Question 1

In the week before Hurricane Katrina, the price of flashlights rose in New Orleans because of:

Accepted Answer

The rise in price of flashlights in New Orleans before Hurricane Katrina was due to an increase in demand. This is because people were preparing for the storm and needed flashlights in case of power outages or other emergencies.

Question 2

If, for any given amount of a good or service, willingness to pay increases, then:

Accepted Answer

An increase in willingness to pay means that consumers are willing to pay more for the same amount of the good or service, indicating an increase in demand. This does not affect the supply of the good or service, as the same amount is still being produced regardless of the change in willingness to pay.

Question 3

Figure: Demand  In the diagram, for a market price of $4 total consumer surplus equals:

Accepted Answer

The answer of Figure: Demand  In the diagram, for...

Question 4

The market price of a good is $5 and 40 units of the good sell at this price. Its demand curve intersects the vertical axis at a price of $10 and has a constant slope. What is the approximate value of consumer surplus in this market?

Accepted Answer

Consumer surplus is the area of the triangle formed by the demand curve, the price line, and the vertical axis. The height of the triangle is $10 - $5 = $5, and the base is 40 units. The area is (1/2) * base * height = (1/2) * 40 * 5 = $100.

Question 5

Which variable is NOT a demand shifter?

Accepted Answer

Price of raw materials is a cost factor that affects supply, not demand. The other variables listed (price of complements, price of substitutes, tastes and preferences) are all factors that can shift the demand curve.

Question 6

Which variable does NOT shift the demand curve?

Accepted Answer

The price of the good itself does not shift the demand curve. Instead, it moves along the existing demand curve. A change in the price of the good leads to a change in the quantity demanded but not the demand. A change in population, income, or the price of complement goods can shift the entire demand curve.

Question 7

An increase in demand shifts the demand curve:

Accepted Answer

An increase in demand means that consumers are willing and able to buy more of a good or service at every given price. This results in a shift of the demand curve upward and to the right, indicating higher quantity demanded at every price level.

Question 8

On a graph of a demand curve, total consumer surplus equals:

Accepted Answer

Consumer surplus is the area beneath the demand curve and above the market price, representing the difference between what consumers are willing to pay and what they actually pay.

Question 9

Alex and Tyler enjoy the food at a restaurant named China Star. Alex values a meal there at $15 and Tyler values it at $26. If the restaurant charges only $10 a meal, what is Alex and Tyler's joint consumer surplus from a meal at China Star?

Accepted Answer

Consumer surplus is the difference between the maximum amount a consumer is willing to pay for a good and the actual amount they pay. In this case, Alex's consumer surplus is $15 - $10 = $5 and Tyler's consumer surplus is $26 - $10 = $16. Therefore, their joint consumer surplus is $5 + $16 = $21. The correct answer is C.

Question 10

The market price of a good is $10 and 40 units of the good sell at this price. Its demand curve intersects the vertical axis at a price of $12 and has a constant slope. What is the approximate value of consumer surplus in this market?

Accepted Answer

Consumer surplus is the area of the triangle formed by the demand curve, the price line, and the vertical axis. The height of the triangle is $2 ($12 - $10), and the base is 40 units. The area is 0.5 * base * height = 0.5 * 40 * 2 = $40.

Question 11

Use the following to answer questions:
Figure: Quantity of Good X 
-(Figure: Quantity of Good X) Refer to the figure. At a price of $200, consumer surplus is:

Accepted Answer

Consumer surplus can be calculated by finding the difference between the maximum amount a consumer is willing to pay (the demand curve) and the price they actually pay. At a price of $200 in the figure, the quantity demanded is 50. The demand curve intersects with the price at a point on the vertical axis where quantity demanded is 50 (which is $400). 
The area of the consumer surplus triangle is:
0.5 x ($400 - $200) x 50 = $10,000. 
Therefore, the correct answer is C.

Question 12

Use the following to answer questions:
Figure: Quantity of Good X 
-(Figure: Quantity of Good X) Refer to the figure. As the price falls from $200 to $100, consumer surplus changes by:

Accepted Answer

Consumer surplus is represented by the triangle above the price and below the demand curve, i.e. the shaded area in the graph. When price falls from $200 to $100, the quantity demanded increases from 40 to 80. So, the new consumer surplus is:

(1/2) x (80-40) x (200-100) = $12,500.

Therefore, consumer surplus changes by $12,500 - $0 = $12,500.

Question 13

Which one of the following choices would cause the demand curve for an inferior good to shift to the left?

Accepted Answer

A rise in incomes would cause the demand curve for an inferior good to shift to the left because consumers would buy less of the inferior good as they can now afford better alternatives.

Question 14

If, for a given amount of a good or service, willingness to pay decreases, then:

Accepted Answer

When willingness to pay decreases, it means consumers are not willing to pay as much for the good or service. This is a decrease in demand, not supply. Therefore, the correct answer is D, demand has decreased.

Question 15

To economists, the term consumer surplus means:

Accepted Answer

Consumer surplus refers to the difference between the highest price a consumer is willing to pay for a good or service and the actual price they pay. It represents the consumer's gain from trading and is a measure of the benefit received by consumers in a market transaction. Options A and D are incorrect as they do not accurately describe consumer surplus, while option B is close but not comprehensive enough as it does not capture the willingness of consumers to pay.

Question 16

Consumer surplus is the amount that consumers:

Accepted Answer

Consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. Therefore, option A is the correct answer.

Question 17

A decrease in demand refers to:

Accepted Answer

A decrease in demand means that buyers are willing to purchase less of a certain product at every price level. This results in a leftward shift of the demand curve.

Question 18

If you are willing to pay $8 for a $6 burrito, what is your consumer surplus if you buy it?

Accepted Answer

Consumer surplus is the difference between the amount a consumer is willing to pay and the actual price paid. In this case, the consumer is willing to pay $8 but only needs to pay $6. Therefore, the consumer surplus is $2 (which is the difference between $8 and $6). The correct choice is B.

Question 19

There are 100 consumers, each of whom values a concert ticket at a unique whole number dollar amount between $1 and $100. One customer is willing to pay $1, a second is willing to pay $2, a third is willing to pay $3, and so on. An unlimited number of concert tickets are on sale for $15 each. What is the total consumer surplus in this market?

Accepted Answer

The total consumer surplus is the sum of the difference between the price of the ticket and the amount each consumer is willing to pay for it. In this case, the price of the ticket is $15, and the amount each consumer is willing to pay for it ranges from $1 to $100. The total consumer surplus is therefore:(1 + 2 + 3 + ... + 100) - (15 * 100) = 5050 - 1500 = $3550

Question 20

What are factors that shift the demand curve?

Accepted Answer

The answer of What are factors that shift the demand...

Quiz 3: Supply and Demand