Question 1

Which of the following will cause no change in producer surplus?
A) the imposition of a nonbinding price ceiling in the market
B) buyers expect the price of a good to be higher next month
C) the price of a substitute increases
D) income increases and buyers consider the good to be inferior

Accepted Answer

A nonbinding price ceiling is a price control that is set above the market price and therefore has no effect on the market equilibrium. As a result, it does not affect producer surplus.

B, C, and D will all cause a change in producer surplus. If buyers expect the price of a good to be higher in the future (B), they may purchase more of the good now, causing an increase in producer surplus. If the price of a substitute for a good increases (C), consumers may switch to the original good, leading to an increase in demand and producer surplus. If income increases and buyers consider the good to be inferior (D), demand for the good may decrease, leading to a decrease in producer surplus.

Question 2

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?
A) profits and costs to firms
B) consumer and producer surplus
C) the equilibrium price and quantity
D) incomes of and prices paid by buyers

Accepted Answer

The answer of Which tools allow economists to determine if...

Question 3

Kristi and Rebecca sell lemonade on the corner.It costs them 7 cents to make each cup.On a certain day,they sell 40 cups.Their producer surplus for that day amounts to $19.20.Kristi & Rebecca sold each cup for
A) 31 cents.
B) 38 cents.
C) 45 cents.
D) 55 cents.

Accepted Answer

The answer of Kristi and Rebecca sell lemonade on the...

Question 4

Total surplus is
A) equal to producer surplus plus consumer surplus.
B) equal to the total cost to sellers minus the total value to buyers.
C) equal to consumers' willingness to pay plus producers' cost.
D) greater than the sum of consumer surplus plus producer surplus.

Accepted Answer

Total surplus is the total value that consumers receive from a good or service, minus the total cost of producing it. Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay. Producer surplus is the difference between the price that a producer receives for a good or service and the cost of producing it. Therefore, total surplus is equal to the sum of consumer surplus and producer surplus, as it represents the total gain from trade in a market.

Question 5

The Surgeon General announces that eating apples promotes healthy teeth.As a result,the equilibrium price of apples
A) increases, and producer surplus increases.
B) increases, and producer surplus decreases.
C) decreases, and producer surplus increases.
D) decreases, and producer surplus decreases.

Accepted Answer

With the announcement that eating apples promotes healthy teeth, the demand for apples increases as people are more willing to pay for them to gain the health benefits. This would cause the equilibrium price to increase, and as a result, the producer surplus will also increase.

Question 6

Consumer surplus equals the
A) value to buyers minus the amount paid by buyers.
B) value to buyers minus the cost to sellers.
C) amount received by sellers minus the cost to sellers.
D) amount received by sellers minus the amount paid by buyers.

Accepted Answer

Consumer surplus is the difference between the value that consumers place on a good or service and the price they actually pay for it. Therefore, it equals the value to buyers (what they are willing to pay) minus the amount paid by buyers (the price they actually pay).

Question 7

Suppose that the market price for pizzas increases.The increase in producer surplus comes from the benefit of the higher prices to
A) only existing sellers who now receive higher prices on the pizzas they were already selling.
B) only new sellers who enter the market because of the higher prices.
C) both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices.
D) Producer surplus does not increase; it decreases.

Accepted Answer

The answer of Suppose that the market price for pizzas...

Question 8

Bill created a new software program he is willing to sell for $300.He sells his first copy and enjoys a producer surplus of $250.What is the price paid for the software?
A) $50.
B) $250.
C) $300.
D) $550.

Accepted Answer

The answer of Bill created a new software program he...

Question 9

ABC Company incurs a cost of 50 cents to produce a dozen eggs,while XYZ Company incurs a cost of 70 cents to produce a dozen eggs.Which of the following price increases would cause both companies to experience an increase in producer surplus?
A) The price of a dozen eggs increases from 40 cents to 55 cents.
B) The price of a dozen eggs increases from 55 cents to 70 cents.
C) The price of a dozen eggs increases from 55 cents to 75 cents.
D) All of these price increases would cause both companies to experience a loss in producer surplus.

Accepted Answer

Both companies have a cost of production below 75 cents, but above 55 cents. Therefore, a price increase from 55 cents to 75 cents would allow both companies to experience an increase in producer surplus. Option A and B would only benefit ABC Company as their cost of production is less, while XYZ Company would experience a decrease in producer surplus. Option D is incorrect as an increase in price above the cost of production would always result in an increase in producer surplus.

Question 10

Total surplus
A) can be used to measure a market's efficiency.
B) is the sum of consumer and producer surplus.
C) is the to value to buyers minus the cost to sellers.
D) All of the above are correct.

Accepted Answer

All three statements are correct. Total surplus is a measure of a market's efficiency, which is calculated as the sum of consumer and producer surplus. Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price paid, while producer surplus is the difference between the minimum price a producer is willing to accept and the actual price received. Total surplus is the net benefit or gain to society, which is measured as the total value to buyers minus the cost to sellers.

Question 11

Bill created a new software program he is willing to sell for $200.He sells his first copy and enjoys a producer surplus of $150.What is the price paid for the software?
A) $50.
B) $150.
C) $200.
D) $350.

Accepted Answer

The answer of Bill created a new software program he...

Question 12

Which of the following events would increase producer surplus?
A) Sellers' costs stay the same and the price of the good increases.
B) Sellers' costs increase and the price of the good stays the same.
C) Sellers' costs increase and the price of the good decreases.
D) All of the above are correct.

Accepted Answer

When the price of a good increases while sellers' costs stay the same, producers will be able to receive a higher price for each unit they sell, resulting in an increase in producer surplus. On the other hand, if sellers' costs increase or the price of the good decreases, producer surplus will decrease because it will become less profitable for them to produce and sell the good.

Question 13

Donald produces nails at a cost of $350 per ton.If he sells the nails for $500 per ton,his producer surplus is
A) $150.
B) $350.
C) $500.
D) $850.

Accepted Answer

The answer of Donald produces nails at a cost of...

Question 14

Which of the following will cause a decrease in producer surplus?
A) the imposition of a nonbinding price ceiling in the market
B) buyers expect the price of a good to be higher next month
C) the price of a substitute increases
D) income increases and buyers consider the good to be inferior

Accepted Answer

The answer of Which of the following will cause a...

Question 15

Total surplus is
A) the total cost to sellers of providing the good minus the total value of the good to buyers.
B) the total value of the good to buyers minus the cost to sellers of providing the good.
C) the difference between consumer surplus and sellers' cost.
D) always smaller than producer surplus.

Accepted Answer

Total surplus is the difference between the total value of the good to buyers and the cost to sellers of providing the good. Therefore, option B is the correct choice. Option A is the opposite of the correct definition, option C is only one component of total surplus, and option D is not always true as it depends on the specific market conditions.

Question 16

Producer surplus equals the
A) value to buyers minus the amount paid by buyers.
B) value to buyers minus the cost to sellers.
C) amount received by sellers minus the cost to sellers.
D) amount received by sellers minus the amount paid by buyers.

Accepted Answer

The answer of Producer surplus equals the
A) value to buyers...

Question 17

Which of the following will cause a decrease in producer surplus?
A) the imposition of a binding price ceiling in the market
B) an increase in the number of buyers of the good
C) income increases and buyers consider the good to be normal
D) the price of a complement decreases

Accepted Answer

The imposition of a binding price ceiling in the market will create a situation where the price that producers receive for their goods is lower than what they would be able to receive in a free market, therefore decreasing their producer surplus.

Question 18

Economists typically measure efficiency using
A) the price paid by buyers.
B) the quantity supplied by sellers.
C) total surplus.
D) profits to firms.

Accepted Answer

Total surplus represents the sum of consumer surplus (the difference between what consumers are willing to pay for a good or service and what they actually pay) and producer surplus (the difference between the price a seller receives and the minimum price they are willing to accept). It captures the overall welfare generated by a market transaction and is a commonly used measure of efficiency in economics.

Question 19

At Nick's Bakery,the cost to make homemade chocolate cake is $4 per cake.As a result of selling five cakes,Nick experiences a producer surplus in the amount of $17.50.Nick must be selling his cakes for
A) $6.50 each.
B) $7.50 each.
C) $9.50 each.
D) $10.50 each.

Accepted Answer

To find the selling price of each chocolate cake, we need to first calculate Nick's total cost of producing five cakes:

Total cost = $4 per cake x 5 cakes = $20

Next, we need to subtract Nick's total cost from the producer surplus he experienced:

Producer surplus = Selling price - Total cost

$17.50 = Selling price - $20

Selling price = $20 + $17.50

Selling price = $37.50

Finally, we can divide the total selling price by the number of cakes sold to find the price per cake:

Price per cake = Selling price / Number of cakes

Price per cake = $37.50 / 5

Price per cake = $7.50

Therefore, Nick must be selling his cakes for $7.50 each.

Question 20

The welfare of sellers is measured by
A) consumer surplus.
B) producer surplus.
C) total surplus.
D) price.

Accepted Answer

The welfare of sellers is measured by producer surplus, which is the difference between the price a producer receives for a good and the minimum price they would be willing to accept. This surplus represents the benefit that sellers receive from participating in a market.

Quiz 7: Consumers, Producers, and the Efficiency of Markets.

Which of the following will cause no change in producer surplus?

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Kristi and Rebecca sell lemonade on the corner.It costs them 7 cents to make each cup.On a certain day,they sell 40 cups.Their producer surplus for that day amounts to $19.20.Kristi & Rebecca sold each cup for

Total surplus is

The Surgeon General announces that eating apples promotes healthy teeth.As a result,the equilibrium price of apples

Consumer surplus equals the

Suppose that the market price for pizzas increases.The increase in producer surplus comes from the benefit of the higher prices to

Bill created a new software program he is willing to sell for $300.He sells his first copy and enjoys a producer surplus of $250.What is the price paid for the software?

ABC Company incurs a cost of 50 cents to produce a dozen eggs,while XYZ Company incurs a cost of 70 cents to produce a dozen eggs.Which of the following price increases would cause both companies to experience an increase in producer surplus?

Total surplus

Bill created a new software program he is willing to sell for $200.He sells his first copy and enjoys a producer surplus of $150.What is the price paid for the software?

Which of the following events would increase producer surplus?

Donald produces nails at a cost of $350 per ton.If he sells the nails for $500 per ton,his producer surplus is

Which of the following will cause a decrease in producer surplus?

Total surplus is

Producer surplus equals the

Which of the following will cause a decrease in producer surplus?

Economists typically measure efficiency using

At Nick's Bakery,the cost to make homemade chocolate cake is $4 per cake.As a result of selling five cakes,Nick experiences a producer surplus in the amount of $17.50.Nick must be selling his cakes for

The welfare of sellers is measured by