Question 1

Producing a soccer ball costs Jake $5.He sells it to Darby for $35.Darby values the soccer ball at $50.For this transaction,the total surplus in the market is $40.

Accepted Answer

The answer of Producing a soccer ball costs Jake $5.He...

Question 2

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

Accepted Answer

Efficiency refers to how well resources are allocated to produce the maximum amount of goods and services possible. This relates to the size of the economic pie. In contrast, equality refers to the distribution of income and wealth among individuals in a society, which relates to how the pie gets sliced and distributed.

Question 3

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

This is the definition of total surplus, which is the difference between the value buyers place on a good and the cost sellers incur in producing and selling that same good.

Question 4

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

Accepted Answer

This statement is true. The producer surplus represents the difference between the market price and the minimum price that producers are willing to receive for their products. The area below the market price and above the supply curve represents the amount of producer surplus in the market.

Question 5

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

Producer surplus is the difference between the market price and the cost of production. In this case, Connie's cost of production is $1 per window, and the market price is $3 per window.

If Connie cleans 100 windows, her total cost of production would be $100 (100 windows multiplied by $1 per window). Her total revenue (assuming she charges the market price) would be $300 (100 windows multiplied by $3 per window).

Her producer surplus would then be the difference between her total revenue and her total cost of production:

Producer surplus = Total revenue - Total cost
Producer surplus = $300 - $100
Producer surplus = $200

Therefore, the statement is true. Connie's producer surplus is $200 if she cleans 100 windows at a cost of $1 per window and charges the market price of $3 per window.

Question 6

Let P represent price;let Q^Srepresent quantity supplied;and assume the equation of the supply curve is .If 90 units of the good are produced and sold,then producer surplus amounts to $1,350.

Accepted Answer

To calculate producer surplus, we need to find the area between the supply curve and the price at which 90 units are sold. 
At QS1U1P1SS1S1P0S1U1P1, the price is $10. So, we can substitute P=10 into the supply curve equation:

QS1U1P1SS1S1P0S1U1P1 = 5 + 1*10 = $15

Therefore, at a price of $10, quantity supplied is $15. 
The area of the triangle between the supply curve and the price of $10 (where 90 units are sold) is: 
(1/2) * (90) * (15-10) = $225

So, at a price of $10, producer surplus is $225.

Since we are told that the total producer surplus is $1,350, we can assume that this is the sum of all the individual producer surpluses for each unit sold.

Therefore, we can divide $1,350 by 90 units to get the average producer surplus per unit: 
$1,350/90 = $15

This tells us that for every unit sold, the producer received $15 of surplus.

Since at a price of $10, producer surplus is $225 per unit, we can calculate how many units were sold at that price by dividing $225 by $15: 
$225/$15 = 15 units

Therefore, out of the total 90 units produced and sold, the first 15 were sold at a price of $10, and the remaining 75 were sold at a price higher than $10. This means that the producer surplus for the first 15 units sold was: 
15 units * $225/unit = $3,375

Since the total producer surplus was only $1,350, we know that the remaining 75 units must have been sold at a price less than $15 (the total surplus divided by the total units).

Therefore, the statement is true: if 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

Question 7

Producer surplus measures the benefit to sellers from receiving a price above their costs.

Accepted Answer

This is a correct definition of producer surplus. It is the difference between the price at which sellers are willing to sell a product and the minimum price they would need to receive in order to supply that product. It represents the additional profit that sellers earn above and beyond their costs.

Question 8

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 9

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

Accepted Answer

Efficiency refers to whether resources are being used in the most optimal way to produce the maximum amount of output possible. Equality refers to how evenly the benefits and costs of that output are distributed among members of society.

Question 10

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

Free markets operate based on the principles of supply and demand, with goods being allocated to those who value them the most and sellers producing them at the least cost.

Question 11

If the government removes a binding price ceiling in a market,then the producer surplus in that market will increase.

Accepted Answer

When a binding price ceiling is in place, it restricts the price that producers can charge for their goods/services, which reduces their ability to earn profits. When the government removes the price ceiling, producers are free to charge higher prices, which increases their ability to earn profits and therefore increases producer surplus.

Question 12

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

Accepted Answer

Producer surplus is the difference between the price at which a producer is willing to supply a good or service and the actual price they receive. If the price is lower, the producer surplus will also be lower as they are receiving less than what they were originally willing to supply the good or service for.

Question 13

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

Accepted Answer

A price ceiling is a maximum price set by the government for a product, which is below the market equilibrium price. This creates a shortage of the product because the quantity demanded exceeds the quantity supplied at the lower price. While consumers may benefit from the lower price, producers will experience a decrease in producer surplus because they are forced to sell their product at a lower price. Therefore, the statement is false.

Question 14

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

Accepted Answer

Total surplus in a market is the sum of consumer surplus and producer surplus. It is not the difference between the two.

Question 15

The cost of production plus producer surplus is the price a seller is paid.

Accepted Answer

The answer of The cost of production plus producer surplus...

Question 16

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

Accepted Answer

The equilibrium point where supply and demand are equal represents the most efficient allocation of goods and services because it maximizes the total benefits to buyers and sellers. At this point, there is no excess supply or demand, and both buyers and sellers are able to realize the highest possible levels of satisfaction.

Question 17

Let P represent price;let Q^Srepresent quantity supplied;and assume the equation of the supply curve is .If 80 units of the good are produced and sold,then producer surplus amounts to $1,200.

Accepted Answer

The answer of Let P represent price;let Q^Srepresent quantity...

Question 18

When demand increases so that 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 demand increases, the market price increases which leads to an increase in producer surplus. This increase happens because not only do existing sellers receive a higher surplus but also new sellers enter the market. Therefore, option A is correct.

Question 19

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

Accepted Answer

The area below the demand curve and above the price level measures consumer surplus, while the area above the supply curve and below the price level measures producer surplus in a market.

Question 20

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.

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