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

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Question 71

True/False

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Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.

A) True
B) False

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Question 72

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The study of how the allocation of resources affects economic well-being is called

A) consumer economics.
B) macroeconomics.
C) willingness-to-pay economics.
D) welfare economics.

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

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Question 73

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Figure 7-31 -Refer to Figure 7-31. If the market equilibrium price is $25, how much is total producer surplus in this market?

If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must have been

A consumer's willingness to pay directly measures

Figure 7-15 -Refer to Figure 7-15. When the price rises from P1 to P2, which area represents the increase in producer surplus due to new producers entering the market?

Table 7-19 -Refer to Table 7-19. How much is total producer surplus at the equilibrium price in this market?

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

When markets fail, public policy can

Figure 7-19 -Refer to Figure 7-19. If the government imposes a price ceiling of $55 in this market, then total surplus will be

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

Figure 7-8 -Refer to Figure 7-8. If the government imposes a price floor of $100 in this market, then consumer surplus will decrease by

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.

Allen tutors in his spare time for extra income. Buyers of his service are willing to pay $40 per hour for as many hours Allen is willing to tutor. On a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. Assume Allen is rational in deciding how many hours to tutor. His producer surplus is

Figure 7-3 -Refer to Figure 7-3. When the price is P2, consumer surplus is

Figure 7-15 -Refer to Figure 7-15. When the price rises from P1 to P2, what area represents the increase in producer surplus?

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase?

Consumer surplus can be measured as the area between the demand curve and the equilibrium price.

Figure 7-17 -Refer to Figure 7-17. Suppose the market starts out in equilibrium with demand curve D and supply curve S. Next, suppose demand shifts left so as to decrease the quantity demanded by 20 units at every price. What is the change in producer surplus as a result of this demand shift?

An example of positive analysis is studying