consumer surplus from the purchase is:

Gayle decides that she would pay as much as $900 for a new laptop computer.She buys the computer and realises a consumer surplus of $600.How much did Gayle pay for her computer?

The cost of producing digital cameras decreases.As a result, the consumer surplus associated with digital cameras:

Consumer surplus equals the:

Other things being equal, if the price of a good falls, the consumer surplus:

Graph 7-1 -Refer to Graph 7-1.What area represents consumer surplus when the price is P₁?

Economists generally agree that the goal in developing the concept of consumer surplus is to:

Consumer surplus is the:

If the cost of producing automobiles increases, consumer surplus will: