Question 1

The total surplus in a market is:
A) the excess supply due to a price above the equilibrium price.
B) the surplus that accrues when a good is not scarce, defined as the total amount (if any) by which quantity supplied exceeds quantity demanded at a zero price.
C) the net benefit to consumers, defined as the excess of consumer surplus over producer surplus.
D) the sum of consumer surplus and producer surplus.

Accepted Answer

The total surplus in a market is the sum of consumer surplus and producer surplus. Option A describes a situation where there is a surplus, but it is not the total surplus. Option B describes a situation with a zero price, which is not relevant to the concept of total surplus. Option C is partially correct, but it only considers the benefit to consumers and does not include the benefit to producers, which is also a part of total surplus.

Question 2

Mountain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip is $150, Mountain River Adventures will offer _____ trips per day and will have producer surplus equal to _____.
A) three; $90
B) three; $10
C) two; $220
D) four; $80

Accepted Answer

The answer of Mountain River Adventures offers whitewater rafting trips...

Question 3

Along a given upward-sloping supply curve, a decrease in price will cause producer surplus to:
A) increase.
B) decrease.
C) stay the same.
D) We cannot determine what producer surplus will do without information about the demand curve.

Accepted Answer

Along an upward-sloping supply curve, a decrease in price will result in a decrease in producer surplus. This is because as the price decreases, the producer will have to sell more units to earn the same revenue, but the cost of producing those additional units may be higher, resulting in a smaller surplus.

Question 4

Luis is willing to sell his pool table for no less than $600, but if he gets $840, the producer surplus Luis receives is:
A) $600.
B) $840.
C) $240.
D) $1,440.

Accepted Answer

Producer surplus is the difference between the market price and the minimum price at which the producer is willing to sell a good. In this case, Luis is willing to sell his pool table for no less than $600. If he gets $840, his producer surplus would be $840 - $600 = $240.

Question 5

Along a given upward-sloping supply curve, a decrease in the price of a good will _____ producer surplus.
A) increase
B) decrease
C) have no effect on
D) It's impossible to tell what will happen to producer surplus.

Accepted Answer

A decrease in the price of a good along an upward-sloping supply curve reduces producer surplus because producers receive less for each unit sold, diminishing the area between the supply curve and the market price.

Question 6

If the supply curve of ice cream is upward-sloping and demand for it decreases, there will be _____ in producer surplus.
A) an increase
B) a decrease
C) no change
D) It's impossible to tell what will happen to producer surplus.

Accepted Answer

When demand decreases, the equilibrium price and quantity of ice cream both decrease. This means that the price that producers receive for each unit of ice cream they sell decreases. Since the supply curve is upward-sloping, this also means that the marginal cost of producing ice cream is higher for each unit produced. As a result, there will be a decrease in producer surplus.

Question 7

Maximum total surplus in the market for chocolate occurs when:
A) total net gain to producers is minimized.
B) all consumers who value chocolate can buy chocolate.
C) all producers can sell their chocolate.
D) the market is in equilibrium.

Accepted Answer

In an equilibrium market, the quantity supplied equals the quantity demanded, and therefore the price is such that both producers and consumers are satisfied with the outcome. At this point, the total surplus in the market is maximized since all transactions that create positive net gains for both parties are taking place. On the other hand, minimizing the total net gain to producers (choice A) may lead to some of them leaving the market due to low profitability, reducing the total quantity supplied and therefore reducing the total surplus. Similarly, if only some consumers (choice B) or producers (choice C) are able to participate in the market, there will be missed opportunities for mutually beneficial transactions, reducing the total surplus as well.

Question 8

Peanut butter and jelly are complements in consumption. Assuming that the supply curve of peanut butter is upward-sloping, if there is a decrease in the price of jelly, producer surplus in the peanut butter market:
A) will increase.
B) will decrease.
C) will not change.
D) may change, but it is impossible to tell whether it will increase or decrease.

Accepted Answer

Since peanut butter and jelly are complements in consumption, a decrease in the price of jelly will likely increase the demand for peanut butter. This will increase the equilibrium quantity of peanut butter sold, which could lead to a higher price for peanut butter and greater producer surplus in the peanut butter market.

Question 9

Use the following to answer question 
Figure: The Market for Hamburgers 
-(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers. The maximum total surplus for the market is _____, and it occurs at a price equal to _____.
A) $550; $1.50
B) $600; $1.50
C) $1,050; $2
D) Not enough information is provided to answer this question, since the maximum total surplus could occur anywhere.

Accepted Answer

The maximum total surplus in a market occurs where the supply and demand curves intersect, as this point represents the equilibrium price and quantity, optimizing the total surplus. Without seeing the figure, we typically assume this principle holds. Given the options, the choice that suggests a specific total surplus and price ($600; $1.50) aligns with the concept of an equilibrium maximizing total surplus, assuming this choice reflects the equilibrium point described in the unseen figure.

Question 10

If the price of a good rises along an upward-sloping supply curve, then producer surplus:
A) will increase.
B) will decrease.
C) will remain the same.
D) may change, but we can't tell how.

Accepted Answer

When the price of a good rises along an upward-sloping supply curve, it means that producers are able to sell their goods at a higher price, which increases their revenue. As a result, producer surplus – which is the difference between the market price and the cost of production – will increase.

Question 11

When a new medical report extols the health advantages of grapefruit, assuming an upward-sloping supply curve, producer surplus in the grapefruit market:
A) will increase.
B) will decrease.
C) will remain the same.
D) may change, but we can't tell how.

Accepted Answer

An upward-sloping supply curve means that as the price of grapefruit increases, suppliers are willing to supply more grapefruit to the market. When a new medical report extols the health advantages of grapefruit, demand for grapefruit is likely to increase. As demand increases, the price of grapefruit is likely to increase as well, leading to an increase in producer surplus. Therefore, producer surplus in the grapefruit market will increase.

Question 12

Equilibrium in the market for peanut butter is disturbed by an increase in the price of peanuts. Assuming that the supply curve of peanut butter is upward-sloping, producer surplus in the peanut butter market:
A) will increase.
B) will decrease.
C) will not change.
D) may change, but we cannot determine the change without more information.

Accepted Answer

The answer of Equilibrium in the market for peanut butter...

Question 13

Along a given supply curve, an increase in the price of a good will:
A) increase producer surplus.
B) decrease producer surplus.
C) increase consumer surplus.
D) decrease producer surplus and increase consumer surplus.

Accepted Answer

An increase in the price of a good will shift the equilibrium point up along the supply curve, which means that producers are able to sell their goods at a higher price. This increase in price will lead to an increase in producer surplus, as their profit margins will be higher. Therefore, the correct answer is A, increase producer surplus.

Question 14

Assuming that the supply curve of cupcakes is upward-sloping and demand for cupcakes decreases, there is a(n) _____ in _____ surplus.
A) increase; producer
B) increase; consumer
C) increase; total
D) decrease; producer

Accepted Answer

If demand for cupcakes decreases, there will be a surplus of cupcakes which means that the quantity supplied is greater than the quantity demanded. This surplus will be experienced by producers as they will have unsold inventory, hence decreasing the surplus of producers. Therefore, the answer is D, decrease in producer surplus.

Question 15

Total surplus is:
A) the difference between price and the cost to the seller.
B) the sum of consumer and producer surplus.
C) equal to the area below the demand curve.
D) always more for consumers than producers.

Accepted Answer

Total surplus is the sum of consumer and producer surplus. It represents the total benefit that society receives from a transaction. Option A is incorrect because it only refers to a portion of the total surplus. Option C is incorrect because it only refers to the consumer surplus. Option D is incorrect because total surplus can vary depending on market conditions, and it is not always more for consumers than producers.

Question 16

Use the following to answer question
Figure: Producer Surplus and Supply 
-(Figure: Producer Surplus and Supply) Look at the figure Producer Surplus and Supply. The difference between the total revenue received by sellers and their total cost is called _____ surplus, which is depicted by area _____ if the amount sold is E.
A) consumer; ABD
B) producer; 0BDE
C) net; 0ADE
D) producer; ABD

Accepted Answer

The question asks for the term used to describe the difference between total revenue and total cost for producers, which is producer surplus. The figure shows that this surplus is depicted by area ABD when the amount sold is E. Therefore, the correct choice is D) producer; ABD.

Question 17

Along the upward-sloping supply curve for brownies, a decrease in the price of brownies will:
A) increase producer surplus.
B) decrease producer surplus.
C) increase consumer surplus.
D) increase producer surplus and consumer surplus.

Accepted Answer

Along the upward-sloping supply curve, a decrease in price will lead to a decrease in producer surplus as producers are receiving a lower price for each unit they produce and sell. Consumer surplus may increase as the lower price makes brownies more affordable for consumers. However, the question specifically asks about the impact on producer surplus only.

Question 18

If the cost to download a song from the Internet falls from $0.99 to $0.50 along an upward-sloping supply curve, producer surplus in the market for MP3 players is likely to:
A) increase.
B) decrease.
C) not change.
D) We cannot determine what producer surplus will do without information about consumer surplus.

Accepted Answer

The answer of If the cost to download a song...

Question 19

Mountain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip was $120 but has now increased to $150, the gain in producer surplus is equal to:
A) $20.
B) $70.
C) $80.
D) $90.

Accepted Answer

The gain in producer surplus is calculated by comparing the additional revenue from the price increase against the cost of additional trips made profitable by the price increase. Initially, at $120, only the first trip is profitable. When the price increases to $150, the second trip also becomes profitable. The gain in producer surplus is the difference in revenue from selling the second trip at the new price ($150) minus its cost ($120), which equals $30, plus the increase in revenue for the first trip, which is the difference between the new price and the old price ($150 - $120 = $30). So, the total gain in producer surplus is $30 (for the second trip) + $30 (increase for the first trip) = $60. However, without considering the costs and revenues for the third and fourth trips, which are not profitable even at the new price, and correcting the calculation mistake, the correct approach is to calculate the gain in producer surplus for the trips that became more profitable due to the price increase. Initially, the mistake in calculation led to an incorrect total. The correct calculation should consider the increase in surplus for each trip that is now profitable or more profitable due to the price increase, taking into account the correct costs and the number of trips now profitable at the new price.

Question 20

Use the following to answer question Figure: Gain in Producer Surplus -(Figure: Gain in Producer Surplus) Look at the figure Gain in Producer Surplus. Which of the following areas represent producer surplus when the price is equal to P₂? A) D, E, and F B) B and C C) D and E D) A, B, and C

Accepted Answer

The answer of Use the following to answer question 
Figure:...

Quiz 4: Consumer and Producer Surplus

The total surplus in a market is:

Along a given upward-sloping supply curve, a decrease in price will cause producer surplus to:

Luis is willing to sell his pool table for no less than $600, but if he gets $840, the producer surplus Luis receives is:

Along a given upward-sloping supply curve, a decrease in the price of a good will _____ producer surplus.

If the supply curve of ice cream is upward-sloping and demand for it decreases, there will be _____ in producer surplus.

Maximum total surplus in the market for chocolate occurs when:

Peanut butter and jelly are complements in consumption. Assuming that the supply curve of peanut butter is upward-sloping, if there is a decrease in the price of jelly, producer surplus in the peanut butter market:

Use the following to answer question Figure: The Market for Hamburgers -(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers. The maximum total surplus for the market is _, and it occurs at a price equal to _.

If the price of a good rises along an upward-sloping supply curve, then producer surplus:

When a new medical report extols the health advantages of grapefruit, assuming an upward-sloping supply curve, producer surplus in the grapefruit market:

Equilibrium in the market for peanut butter is disturbed by an increase in the price of peanuts. Assuming that the supply curve of peanut butter is upward-sloping, producer surplus in the peanut butter market:

Along a given supply curve, an increase in the price of a good will:

Assuming that the supply curve of cupcakes is upward-sloping and demand for cupcakes decreases, there is a(n) _ in _ surplus.

Total surplus is:

Along the upward-sloping supply curve for brownies, a decrease in the price of brownies will:

If the cost to download a song from the Internet falls from $0.99 to $0.50 along an upward-sloping supply curve, producer surplus in the market for MP3 players is likely to:

Use the following to answer question Figure: Gain in Producer Surplus -(Figure: Gain in Producer Surplus) Look at the figure Gain in Producer Surplus. Which of the following areas represent producer surplus when the price is equal to P₂?