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When a perfectly competitive, well-functioning market is not in equilibrium:


A) total surplus is not maximized.
B) the market is not efficient.
C) exchanges exist that make some better off without making someone else worse off.
D) All of these are correct.

E) A) and C)
F) None of the above

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Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot could offer a hammer for a minimum of $7. Lace Hardware could offer a hammer for a minimum of $10. Bob's Hardware could offer a hammer for a minimum of $13.If the market price of hammers increased from $8 to $14, total producer surplus would increase from:


A) $8 to $14.
B) $1 to $12.
C) $14 to $8.
D) $7 to $30.

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

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Assume the market depicted in the graph is in equilibrium. Consumer surplus is the area: A) under the supply curve and above the market price. B) above the supply curve and below the market price. C) under the demand curve and above the market price. D) above the demand curve and below the market price. Assume the market depicted in the graph is in equilibrium. Consumer surplus is the area:


A) under the supply curve and above the market price.
B) above the supply curve and below the market price.
C) under the demand curve and above the market price.
D) above the demand curve and below the market price.

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

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Assume the market depicted in the graph is in equilibrium at demand (D) and supply (S<sub>1</sub>) . Consumer surplus is: A) greater than it is when market is in equilibrium at D and S<sub>2</sub>. B) less than it is when market is in equilibrium at D and S<sub>2</sub>. C) the same as it is when market is in equilibrium at D and S<sub>2</sub>. D) zero. Assume the market depicted in the graph is in equilibrium at demand (D) and supply (S1) . Consumer surplus is:


A) greater than it is when market is in equilibrium at D and S2.
B) less than it is when market is in equilibrium at D and S2.
C) the same as it is when market is in equilibrium at D and S2.
D) zero.

E) A) and D)
F) B) and D)

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Consider a market that is currently in equilibrium. If the demand curve shifts to the right and a new equilibrium is reached:


A) total surplus will increase.
B) consumer surplus may increase or decrease.
C) producer surplus will increase.
D) producer surplus will decrease.

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

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Assume the market depicted in the graph is in equilibrium at demand (D) and supply (S<sub>1</sub>) . If the supply curve shifts to S<sub>2</sub>, and a new equilibrium is reached, which of the following is true? A) Consumer surplus increases, but producer surplus decreases. B) Consumer surplus decreases, but producer surplus increases. C) Both consumer and producer surplus increase. D) Both consumer and producer surplus decrease. Assume the market depicted in the graph is in equilibrium at demand (D) and supply (S1) . If the supply curve shifts to S2, and a new equilibrium is reached, which of the following is true?


A) Consumer surplus increases, but producer surplus decreases.
B) Consumer surplus decreases, but producer surplus increases.
C) Both consumer and producer surplus increase.
D) Both consumer and producer surplus decrease.

E) A) and C)
F) None of the above

Correct Answer

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Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot could offer a hammer for a minimum of $7. Lace Hardware could offer a hammer for a minimum of $10. Bob's Hardware could offer a hammer for a minimum of $13.If the market price of hammers is $12, what would total producer surplus be?


A) $7
B) $9
C) $17
D) $30

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

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Which of the following is an example of a missing market?


A) The market to buy and sell children for adoption
B) The market for typewriters
C) The market for student loans
D) None of these exemplify a missing market.

E) B) and D)
F) A) and D)

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A

Assume the market depicted in the graph is in equilibrium. Consumer surplus consists of which area(s) ? A) A B) A + B + C C) A + B + C + D + E D) D + E Assume the market depicted in the graph is in equilibrium. Consumer surplus consists of which area(s) ?


A) A
B) A + B + C
C) A + B + C + D + E
D) D + E

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

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A market has four individuals, each considering buying a grill. Assume that grills come in only one size and model. Martina considers herself a grill-master, and finds a grill a necessity, so she is willing to pay $400 for a grill. Javier is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Kamal wants to impress his friends with his vegetable grilling skills and is willing to pay $320 for a grill. Lina loves grilled shrimp and thinks it might be cheaper in the long run if she grills her own shrimp instead of eating out at a restaurant, so she is willing to pay $200 for a grill.If the market price of grills increases from $300 to $325,:


A) Kamal would drop out of the market.
B) Kamal's surplus would decrease the most.
C) Kamal is the only consumer who would be affected in terms of surplus.
D) Lina's surplus would decrease.

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

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What consumer surplus is received by someone whose willingness to pay is $35 below the market price of a good?


A) $35
B) $0
C) ($35 × P*)
D) None of these are correct.

E) A) and D)
F) A) and C)

Correct Answer

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A market has four individuals, each considering buying a grill. Assume that grills come in only one size and model. Martina considers herself a grill-master, and finds a grill a necessity, so she is willing to pay $400 for a grill. Javier is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Kamal wants to impress his friends with his vegetable grilling skills and is willing to pay $320 for a grill. Lina loves grilled shrimp and thinks it might be cheaper in the long run if she grills her own shrimp instead of eating out at a restaurant, so she is willing to pay $200 for a grill.If the market price of grills falls from $375 to $330, which of the following statements is true?


A) Javier will join the market but will receive no consumer surplus.
B) Javier and Kamal will join the market and together will receive $30 in consumer surplus.
C) Martina will experience a decrease in consumer surplus of $45.
D) Martina will experience an increase in consumer surplus of $45.

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

Correct Answer

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Assume the market depicted in the graph is in equilibrium. If the market price is set to $6, which of the following statements is true? A) For those still interacting in the market, some surplus will be transferred from buyer to seller. B) For those still interacting in the market, some surplus will be transferred from seller to buyer. C) Producers will gain the surplus of those buyers who drop out of the market. D) Consumers will gain the surplus of those sellers who drop out of the market. Assume the market depicted in the graph is in equilibrium. If the market price is set to $6, which of the following statements is true?


A) For those still interacting in the market, some surplus will be transferred from buyer to seller.
B) For those still interacting in the market, some surplus will be transferred from seller to buyer.
C) Producers will gain the surplus of those buyers who drop out of the market.
D) Consumers will gain the surplus of those sellers who drop out of the market.

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

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B

Assume the market depicted in the graph is in equilibrium. If its price is subsequently set at $12, deadweight loss will consist of area(s) : A) D + E. B) C + G. C) L. D) None of these are correct. Assume the market depicted in the graph is in equilibrium. If its price is subsequently set at $12, deadweight loss will consist of area(s) :


A) D + E.
B) C + G.
C) L.
D) None of these are correct.

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

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Surplus refers to the difference between:


A) the price at which a buyer or seller would be willing to trade and the actual price.
B) the willingness to pay and the actual price paid.
C) the willingness to sell and the actual price accepted.
D) All of these are correct.

E) None of the above
F) All of the above

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D

Assume the market depicted in the graph is in equilibrium. What is consumer surplus? A) $40. B) $80. C) $160. D) $240. Assume the market depicted in the graph is in equilibrium. What is consumer surplus?


A) $40.
B) $80.
C) $160.
D) $240.

E) B) and D)
F) B) and C)

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Surplus is:


A) a measure of the value that buyers and sellers get from participating in a market
B) maximized for individuals whose willingness to pay equals the market price.
C) negative for all individuals who do not participate in a market.
D) All of these are correct.

E) None of the above
F) A) and B)

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Assume the market depicted in the graph is in equilibrium. What is producer surplus? A) $30 B) $20 C) $50 D) $60 Assume the market depicted in the graph is in equilibrium. What is producer surplus?


A) $30
B) $20
C) $50
D) $60

E) C) and D)
F) B) and D)

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Assume the market depicted in the graph is in equilibrium. What is consumer surplus? A) $54,000 B) $72,000 C) $126,000 D) $108,000 Assume the market depicted in the graph is in equilibrium. What is consumer surplus?


A) $54,000
B) $72,000
C) $126,000
D) $108,000

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

Correct Answer

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A market has four individuals, each considering buying a grill. Assume that grills come in only one size and model. Martina considers herself a grill-master, and finds a grill a necessity, so she is willing to pay $400 for a grill. Javier is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Kamal wants to impress his friends with his vegetable grilling skills and is willing to pay $320 for a grill. Lina loves grilled shrimp and thinks it might be cheaper in the long run if she grills her own shrimp instead of eating out at a restaurant, so she is willing to pay $200 for a grill.If the market price of grills is $350, what is total consumer surplus?


A) $750
B) $400
C) $50
D) $870

E) A) and C)
F) C) and D)

Correct Answer

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