Question 1

Joel has a 1966 Mustang,which he sells to Susie,an avid car collector.Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car.Susie's consumer surplus is $2,000.

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 paid. In this case, Susie's consumer surplus would be calculated as:

Consumer surplus = Maximum price willing to pay - Actual price paid
Consumer surplus = $11,000 - $8,000
Consumer surplus = $3,000

Therefore, the statement in the question is false. Susie's consumer surplus is $3,000, not $2,000.

Question 2

Suppose there is an increase in supply that reduces market price.Consumer surplus increases because (1)consumer surplus received by existing buyers increases and (2)new buyers enter the market.

Accepted Answer

An increase in supply leads to a reduction in market price, which benefits consumers. Existing buyers benefit from a lower price, which increases their consumer surplus. Additionally, the lower price may attract new buyers to enter the market, which also increases consumer surplus. Therefore, consumer surplus increases due to both factors (1) and (2) mentioned in the statement.

Question 3

If Darby values a soccer ball at $50,and she pays $40 for it,her consumer surplus is $10.

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the price they actually pay. In this case, Darby values the soccer ball at $50 but pays only $40, so her consumer surplus is $10. Therefore, the statement is true.

Question 4

Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay for it.

Accepted Answer

Consumer surplus represents the extra value or benefit that a consumer receives as a result of paying less than they are willing to for a product. It is calculated by subtracting the actual price paid from the maximum price the consumer is willing to pay.

Question 5

If the government imposes a binding price floor in a market,then the consumer surplus in that market will decrease.

Accepted Answer

A binding price floor leads to an increase in price and a decrease in quantity demanded. This results in a decrease in consumer surplus, as consumers are paying higher prices for fewer goods.

Question 6

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay,but would refuse to buy a product at a price less than his willingness to pay.

Accepted Answer

A buyer is willing to buy a product at a price less than or equal to his willingness to pay, but would refuse to buy a product at a price greater than his willingness to pay.

Question 7

Welfare economics is the study of the welfare system.

Accepted Answer

Welfare economics is not the study of the welfare system, but rather the study of how economic policies and activities affect the well-being of individuals and society as a whole. It is concerned with issues such as income distribution, externalities, and market failures. The welfare system itself is a particular policy tool that is studied within welfare economics, but it is not the sole focus.

Question 8

Producer surplus is the amount a seller is paid minus the cost of production.

Accepted Answer

Producer surplus is the difference between the price a seller receives and the minimum amount they are willing to accept for a good or service, which is their cost of production. Therefore, producer surplus is the amount a seller is paid minus the cost of production.

Question 9

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Accepted Answer

Consumer surplus is measured as the area between the demand curve and the price level, up to the quantity demanded.

Question 10

Consumer surplus measures the benefit to buyers of participating in a market.

Accepted Answer

Consumer surplus is the difference between the maximum amount that the consumer is willing to pay for a good and the price they actually pay. This represents the benefit or value that the consumer gains from participating in the market.

Question 11

In a competitive market,sales go to those producers who are willing to supply the product at the lowest price.

Accepted Answer

In a competitive market, consumers have many options to choose from and generally go for the product that is priced the lowest among its competitors. This leads to higher sales for the producer that can supply the product at the lowest price.

Question 12

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Accepted Answer

Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay for it.

Question 13

If Darby values a soccer ball at $50,and she pays $40 for it,her consumer surplus is $90.

Accepted Answer

Consumer surplus is the difference between the maximum amount that a consumer is willing to pay for a good or service and the actual amount that they pay. In this case, Darby values the soccer ball at $50 but pays $40 for it. Therefore, her consumer surplus is $10, not $90.

Question 14

For any given quantity,the price on a demand curve represents the marginal buyer's willingness to pay.

Accepted Answer

The price on a demand curve represents the maximum amount a marginal buyer is willing to pay for a given quantity.

Question 15

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

Accepted Answer

This statement accurately describes the concept of willingness to pay.

Question 16

All else equal,an increase in supply will cause an increase in consumer surplus.

Accepted Answer

When supply increases, the equilibrium price decreases, which leads to a larger quantity demanded and an increase in consumer surplus.

Question 17

Consumer surplus can be measured as the area between the demand curve and the equilibrium price.

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a certain quantity of a good or service and the price they actually pay. It can be visualized as the area between the demand curve and the equilibrium price, since the demand curve represents the willingness to pay of consumers and the equilibrium price is the price at which the quantity demanded equals the quantity supplied.

Question 18

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

Accepted Answer

When the government imposes a binding price floor in a market, it sets a minimum price above the equilibrium price. This reduces the quantity demanded and increases the quantity supplied, leading to a surplus. This surplus reduces consumer surplus as consumers are not able to purchase as much at the higher price.

Question 19

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Accepted Answer

This statement is true according to the basic principle of economics: producers will supply goods and services as long as they can earn a profit, which means their revenue exceeds their costs, including opportunity costs.

Question 20

At any quantity,the price given by the supply curve shows the cost of the lowest-cost seller.

Accepted Answer

The price given by the supply curve at any quantity represents the cost of the marginal seller, which is the cost of the highest-cost seller willing to sell at that price, not the lowest-cost seller.

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

Joel has a 1966 Mustang,which he sells to Susie,an avid car collector.Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car.Susie's consumer surplus is $2,000.

Suppose there is an increase in supply that reduces market price.Consumer surplus increases because (1)consumer surplus received by existing buyers increases and (2)new buyers enter the market.

If Darby values a soccer ball at $50,and she pays $40 for it,her consumer surplus is $10.

Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay for it.

If the government imposes a binding price floor in a market,then the consumer surplus in that market will decrease.

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay,but would refuse to buy a product at a price less than his willingness to pay.

Welfare economics is the study of the welfare system.

Producer surplus is the amount a seller is paid minus the cost of production.

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Consumer surplus measures the benefit to buyers of participating in a market.

In a competitive market,sales go to those producers who are willing to supply the product at the lowest price.

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

If Darby values a soccer ball at $50,and she pays $40 for it,her consumer surplus is $90.

For any given quantity,the price on a demand curve represents the marginal buyer's willingness to pay.

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

All else equal,an increase in supply will cause an increase in consumer surplus.

Consumer surplus can be measured as the area between the demand curve and the equilibrium price.

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

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

At any quantity,the price given by the supply curve shows the cost of the lowest-cost seller.