Question 1

Table 7-1
 
-Refer to Table 7-1.If the table represents the willingness to pay of 4 buyers and the price of the product is $25,who would be willing to purchase the product
A)Mike
B)Mike and Evan
C)Mike, Evan, and Jonathan
D)Mike, Evan, Jonathan, and Haley

Accepted Answer

Only Mike, Evan, and Jonathan have a willingness to pay that is equal to or greater than the price of the product, so they would be willing to purchase it. Haley's willingness to pay is only $20, so she would not be willing to purchase the product at a price of $25.

Question 2

With respect to welfare economics,why is the equilibrium price of a product considered to be the best price
A)It maximizes total revenue to firms and total utility to buyers.
B)It maximizes the total welfare of buyers and sellers.
C)It minimizes costs and maximizes profits of sellers.
D)It minimizes the level of welfare payments to those living close to the poverty line.

Accepted Answer

According to welfare economics, the equilibrium price is considered to be the best price because it maximizes total welfare of buyers and sellers. This means that at the equilibrium price, there is neither surplus nor shortage of the product, and both buyers and sellers are able to transact at a price where they feel satisfied with the outcome. This leads to an optimal allocation of resources, which is the main objective of welfare economics. Therefore, option B is the correct answer. The other options are incorrect because they either focus on the interests of one group (option A and C) or are irrelevant to the question (option D).

Question 3

To what does normative analysis refer
A)what is
B)what should be
C)what maximizes efficiency
D)what is politically correct

Accepted Answer

Normative analysis refers to what should be, or how things ought to be. It is concerned with evaluating policies or actions based on a specific set of values or standards, and making recommendations for how to achieve those standards. The other options, such as what is, what maximizes efficiency, and what is politically correct, are related to positive analysis, which is concerned with describing and analyzing existing phenomena rather than evaluating them based on normative criteria.

Question 4

What is welfare economics
A)the study of the well-being of less fortunate people
B)the study of welfare programs in Canada
C)the study of the effect of income redistribution on work effort
D)the study of how the allocation of resources affects economic well-being

Accepted Answer

Welfare economics is the branch of economics that studies how the allocation of resources affects economic well-being. It examines the ways in which economic policies and institutions can be designed to improve the well-being of individuals and society as a whole. While issues related to welfare programs and income redistribution may be included in the study of welfare economics, they are not the sole focus of the field.

Question 5

What is the likely effect of the equilibrium of supply and demand in a market
A)It maximizes the prices at which producers are willing to sell.
B)It minimizes the prices that consumers are willing to pay.
C)It maximizes market benefits from government intervention.
D)It maximizes total surplus in a competitive market.

Accepted Answer

The equilibrium of supply and demand in a market will maximize total surplus in a competitive market. This is because at the equilibrium point, the quantity of goods or services supplied by producers will equal the quantity demanded by consumers, resulting in an efficient allocation of resources and maximizing the net benefits to society. At this point, both producers and consumers are satisfied, and no one can be made better off without making someone else worse off.

Question 6

What does the equilibrium of supply and demand in a market do
A)It maximizes the prices at which producers are willing to sell.
B)It minimizes the prices that consumers are willing to pay.
C)It produces both an efficient and equitable market outcome.
D)It maximizes the total benefits received by buyers and sellers.

Accepted Answer

The equilibrium of supply and demand in a market maximizes the total benefits received by both buyers and sellers, as it determines the price and quantity at which both are willing to participate in the market. This leads to a mutually beneficial outcome and a more efficient allocation of resources. Therefore, choice D is the best option.

Question 7

What does consumer surplus measure
A)the amount of a product a consumer can buy at a price below equilibrium price
B)the difference between the amount a consumer has to pay and the amount the consumer would be willing to pay
C)the number of consumers who are excluded from a market because of scarcity
D)how much a buyer values a good

Accepted Answer

Consumer surplus measures the difference between the amount a consumer is willing to pay for a good or service and the price they actually pay. This is calculated by subtracting the price paid from the maximum price the consumer would be willing to pay. Option A is incorrect as consumer surplus is not related to equilibrium price. Option C is incorrect as it refers to scarcity which is not related to consumer surplus. Option D is incorrect as it describes the concept of willingness to pay, which is a factor used in the calculation of consumer surplus.

Question 8

Suri is willing to pay $85 for a pair of shoes for her graduation banquet.She finds a pair at her favourite outlet shoe store for $62.What is Suri's consumer surplus
A)$23
B)$46
C)$62
D)$85

Accepted Answer

Suri's maximum willingness to pay for the shoes was $85, but she was able to purchase them for only $62. Therefore, her consumer surplus is:

Consumer Surplus = Maximum Willingness to Pay - Price Paid
Consumer Surplus = $85 - $62
Consumer Surplus = $23

Option A is the correct answer.

Question 9

What name is given to the study of how the allocation of resources affects economic well-being
A)consumer economics
B)managerial economics
C)welfare economics
D)supply-side economics

Accepted Answer

The name given to the study of how the allocation of resources affects economic well-being is welfare economics. Consumer economics is a narrower field that focuses on how consumers make decisions about spending and saving, while managerial economics looks at how businesses make decisions about production and pricing. Supply-side economics is a school of thought that emphasizes low taxes and deregulation as a means of promoting economic growth.

Question 10

Suppose Lauren,Leslie,and Lyndsay all purchase bulletin boards for their rooms for $20 each.Lauren's willingness to pay was $35,Leslie's willingness to pay was $25,and Lyndsay's willingness to pay was $30.What is the total consumer surplus for these three
A)$10
B)$20
C)$30
D)$40

Accepted Answer

The answer of Suppose Lauren,Leslie,and Lyndsay all purchase bulletin boards...

Question 11

If Paula is willing to pay $80 for Prince's last album,and the market-equilibrium price is $70,what is consumer surplus for Paula
A)$0
B)$10
C)$70
D)$80

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price they pay. In this case, Paula is willing to pay $80 but only has to pay $70, so her consumer surplus is $10. Therefore, the answer is B.

Question 12

Why is the best price the particular price that results in quantity supplied being equal to quantity demanded
A)It maximizes sellers' costs.
B)It maximizes profit for buyers.
C)It maximizes the total welfare of buyers and sellers.
D)It minimizes the expenditure of buyers.

Accepted Answer

The best price is the one that results in quantity supplied being equal to quantity demanded because it maximizes the total welfare of both buyers and sellers. This is because when supply and demand are in equilibrium, the price signals that the market has allocated resources efficiently and that there are no shortages or surpluses, leading to a fair distribution of benefits to both buyers and sellers. The other options are not correct because maximizing sellers' costs (A) or buyers' profit (B) does not consider the welfare of both parties in the market, and minimizing buyers' expenditure (D) does not necessarily lead to an efficient allocation of resources or a fair distribution of benefits.

Question 13

To what does positive analysis refer
A)what is
B)what should be
C)what could be
D)what is politically correct

Accepted Answer

Positive analysis refers to what is, meaning it deals with objective facts and data without any value judgments or opinions.

Question 14

What does a consumer's willingness to pay measure
A)the cost of a good to the buyer
B)how much a buyer values a good
C)how much a buyer has to pay to receive a good
D)how much a seller receives from the sale of a good

Accepted Answer

A consumer's willingness to pay measures how much a buyer values a good. It is the maximum price a buyer is willing to pay for a certain product or service. It is not the actual cost of the good to the buyer, the amount a buyer has to pay to receive the good, or how much a seller receives from the sale of the good.

Question 15

What is consumer surplus
A)a buyer's willingness to pay minus the price
B)a buyer's willingness to pay plus the price
C)the price of the product minus the buyer's willingness to pay
D)the price of the product plus the buyer's willingness to pay

Accepted Answer

Consumer surplus is the difference between the highest price a consumer is willing to pay for a product and the actual price they pay. Therefore, it is the buyer's willingness to pay minus the price.

Question 16

Shannon buys a new audio system for her car for $335.She receives consumer surplus of $25 on her purchase.What is her willingness to pay
A)$25
B)$300
C)$335
D)$360

Accepted Answer

Shannon's willingness to pay is the maximum amount of money she is willing to spend on the audio system. Since she received consumer surplus of $25, her willingness to pay must be higher than the price she paid ($335-$25=$310). Therefore, the only option that is higher than $310 is D)$360.

Question 17

What does willingness to pay measure
A)the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
B)the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept
C)the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept
D)the maximum amount that a buyer will pay for a good

Accepted Answer

Willingness to pay measures the maximum amount that a buyer is willing to pay for a good.

Question 18

Suppose Lauren,Leslie,and Lyndsay all purchase bulletin boards for their rooms for $15 each.Lauren's willingness to pay was $35,Leslie's willingness to pay was $25,and Lyndsay's willingness to pay was $30.Rank their consumer surplus from high to low.
A)Lauren, Lyndsay, and Leslie
B)Leslie, Lyndsay, and Lauren
C)Lyndsay, Leslie, and Lauren
D)Lauren, Leslie, and Lyndsay

Accepted Answer

Consumer surplus is the difference between the willingness to pay and the actual price paid for a good or service. So, Lauren's consumer surplus would be $20 ($35 - $15), Lyndsay's consumer surplus would be $15 ($30 - $15), and Leslie's consumer surplus would be $10 ($25 - $15). Therefore, the ranking of consumer surplus from high to low would be Lauren, Lyndsay, and Leslie.

Question 19

Suppose that Emmilyn,Cassie,and Tessa are bidding in an auction for a mint-condition video of the original Star Wars movie.Each has in mind a maximum amount that she will bid.What is this maximum called
A)resistance price
B)willingness to pay
C)consumer surplus
D)producer surplus

Accepted Answer

The maximum amount that each bidder is willing to pay is called their willingness to pay.

Question 20

Suppose Connor is willing to pay $400 for a new suit for his graduation,but is able to buy the suit for $350.What is his consumer surplus
A)$50
B)$150
C)$350
D)$400

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay and what they actually pay. Here, it's $400 - $350 = $50.

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

Table 7-1 -Refer to Table 7-1.If the table represents the willingness to pay of 4 buyers and the price of the product is $25,who would be willing to purchase the product

With respect to welfare economics,why is the equilibrium price of a product considered to be the best price

To what does normative analysis refer

What is welfare economics

What is the likely effect of the equilibrium of supply and demand in a market

What does the equilibrium of supply and demand in a market do

What does consumer surplus measure

Suri is willing to pay $85 for a pair of shoes for her graduation banquet.She finds a pair at her favourite outlet shoe store for $62.What is Suri's consumer surplus

What name is given to the study of how the allocation of resources affects economic well-being

Suppose Lauren,Leslie,and Lyndsay all purchase bulletin boards for their rooms for $20 each.Lauren's willingness to pay was $35,Leslie's willingness to pay was $25,and Lyndsay's willingness to pay was $30.What is the total consumer surplus for these three

If Paula is willing to pay $80 for Prince's last album,and the market-equilibrium price is $70,what is consumer surplus for Paula

Why is the best price the particular price that results in quantity supplied being equal to quantity demanded

To what does positive analysis refer

What does a consumer's willingness to pay measure

What is consumer surplus

Shannon buys a new audio system for her car for $335.She receives consumer surplus of $25 on her purchase.What is her willingness to pay

What does willingness to pay measure

Suppose Lauren,Leslie,and Lyndsay all purchase bulletin boards for their rooms for $15 each.Lauren's willingness to pay was $35,Leslie's willingness to pay was $25,and Lyndsay's willingness to pay was $30.Rank their consumer surplus from high to low.

Suppose that Emmilyn,Cassie,and Tessa are bidding in an auction for a mint-condition video of the original Star Wars movie.Each has in mind a maximum amount that she will bid.What is this maximum called

Suppose Connor is willing to pay $400 for a new suit for his graduation,but is able to buy the suit for $350.What is his consumer surplus