Ch 7 Consumers, Producers, Market Efficiency

Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Suppose Chris and Laura 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 a deadweight loss. . b willingness to pay. . c consumer surplus. . d producer surplus. .

____

2. a . b . c . d .

illingness to pay measures the !alue that a buyer places on a good. is the amount a seller actually recei!es for a good minus the minimum amount the seller is willing to accept. is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept. is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

____

". Consumer surplus is the a amount of a good consumers get without paying anything. . b amount a consumer pays minus the amount the consumer is willing to pay. . c amount a consumer is willing to pay minus the amount the consumer actually pays. . d !alue of a good to a consumer. .

Table 7-5 #or each of three potential buyers of oranges$ the table displays the willingness to pay for the first three oranges of the day. %ssume %lex$ &arb$ and Carlos are the only three buyers of oranges$ and only three oranges can be supplied per day. First Orange '2.(( '1.)( '(.*) Second Orange '1.)( '1.(( '(.2) Third Orange '(.*) '(.+( '(

%lex &arb Carlos

____

,. Refer to Ta le 7!"# -f the mar.et price of an orange is '(.*($ the mar.et /uantity of oranges demanded per day is a ). . b 0. . c *. . d 1. .

____

). Refer to Ta le 7!"# ho experiences the largest loss of consumer surplus when the price of an orange increases from '(.*( to '1.,(2 a %lex . b &arb . c Carlos . d %ll three indi!iduals experience the same loss of consumer surplus. .

____

0. Chad is willing to pay ').(( to get his first cup of morning latt3. 4e buys a cup from a !endor selling latt3 for '".*) per cup. Chad5s consumer surplus is a '+.*). . b ').((. . c '".*). . d '1.2). .

____

*. 6enise !alues a stainless steel dishwasher for her new house at ')(($ but she succeeds in buying one for '")(. 6enise5s consumer surplus is a '1)(. . b '")(. . c ')((. . d '+)(. .

____

+. %t 7ic.5s &a.ery$ the cost to ma.e homemade chocolate ca.e is '" per ca.e. %s a result of selling three ca.es$ 7ic. experiences a producer surplus in the amount of '11.)(. 7ic. must be selling his ca.es for a '0.)( each. . b '*.)( each. . c '1.)( each. . d '1(.)( each. .

Table 7-6 The following table represents the costs of fi!e possible sellers. Seller %bby &obby Carlos 6ianne E!alina Cost '1$)(( '1$2(( '1$((( '*)( ')((

____

1. Refer to Ta le 7!$. -f the mar.et price is '1(($ the combined total cost of all participating sellers is a '"$*((. . b '2$*((. . c '2$2)(. . d '1$2)(. .

Figure 7-8

"(( 2*) 2)( 22) 2(( 1*) 1)( 12) 1(( *) )( 2)

Price

S5

6 2) )(

65 Quantity

*) 1(( 12) 1)( 1*) 2((

____ 1(. Refer to Figure 7!%# -f the supply cur!e is S$ the demand cur!e is 6$ and the e/uilibrium price is '1(($ what is the producer surplus2 a '02) . b '1$2)( . c '2$)(( . d ')$((( .

____ 11. Refer to Figure 7!%# -f the demand cur!e is 6 and the supply cur!e shifts from S8 to S$ what is the change in producer surplus2 a 9roducer surplus increases by '02). . b 9roducer surplus increases by '1$+*). . c 9roducer surplus decreases by '02). . d 9roducer surplus decreases by '1$+*). .

Figure 7-9

2)( 22) 2(( 1*) 1)( 12) 1(( *) )( 2)

Price

2)

)(

*) 1(( 12) 1)(

Quantity

____ 12. Refer to Figure 7!&# -f the e/uilibrium price rises from ')( to '2(($ what is the additional producer surplus to initial producers2 a '02) . b '"$*)( . c ')$02) . d '1($((( .

Figure 7-10

Price 1*( 10( 1)( 1,( 1"( 12( 11( 1(( 1( +( *( 0( )( ,( "( 2( 1( 1 2 " , ) 0 * + 1 1( 11 12 1" 1, 1) 10 1* 1+ 11 2( 21 22 2" 2,

6
2) Quantity

____ 1". Refer to Figure 7!'(# -f the go!ernment imposes a price ceiling of '*( in this mar.et$ then the new producer surplus will be a ')(. . b '1((. . c '1*). . d '")(. .

____ 1,. Refer to Figure 7!'(# -f the go!ernment imposes a price ceiling of '*( in this mar.et$ then producer surplus will decrease by a ')(. . b '12). . c '1)(. . d '2((. .

Figure 7-11

Price

Supply

92 % 91 C 6 :1 :2
Quantity

&

____ 1). Refer to Figure 7!''. a %. . b %<C. . c %<&<C. . d 6<;. .

hen the price is 92$ producer surplus is

____ 10. Economists typically measure efficiency using a the price paid by buyers. . b the /uantity supplied by sellers. . c total surplus. . d profits to firms. .

____ 1*. %t the e/uilibrium price of a good$ the good will be purchased by those buyers who a !alue the good more than price. . b !alue the good less than price. . c ha!e the money to buy the good. . d consider the good a necessity. .

Table 7-9

Price '12.(( '1(.(( ' +.(( ' 0.(( ' ,.(( ' 2.(( ' (.((

)uantity *emanded ( , + 12 10 2( 2,

)uantity Supplied 12 1( + 0 , 2 (

____ 1+. Refer to Ta le 7!&. The e/uilibrium price is a '1(.((. . b '+.((. . c '0.((. . d ',.((. .

____ 11. Refer to Ta le 7!&. %t a price of ',.(($ total surplus is a more than it would be at the e/uilibrium price. . b less than it would be at the e/uilibrium price. . c the same as it would be at the e/uilibrium price. . d There is insufficient information to ma.e this determination. .

Figure 7-13
= Price Supply

>

6emand L ?

Quantity

____ 2(. Refer to Figure 7!'+# #or /uantities greater than ?$ the !alue to the marginal buyer is a greater than the cost to the marginal seller$ so increasing the /uantity increases total . surplus. b less than the cost to the marginal seller$ so increasing the /uantity increases total surplus. . c greater than the cost to the marginal seller$ so decreasing the /uantity increases total . surplus. d less than the cost to the marginal seller$ so decreasing the /uantity increases total surplus. .

Figure 7-14
Price

Supply
92

% &
91

C 6 6emand
:1 Quantity

____ 21. Refer to Figure 7!',# hen the price is 91$ area C represents a total benefit. . b producer surplus. . c consumer surplus. . d 7one of the abo!e is correct. .

____ 22. Refer to Figure 7!',. a %<& . b &<C . c C<6 . d %<&<C<6

hich area represents total surplus in the mar.et when the price is 912

Figure 7-16
9,
Price

Supply %

9"

&
92

C 4

6
91

# ;
:1

6emand
:2 Quantity

____ 2". Refer to Figure 7!'$. %t e/uilibrium$ total surplus is represented by the area a %<&<C. . b %<&<6<#. . c %<&<C<6<4<#. . d %<&<C<6<4<#<;<-. .

Figure 7-17

Price ,+ ,, ,( "0 "2 2+ 2, 2( 10 12 + , 1 2 " , ) 0 * + 1 1( 11 Quantity C 4 & # ; % >

Supply

6emand

____ 2,. Refer to Figure 7!'7. %t e/uilibrium$ total surplus is measured by the area a %C;. . b %#;. . c >&;. . d C#;. .

____ 2). ?ar.et power refers to the a side effects that may occur in a mar.et. . b go!ernment regulations imposed on the sellers in a mar.et. . c ability of mar.et participants to influence price. . d forces of supply and demand in determining e/uilibrium price. .

Ch 7 Consumers, Producers, Market Efficiency -ns.er Section

M/0T1P0E C2O1CE 1. %7SA & 7%TA %nalytic ?SCA 6efinitional 2. %7SA % 7%TA %nalytic ?SCA 6efinitional ". %7SA C 7%TA %nalytic ?SCA 6efinitional ,. %7SA C 7%TA %nalytic ?SCA %nalytical ). %7SA % 7%TA %nalytic ?SCA %pplicati!e 0. %7SA 6 7%TA %nalytic ?SCA %pplicati!e *. %7SA % 7%TA %nalytic ?SCA %pplicati!e +. %7SA C 7%TA %nalytic ?SCA %pplicati!e 1. %7SA 6 7%TA %nalytic ?SCA %nalytical 1(. %7SA C 7%TA %nalytic ?SCA %nalytical 11. %7SA & 7%TA %nalytic ?SCA %nalytical 9TSA 1 6-#A 1 LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A 1 LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A " LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A " LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A " LCCA Supply and demand 9TSA 1 6-#A " LCCA Supply and demand @E#A *B1 TC9A illingness to pay @E#A *B1 TC9A illingness to pay @E#A *B1 TC9A Consumer surplus @E#A *B1 TC9A ?ar.et demand @E#A *B1 TC9A Consumer surplus @E#A *B1 TC9A Consumer surplus @E#A *B1 TC9A Consumer surplus @E#A *B2 TC9A 9roducer surplus @E#A *B2 TC9A Cpportunity cost @E#A *B2 TC9A 9roducer surplus @E#A *B2 TC9A 9roducer surplus

12. %7SA & 7%TA %nalytic ?SCA %nalytical 1". %7SA % 7%TA %nalytic ?SCA %nalytical 1,. %7SA C 7%TA %nalytic ?SCA %nalytical 1). %7SA C 7%TA %nalytic ?SCA %pplicati!e 10. %7SA C 7%TA %nalytic ?SCA -nterpreti!e 1*. %7SA % 7%TA %nalytic ?SCA -nterpreti!e 1+. %7SA & 7%TA %nalytic ?SCA %pplicati!e 11. %7SA & 7%TA %nalytic ?SCA -nterpreti!e 2(. %7SA 6 7%TA %nalytic ?SCA -nterpreti!e 21. %7SA & 7%TA %nalytic ?SCA %pplicati!e 22. %7SA & 7%TA %nalytic ?SCA %pplicati!e 2". %7SA C 7%TA %nalytic ?SCA %pplicati!e 2,. %7SA % 7%TA %nalytic

9TSA 1 6-#A " LCCA Supply and demand 9TSA 1 6-#A " LCCA Supply and demand 9TSA 1 6-#A " LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A 1 LCCA Supply and demand 9TSA 1 6-#A 1 LCCA Supply and demand 9TSA 1 6-#A 1 LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A 2 LCCA Supply and demand 9TSA 1 6-#A 1 LCCA Supply and demand

@E#A *B2 TC9A 9roducer surplus @E#A *B2 TC9A 9roducer surplus @E#A *B2 TC9A 9roducer surplus @E#A *B2 TC9A 9roducer surplus @E#A *B" TC9A Consumer surplus @E#A *B" TC9A Efficiency @E#A *B" TC9A Efficiency @E#A *B" TC9A Total surplus @E#A *B" TC9A Total surplus @E#A *B" TC9A 9roducer surplus @E#A *B" TC9A Total surplus @E#A *B" TC9A Total surplus @E#A *B" TC9A Total surplus

?SCA -nterpreti!e 2). %7SA C 7%TA %nalytic ?SCA 6efinitional 9TSA 1 6-#A 1 LCCA Supply and demand @E#A *B, TC9A ?ar.et power