Question 1

If the cost of producing sofas decreases,then consumer surplus in the sofa market will

Accepted Answer

When the cost of producing sofas decreases, the price of sofas will decrease (assuming the market is competitive). This will create a surplus for the consumers who are willing to pay more than the new lower price. As a result, the consumer surplus in the sofa market increases.

Question 2

Suppose the market demand curve for a good passes through the point (quantity demanded = 100,price = $25).If there are five buyers in the market,then

Accepted Answer

The marginal buyer is the buyer who is willing to pay exactly the market price for the good, which in this case is $25 for the 100th unit. This does not imply anything about the sum, average, or minimum willingness to pay of all buyers, just the willingness to pay of the buyer at the margin.

Question 3

Denise values a stainless steel dishwasher for her new house at $500.The actual price of the dishwasher is $650.Denise

Accepted Answer

Denise does not buy the dishwasher because the price exceeds her valuation, resulting in no transaction and a consumer surplus of $0.

Question 4

Which of the following will cause an increase in consumer surplus?

Accepted Answer

A technological improvement in the production of the good will shift the supply curve to the right, resulting in a lower equilibrium price and higher quantity demanded. This will increase consumer surplus as consumers are now able to purchase the same quantity of the good at a lower price.

Question 5

Suppose your own demand curve for tomatoes slopes downward.Suppose also that,for the last tomato you bought this week,you paid a price exactly equal to your willingness to pay.Then

Accepted Answer

If you paid a price exactly equal to your willingness to pay, then you did not experience any consumer surplus on the last tomato you bought. Consumer surplus is the difference between the maximum price a person is willing to pay for a good and the actual price paid. So, option C is correct. Option A and B cannot be determined without further information. Option D is not correct as there could have been consumer surplus on the other tomatoes bought earlier in the week.

Question 6

Michael values a stainless steel refrigerator for his new house at $3,500,but he succeeds in buying one for $3,000.Michael's consumer surplus is

Accepted Answer

Consumer surplus is the difference between the maximum amount a consumer is willing to pay for a good or service and the actual price they pay. In this case, Michael was willing to pay $3,500 but only had to pay $3,000. Therefore, his consumer surplus is $500 (the difference between the two).

Question 7

If the price a consumer pays for a product is equal to a consumer's willingness to pay,then the consumer surplus relevant to that purchase is

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay and what the consumer actually pays. If these two amounts are equal, the consumer surplus is zero.

Question 8

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

Accepted Answer

When a binding price floor is imposed in the market, the price of the good is forced to be higher than the equilibrium price, resulting in a decrease in the quantity demanded. As a result, some consumers who were willing to buy the good at the lower equilibrium price would not be able to afford it at the higher price, leading to a decrease in consumer surplus.

Question 9

Cameron visits a sporting goods store to buy a new set of golf clubs.He is willing to pay $750 for the clubs but buys them on sale for $575.Cameron's consumer surplus from the purchase is

Accepted Answer

Consumer surplus is the difference between the price a consumer is willing to pay for a product and the actual price they pay. In this case, Cameron was willing to pay $750 for the golf clubs but ended up paying only $575, giving him a consumer surplus of $175 ($750 - $575 =$175). Therefore, the correct answer is A) $175. Choice B, C and D are not correct as they do not represent Cameron's actual consumer surplus.

Question 10

Pat bought a new car for $15,500 but was willing to pay $24,000.The consumer surplus is

Accepted Answer

Consumer surplus is the difference between the price a consumer is willing to pay and the actual price paid. In this case, Pat was willing to pay $24,000 but only paid $15,500, so the consumer surplus is $8,500.

Question 11

Denise values a stainless steel dishwasher for her new house at $500,but she succeeds in buying one for $350.Denise's consumer surplus is

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the actual price paid. In this case, Denise values the dishwasher at $500 but only has to pay $350 for it, so her consumer surplus is $150 ($500 - $350). The other answer choices are incorrect as they either overestimate or underestimate the consumer surplus.

Question 12

Suppose there is an early freeze in California that reduces the size of the lemon crop.What happens to consumer surplus in the market for lemons?

Accepted Answer

With a reduction in the size of the lemon crop, the supply of lemons decreases. This leads to an increase in the price of lemons, resulting in a decrease in consumer surplus. Therefore, consumer surplus decreases.

Question 13

All else equal,what happens to consumer surplus if the price of a good decreases?

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the actual price they pay. When the price of a good decreases, consumers are able to purchase the same quantity of the good for a lower price, resulting in an increase in consumer surplus. Therefore, the correct answer is A.

Question 14

Jeff decides that he would pay as much as $2,000 for a new laptop computer.He buys the computer and realizes a consumer surplus of $300.How much did Jeff pay for his computer?

Accepted Answer

Jeff's maximum willingness to pay was $2,000 and he ended up paying less than that, so his consumer surplus is the difference between what he was willing to pay and what he actually paid. 
Consumer surplus = Maximum willingness to pay - Price paid
$300 = $2,000 - Price paid
Price paid = $2,000 - $300 = $1,700. 
Therefore, Jeff paid $1,700 for his computer.

Question 15

Ray buys a new tractor for $118,000.He receives consumer surplus of $13,000 on his purchase.Ray's willingness to pay is

Accepted Answer

Ray's willingness to pay is the sum of the price he paid ($118,000) and the consumer surplus ($13,000), which equals $131,000.

Question 16

Dawn's bridal boutique is having a sale on evening dresses.The increase in consumer surplus comes from the benefit of the lower prices to

Accepted Answer

Both existing and new customers benefit from the lower prices, therefore the increase in consumer surplus comes from both groups.

Question 17

Jeff decides that he would pay as much as $3,000 for a new laptop computer.He buys the computer and realizes consumer surplus of $700.How much did Jeff pay for his computer?

Accepted Answer

Consumer surplus is the difference between the amount that Jeff was willing to pay ($3,000) and the actual price he paid. Therefore, we can set up the equation:

$3,000 - actual price = $700

Solving for the actual price:

actual price = $3,000 - $700 = $2,300

So Jeff paid $2,300 for the computer, which corresponds to answer choice B.

Question 18

Billie Jo values a stainless steel dishwasher for her new house at $500,but she succeeds in buying one for $425.Billie Jo's willingness to pay for the dishwasher is

Accepted Answer

Billie Jo's willingness to pay for the dishwasher is the maximum amount she values it at, which in this case is $500. Since she bought the dishwasher for $425, she got a good deal and saved $75. However, her willingness to pay for the dishwasher still remains at $500, so that is the value that should be considered.

Question 19

Michael values a stainless steel refrigerator for his new house at $3,500,but he succeeds in buying one for $3,000.Michael's willingness to pay is

Accepted Answer

Michael's willingness to pay is the maximum amount he is willing to spend on the refrigerator, which is $3,500.

Question 20

All else equal,what happens to consumer surplus if the price of a good increases?

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the actual price they pay. If the price of a good increases, consumers are willing to pay less for that good which leads to a decrease in consumer surplus. Therefore, the correct answer is B.

Quiz 7: Consumers Producers and the Efficiency of Markets: Consumer Surplus