Question 1

From a demand curve,consumer surplus is the area:

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay for a good or service and what they actually pay. It is represented by the area below the demand curve and above the market price. This is because the demand curve represents the highest price a consumer is willing to pay for each quantity purchased, and the market price is the actual price they pay. The area above the market price and below the demand curve shows the amount of additional benefit or surplus the consumer receives from purchasing the good at a lower price than they were willing to pay.

Question 2

Suppose that a customer's willingness to pay for a product is $1,480,and the seller's willingness to sell is $1,210.If the negotiated price is $1479:

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price paid, which is $1,480 - $1,479 = $1. Producer surplus is the difference between the actual price received and the minimum price the seller is willing to accept, which is $1,479 - $1,210 = $269. Therefore, producer surplus is greater than consumer surplus in this case.

Question 3

Suppose the market price is $5.There are three consumers in the market.The consumer who purchases the first unit of output is willing to pay $12;the consumer purchasing the second unit of output is willing to pay $8;and the consumer buying the third unit of output is willing to pay $7.Total consumer surplus is:

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay. Since there are three consumers in the market, the consumer surplus for each unit of output is:

- $7 for the first unit (since the market price is $5 and the first consumer was willing to pay $12).
- $3 for the second unit (since the market price is $5 and the second consumer was willing to pay $8).
- $2 for the third unit (since the market price is $5 and the third consumer was willing to pay $7).

Adding up the consumer surplus for each unit gives a total of $7 + $3 + $2 = $12. Therefore, the correct choice is C) $12.

Question 4

Producer surplus is shown graphically as the area:

Accepted Answer

The answer of Producer surplus is shown graphically as the...

Question 5

Jonathan purchased coffee for $5 at Jennifer's coffee shop;however,he was willing to pay $9.Jennifer was willing to accept $3 for the coffee.The results of this transaction are a consumer surplus of:

Accepted Answer

The consumer surplus is the difference between the highest price the consumer is willing to pay and the actual price paid. In this case, it is $9 - $5 = $4.
The producer surplus is the difference between the actual price received and the lowest price the producer is willing to accept. In this case, it is $5 - $3 = $2.
Therefore, the total surplus is $4 + $2 = $6. The closest option is D, which has a consumer surplus of $4 and a producer surplus of $2.

Question 6

The difference between what the market would be willing to pay and the market price is:

Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay for a certain product or service and what they actually end up paying. It is a measure of the benefit that consumers receive from purchasing a good at a price that is lower than the maximum price they are willing to pay. Therefore, consumer surplus represents the difference between the market price and what the market would be willing to pay.

Question 7

Suppose the actual price for good A is $20.John is willing to pay $30,Susie is willing to pay $28,Joseph is willing to pay $25,Jessica is willing to pay $23,and Jeremy is willing to pay $21.What is total consumer surplus?

Accepted Answer

Consumer surplus is the difference between the highest price consumers are willing to pay and the price they actually pay. In this case, the highest price any consumer is willing to pay is $30, so John could have paid up to $30 for the good and still received some consumer surplus. Similarly, Susie could have paid up to $28, Joseph up to $25, Jessica up to $23, and Jeremy up to $21. The actual price of the good is $20, so John's consumer surplus is $30-$20=$10, Susie's is $28-$20=$8, Joseph's is $25-$20=$5, Jessica's is $23-$20=$3, and Jeremy's is $21-$20=$1. Adding these individual consumer surpluses together, we get a total consumer surplus of $10+$8+$5+$3+$1=$27, which is option C.

Question 8

Producer surplus is the:

Accepted Answer

Producer surplus is the difference between the market price and the minimum price at which producers are willing to supply the product.

Question 9

Consumer surplus is shown graphically as the area:

Accepted Answer

Consumer surplus is the difference between the highest price a consumer is willing to pay and the actual price they pay. This is shown graphically as the area under the demand curve and above the market price, as this represents the difference between the maximum price consumers are willing to pay (as shown by the demand curve) and the actual price they pay (which is the same for all consumers and is represented by the market price).

Question 10

Consumer surplus and producer surplus are maximized at:

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay for a good or service and what they actually pay, while producer surplus is the difference between the price a producer receives for a good or service and the cost to produce it. At the market equilibrium price, both consumers and producers are satisfied and getting the most value out of the transaction, maximizing both consumer and producer surplus. Therefore, the best choice is C, the market equilibrium price. A price below or above equilibrium will result in a loss of surplus for either consumers or producers, respectively. The price of $0 is not a realistic or sustainable market price, as suppliers would not be willing to produce the good or service for free.

Question 11

Suppose that a customer's willingness to pay for a product is $1,480,and the seller's willingness to sell is $1,210.If the negotiated price is $1,479,how much is producer surplus?

Accepted Answer

Producer surplus is the difference between the price at which the producer is willing to sell and the actual price. In this case, the producer is willing to sell for $1,210 and the negotiated price is $1,479. Therefore, producer surplus = $1,479 - $1,210 = $269.

Question 12

The difference between market price and the price at which sellers would be willing to supply the product is called:

Accepted Answer

The difference between market price and the price at which sellers would be willing to supply the product is known as producer surplus. This occurs when the market price is higher than the minimum price required by sellers to produce and sell the product. It reflects the extra money that the producer would receive above and beyond the cost of production.

Question 13

Mike really enjoys Bitter Sweet coffee and is willing to pay $10 per cup.The retail price is $3.

Accepted Answer

Consumer surplus is the difference between the maximum price a person is willing to pay for a good or service and the actual retail price they pay. In this case, Mike is willing to pay $10 for a cup of Bitter Sweet coffee and the retail price is $3. Therefore, Mike's consumer surplus is $7 per cup (10-3 = 7). Option C is incorrect because if the seller raises the price to $13, it will exceed Mike's maximum willingness to pay and he may not make a sale. Option D is incorrect because Mike's consumer surplus is positive, which means he is getting a good deal on the coffee.

Question 14

If an individual consumer is willing to pay $20 for a pizza,but the price of the pizza is $10,then the amount of consumer surplus resulting from the purchase of that pizza would be:

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay and what they actually pay. In this case, the consumer is willing to pay $20 but only pays $10, resulting in a consumer surplus of $10.

Question 15

Suppose the market price is $5.The producer who sells the first unit of output has a willingness-to-sell equal to $1;the producer who sells the second unit of output has a willingness-to-sell equal to $2;and the producer who sells the third unit of output has a willingness-to-sell equal to $4.Total producer surplus is:

Accepted Answer

The producer surplus for the first unit is $4 ($5-$1), for the second unit is $3 ($5-$2), and for the third unit is $1 ($5-$4). 
Therefore, the total producer surplus is $4+$3+$1=$8.

Question 16

In a market,consumers get extra benefits called ______________,while businesses receive extra benefits known as _________________.

Accepted Answer

Consumer surplus refers to the extra benefit that consumers receive from purchasing a good or service at a price lower than what they are willing to pay. Producer surplus, on the other hand, is the extra benefit that businesses receive from selling a good or service at a price higher than what they are willing to sell it for. Therefore, option B is the most appropriate answer.

Question 17

All else equal,consumers prefer market outcomes with:

Accepted Answer

Consumers prefer market outcomes with more consumer surplus because it represents the difference between the amount a consumer is willing to pay for a good and the actual price they pay. More consumer surplus means that consumers are getting a better deal and are able to keep more of their money.

Question 18

Jason purchased a new printer for $150 although he was willing to pay $175.The minimum price acceptable by the seller,Jasmine,was $145.The results of this transaction are a consumer surplus of:

Accepted Answer

Consumer surplus is the difference between what the consumer is willing to pay and what they actually pay. In this case, Jason was willing to pay $175 but only paid $150, so his consumer surplus is $25.
Producer surplus is the difference between the price the seller receives and the minimum price they are willing to accept. In this case, Jasmine received $150 but was willing to accept $145, so her producer surplus is $5.
Therefore, the total surplus in this transaction is $25 (consumer surplus) + $5 (producer surplus) = $30. Option B is the only possible answer that matches this calculation.

Question 19

If you are willing to sell your old bicycle for $30,but someone offers you $40 for it,the results of the transaction would yield:

Accepted Answer

Producer surplus is the difference between what a seller is willing to accept for a good and what they actually receive. In this case, the seller was willing to accept $30 but received $40, resulting in a $10 producer surplus. Consumer surplus is not determined with the given information.

Question 20

Suppose that a customer's willingness to pay for a product is $1,480,and the seller's willingness to sell is $1,210.If the negotiated price is $1,479,how much is consumer surplus?

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay and what they actually pay. Here, the consumer is willing to pay $1,480 and pays $1,479, so the consumer surplus is $1.

Quiz 4: Markets and Government