Question 1

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

Accepted Answer

A binding price ceiling will lead to a reduction in producer surplus, as producers are not able to charge the price they would have been able to without the price ceiling. This results in a decrease in the amount of profit that they can earn.

Question 2

The area below the demand curve and above the supply curve measures the producer surplus in a market.

Accepted Answer

The area below the demand curve and above the price level measures consumer surplus, while the area above the supply curve and below the price level measures producer surplus in a market.

Question 3

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is
  If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

Accepted Answer

We do not have enough information to determine the exact price or equation of the supply curve. However, we know that at a quantity of 90 units, the producer surplus is $1,350. This gives us a point on the supply curve, which we can use to find additional points and eventually the equation. Therefore, it is possible for the statement to be true, and the answer is A.

Question 4

Producer surplus measures the benefit to sellers from receiving a price above their costs.

Accepted Answer

Producer surplus is the difference between the amount a seller receives for a good or service and their production cost. It represents the benefit to sellers for receiving a price above their costs.

Question 5

Efficiency refers to whether a market outcome is fair, while equality refers to whether the maximum amount of output was produced from a given number of inputs.

Accepted Answer

Efficiency refers to whether the maximum amount of output was produced from a given number of inputs, while equality refers to whether the market outcome is fair and equitable.

Question 6

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is
  If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.

Accepted Answer

The equation of the supply curve has not been provided, so we cannot determine the producer surplus.

Question 7

Total surplus in a market is consumer surplus minus producer surplus.

Accepted Answer

Total surplus in a market is consumer surplus plus producer surplus.

Question 8

The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.

Accepted Answer

The equilibrium price and quantity in a market are determined by the intersection of the supply and demand curves. At this point, the quantity supplied and quantity demanded are equal, and all trades that occur benefit both buyers and sellers. Therefore, the equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers.

Question 9

The area below the price and above the supply curve measures the producer surplus in a market.

Accepted Answer

This statement is true. The producer surplus is calculated by finding the difference between the price at which producers are willing to sell a good or service and the actual market price. The area between the supply curve and the market price represents the producer surplus, as producers are receiving more revenue than they would require to cover their costs.

Question 10

When demand increases so that market price increases, producer surplus increases because 1) producer surplus received by existing sellers increases, and 2) new sellers enter the market.

Accepted Answer

When market price increases due to demand, existing sellers receive a higher price for their products, resulting in an increase in their producer surplus. Additionally, new sellers may enter the market to capture the higher price, leading to further increases in the total producer surplus.

Question 11

Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the soccer ball at $50. For this transaction, the total surplus in the market is $40.

Accepted Answer

The answer of Producing a soccer ball costs Jake $5....

Question 12

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

This is the definition of total surplus in economics, where the total value gained by buyers exceeds the total costs incurred by sellers in a market transaction.

Question 13

If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $35.

Accepted Answer

Producer surplus is defined as the difference between the price at which a producer is willing to sell a product and the actual price received for it. In this case, Jake is willing to sell the soccer ball for $40, but it only costs him $5 to produce it, giving him a producer surplus of $35.

Question 14

If the government removes a binding price ceiling in a market, then the producer surplus in that market will increase.

Accepted Answer

When a binding price ceiling is removed, producers are able to charge a higher price for their goods or services, resulting in an increase in their producer surplus.

Question 15

Efficiency is related to the size of the economic pie, whereas equality is related to how the pie gets sliced and distributed.

Accepted Answer

Efficiency is about maximizing the total output or size of the economic pie, while equality is about how that output is divided among individuals.

Question 16

Total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve, up to the point of equilibrium.

Accepted Answer

Total surplus in a market is measured as the area above the supply curve and below the demand curve, up to the point of equilibrium, representing the sum of consumer and producer surplus.

Question 17

The lower the price, the lower the producer surplus, all else equal.

Accepted Answer

Producer surplus is the difference between the price that a producer is willing to receive and the price that they actually receive. If the price is lower, then the producer will receive less and consequently, their surplus will be lower.

Question 18

The cost of production plus producer surplus is the price a seller is paid.

Accepted Answer

The answer of The cost of production plus producer surplus...

Question 19

Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window- cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $100.

Accepted Answer

Producer surplus is the difference between what a producer is willing to accept for a good or service versus what they actually receive. If Connie is willing to clean windows at $1 per window but receives $3 per window, her surplus per window is $2. For 100 windows, her producer surplus would be $200, not $100.

Question 20

Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window- cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $200.

Accepted Answer

Connie's total cost for cleaning 100 windows is $100 ($1 per window), but she can sell her services for $300 (100 windows at $3 per window), giving her a revenue of $200. Her producer surplus is the difference between her revenue and her cost, which is $200 in this case.

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