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

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Question 201

Multiple Choice

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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

A) $500.
B) $3,000.
C) $3,500.
D) $6,500.

E) B) and C)
F) A) and B)

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Question 202

Multiple Choice

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Figure 7-24 -Refer to Figure 7-24. If 6 units of the good are produced and sold, then

A) efficiency is achieved in this market.
B) the marginal value to buyers equals the marginal cost to sellers.
C) the sum of consumer surplus and producer surplus is maximized.
D) All of the above are correct.

E) B) and D)
F) All of the above

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Question 203

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Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, what is the change in total consumer surplus in the market?

If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175, the price of the tickets is $625.

Table 7-13 The only four producers in a market have the following costs: Seller Cost Abbey $30 Bev $40 Carl $55 Dale $65 -Refer to Table 7-13. If the sellers bid against each other for the right to sell the good to a single consumer, then the good will sell for

If the government allowed a free market for transplant organs such as kidneys to exist, critics argue that such a market would

Figure 7-1 -Refer to Figure 7-1. If the price of the good is $250, then consumer surplus amounts to

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called

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

Figure 7-27 -Refer to Figure 7-27. Sellers whose costs are less than the equilibrium price are represented by which line segment?

Table 7-6 For each of three potential buyers of apples, the table displays the willingness to pay for the first three apples of the day. Assume Xavier, Yadier, and Zavi are the only three buyers of apples, and only three apples can be supplied per day. -Refer to Table 7-6. If the market price of an apple is $1.40, then the market quantity of apples demanded per day is

Figure 7-23 -Refer to Figure 7-23. If the price were P3, consumer surplus would be represented by the area

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

ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ Company incurs a cost of 70 cents to produce a dozen eggs. Which of the following price increases would cause both companies to experience an increase in producer surplus?

Figure 7-18 -Refer to Figure 7-18. If total surplus is $240 and consumer surplus is

Figure 7-33 -Refer to Figure 7-33. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total consumer surplus in this market at the new equilibrium price?

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

Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie. Each has in mind a maximum amount that he will bid. This maximum is called

Figure 7-19 -Refer to Figure 7-19. At the equilibrium price, producer surplus is

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will