Question 1

For any given quantity,the price on a demand curve represents the marginal buyer's willingness to pay.

Accepted Answer

The price on a demand curve represents the value that the marginal buyer places on the next unit of the product, which is also known as their willingness to pay.

Question 2

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.

Accepted Answer

Producer surplus is the difference between what a producer is willing to accept for a good or service versus what they actually receive. If Connie is willing to clean windows at $1 per window but receives $3 per window, her surplus per window is $2. For 100 windows, her producer surplus would be $200, not $100.

Question 3

In a competitive market,sales go to those producers who are willing to supply the product at the lowest price.

Accepted Answer

In a competitive market, customers often choose products based on price, so producers who can supply products at the lowest price are more likely to make sales and succeed in the market.

Question 4

Free markets allocate (a)the supply of goods to the buyers who value them most highly and (b)the demand for goods to the sellers who can produce them at least cost.

Accepted Answer

This is a basic principle of free market economics, known as the law of supply and demand. The idea is that consumers are willing to pay more for goods they value highly, which creates a market for those goods, and producers will provide goods at the lowest cost possible to maximize their profits. In this way, the supply and demand for goods is naturally balanced in a free market system.

Question 5

Economists argue that restrictions against ticket scalping actually drive up the cost of many tickets.

Accepted Answer

Economists argue that restrictions against ticket scalping limit the supply of tickets available on the secondary market, leading to higher prices as demand exceeds supply. Additionally, the costs of enforcing anti-scalping laws and regulations may also contribute to higher ticket prices.

Question 6

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

Accepted Answer

This is the correct definition of producer surplus. It is the amount of revenue a seller earns from selling a good minus the cost of producing the good.

Question 7

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay,but would refuse to buy a product at a price less than his willingness to pay.

Accepted Answer

A buyer is willing to buy a product at a price less than or equal to his willingness to pay, but would refuse to buy a product at a price greater than his willingness to pay.

Question 8

Total surplus in a market is consumer surplus minus producer surplus.

Accepted Answer

Total surplus in a market is the sum of both consumer surplus and producer surplus.

Question 9

Consumer surplus measures the benefit to buyers of participating in a market.

Accepted Answer

Consumer surplus represents the difference between what consumers are willing to pay for a good or service and what they actually pay. This measures the benefit or value that buyers gain from participating in a market. Therefore, the statement is true.

Question 10

Efficiency refers to whether a market outcome is fair,while equity refers to whether the maximum amount of output was produced from a given number of inputs.

Accepted Answer

Efficiency refers to whether resources are allocated in the most optimal way possible in a market, while equity refers to how the benefits and costs of that allocation are distributed among individuals or groups.

Question 11

The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.

Accepted Answer

When the supply and demand are equal, the market reaches equilibrium, which is considered the most efficient allocation of resources in a market because it maximizes the total benefits to buyers and sellers. At this point, there is neither surplus nor shortage in the market, and the price is set at the level where quantity demanded equals quantity supplied.

Question 12

When market price increases,producer surplus increases because (1)producer surplus received by existing sellers increases,and (2)new sellers enter the market.

Accepted Answer

When market price increases, existing sellers can charge a higher price, which increases their producer surplus. Additionally, new sellers may enter the market because the higher price creates more profit opportunities, which also increases producer surplus overall.

Question 13

At any quantity,the price given by the supply curve shows the cost of the lowest-cost seller.

Accepted Answer

The price given by the supply curve at any quantity represents the cost of the marginal seller, which is the cost of the highest-cost seller willing to sell at that price, not the lowest-cost seller.

Question 14

Economists generally believe that,although there may be advantages to society from ticket-scalping,the costs to society of this activity outweigh the benefits.

Accepted Answer

Economists generally believe that ticket-scalping can lead to a more efficient allocation of tickets, matching them with those who value them the most, thus potentially increasing overall societal welfare. The primary criticism often revolves around fairness and access, rather than a clear-cut economic cost outweighing benefits.

Question 15

Even though participants in the economy are motivated by self-interest,the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Accepted Answer

This is the concept of Adam Smith's invisible hand theory, where self-interest in a competitive market leads to maximum efficiency and welfare for society as a whole.

Question 16

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.

Accepted Answer

This is true as sellers will not continue to produce and sell a product if the cost of producing it is higher than what they can receive for it. The opportunity cost is the alternative use of resources that a seller could have pursued instead of producing the product, so if the selling price is higher than this cost, the seller will continue to produce and sell the product.

Question 17

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

Total surplus is defined as the difference between the value buyers place on a good or service and the cost or price sellers incur to provide it. Therefore, it is the value to buyers minus the costs to sellers.

Question 18

Total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve,up to the point of equilibrium.

Accepted Answer

Total surplus in a market is measured as the area above the supply curve and below the demand curve, up to the point of equilibrium, representing the sum of consumer and producer surplus.

Question 19

Efficiency is related to the size of the economic pie,whereas equity is related to how the pie gets sliced and distributed.

Accepted Answer

Efficiency refers to the overall productivity and output of the economy, while equity refers to how this output is divided and distributed among individuals and groups. Therefore, efficiency and equity are two distinct concepts that are related to different aspects of the economy.

Question 20

The area below the price and above the supply curve measures the producer surplus in a market.

Accepted Answer

This is true according to the concept of producer surplus, which refers to the difference between the price at which a producer is willing to sell a certain quantity of a product and the actual market price received. Graphically, it is represented by the area below the price and above the supply curve.

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