Question 1

All else equal,an increase in demand will cause an increase in producer surplus.

Accepted Answer

An increase in demand means that consumers are willing to pay more for the same quantity of a good or service, which allows producers to increase their prices and still sell the same quantity. As a result, producer surplus - the difference between the market price and the cost of production - will increase.

Question 2

Suppose you buy an iPod for $100.If your consumer surplus is $30,your willingness to pay is $70.

Accepted Answer

Your willingness to pay is $130, as consumer surplus is the difference between what you are willing to pay and what you actually pay.

Question 3

The lower the price,the lower the consumer surplus,all else equal.

Accepted Answer

Consumer surplus increases as the price decreases because consumers are paying less than what they are willing to pay for a good or service, thus increasing the difference between their willingness to pay and the actual price.

Question 4

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

Accepted Answer

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

Question 5

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, consumers tend to opt for the lowest priced product, therefore sales usually go to the producers who can offer the product at the lowest price.

Question 6

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

Accepted Answer

This is a correct statement. Producer surplus is the difference between the market price and the minimum price that producers are willing to accept for a given quantity of output. The area above the supply curve represents the minimum price that producers are willing to accept, and the area below the price and above the supply curve represents the actual price that they receive, which is their producer surplus.

Question 7

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 $200.

Accepted Answer

Connie's producer surplus can be calculated by subtracting her cost (in this case, $100 for cleaning 100 windows) from her revenue (in this case, $300 for cleaning 100 windows at the market price of $3 per window). 
Producer surplus = revenue - cost
Producer surplus = $300 - $100
Producer surplus = $200
Therefore, the statement is true.

Question 8

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 statement is true according to the economic concept of opportunity cost, which is the value of the next best alternative that must be given up in order to pursue a certain action, such as producing a product. If the price offered for the product is greater than the opportunity cost of producing it, then the seller will be willing to sell.

Question 9

An increase in price increases consumer surplus.

Accepted Answer

An increase in price decreases consumer surplus as consumers have to pay more for the same good or service leading to a decrease in their overall satisfaction or surplus.

Question 10

In order to calculate consumer surplus in a market,we need to know willingness to pay and price.

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay for a product or service and what they actually have to pay. Therefore, knowledge of both willingness to pay and price is necessary to calculate consumer surplus.

Question 11

If the government imposes a binding price floor in a market,then the consumer surplus in that market will decrease.

Accepted Answer

When a price floor is imposed, it sets a minimum price that must be paid for the good or service. If this price is above the equilibrium price, then it will create a surplus of supply (quantity supplied exceeds quantity demanded) and a decrease in consumer surplus, since consumers will have to pay a higher price for the same quantity.

Question 12

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 13

All else equal,a decrease in demand will cause an increase in producer surplus.

Accepted Answer

A decrease in demand will cause a decrease in producer surplus because the decrease in demand will result in lower prices, and producers will receive less revenue for each unit sold. This means that the gap between the market price and the producer's cost per unit will decrease, reducing the producer surplus.

Question 14

All else equal,an increase in demand will always increase consumer surplus.

Accepted Answer

An increase in demand typically raises prices, which can reduce consumer surplus because consumers are paying more for the same quantity of goods or services. Consumer surplus is the difference between what consumers are willing to pay and what they actually pay.

Question 15

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

Accepted Answer

This is the definition of producer surplus, which represents the profit a seller earns from selling a good or service. It is calculated by subtracting the cost of production from the price received for the good or service.

Question 16

If producing a soccer ball costs Jake $5,and he sells it for $40,his producer surplus is $45.

Accepted Answer

Producer surplus is the difference between the price a producer receives and the cost of production. In this case, Jake's producer surplus would be $35 ($40 selling price - $5 production cost).

Question 17

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 18

If the government imposes a binding price floor in a market,then the consumer surplus in that market will increase.

Accepted Answer

When a price floor is imposed, it sets a minimum price above the equilibrium price. This reduces the quantity demanded and creates a surplus of supply. As a result, consumers may have to pay higher prices and some may even be priced out of the market, leading to a decrease in consumer surplus.

Question 19

If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175,the price of the tickets is $625.

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay and what they actually pay. Therefore, if Rosa is willing to pay $450 and has a consumer surplus of $175, she paid $450 - $175 = $275 for the tickets.

Question 20

If producing a soccer ball costs Jake $5,and he sells it for $40,his producer surplus is $35.

Accepted Answer

Producer surplus is the difference between the price at which a producer is willing to sell a good and the actual selling price. In this case, Jake is willing to sell the soccer ball for at least $40, which gives him a producer surplus of $35 ($40 - $5 = $35).

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

All else equal,an increase in demand will cause an increase in producer surplus.

Suppose you buy an iPod for $100.If your consumer surplus is $30,your willingness to pay is $70.

The lower the price,the lower the consumer surplus,all else equal.

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

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

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

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 $200.

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.

An increase in price increases consumer surplus.

In order to calculate consumer surplus in a market,we need to know willingness to pay and price.

If the government imposes a binding price floor in a market,then the consumer surplus in that market will decrease.

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

All else equal,a decrease in demand will cause an increase in producer surplus.

All else equal,an increase in demand will always increase consumer surplus.

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

If producing a soccer ball costs Jake $5,and he sells it for $40,his producer surplus is $45.

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.

If the government imposes a binding price floor in a market,then the consumer surplus in that market will increase.

If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175,the price of the tickets is $625.

If producing a soccer ball costs Jake $5,and he sells it for $40,his producer surplus is $35.