MOCK QUIZ #7

Chapter 7 - Consumers, Producers, and the Efficiency of Markets

Set B
1. Economists refer to the study of how the allocation of resources affects economic well-being
as
a. economic policy.
b. welfare economics.
c. market efficiency.
d. Keynesian economics.
2. With respect to welfare economics, the equilibrium price of a product is considered to be the
best price because it
a. maximizes tax revenue to the government.
b. minimizes costs and maximizes profits of sellers.
c. maximizes the total welfare of buyers and sellers.
d. minimizes the level of welfare payments to those who no longer live below the
poverty line.
3. The height of a demand curve represents the
a. cost of the marginal seller.
b. cost of the highest-cost sellers.
c. marginal buyers willingness to pay.
d. minimum amount the marginal buyer will be willing to pay for a specific quantity
good.
4. When we measure a buyers willingness to pay, we are measuring
a. how much the buyer values a good.
b. the buyers consumer surplus.
c. the dollar amount a buyer has to pay to obtain a good.
d. how much of the purchase price a seller receives as profit from the sale of a

of a

good.

5. Al is willing to pay $40.00 for a video of the movie Castaways. He finds a copy at his favorite
video store for $15. Als consumer surplus is
a. $15.
b. $25.
c. $40.
d. $55.
6. Julie buys a new pair of boots for $100. She receives a consumer surplus of $25 on her
purchase. Her willingness to pay is
a. $25.
b. $75.
c. $100.
d. $125.
7. A definition for consumer surplus would be
a. the amount of a product a consumer can buy at a price below the equilibrium
b. the difference between the amount a consumer has to pay and the amount the
consumer was willing to pay.
c. the number of consumers who are excluded from a market because of scarcity.
d. how much a buyer values a good.

price.

8. If the price of the product is equal to a consumers willingness to pay, then the consumer
surplus of that purchase would be
a. zero, and the consumer would not purchase the product.
b. negative, and the consumer would not purchase the product.
c. zero, but the consumer would purchase the product.
d. There is not enough information given to answer this question.

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9. Consumer surplus is measured graphically as the area

a. between the demand and supply curves.
b. below the demand curve and above price.
c. below the price and above the supply curve.
d. below the demand curve to the right of equilibrium price.
10. What will happen to consumer surplus if the price of a good falls?
a. It increases.
b. It decreases.
c. It is unchanged.
d. It may increase, decrease, or remain unchanged, depending on how much the
fell.

price

11. Producer surplus is the

a. area under the demand curve above price.
b. amount a seller is paid less the cost of production.
c. cost producers incur when they choose to participate in the market.
d. total area under the supply curve that is to the left of equilibrium quantity.
12. A seller would be willing to sell a product ONLY IF the price received is
a. equal to the cost of production.
b. at least double the cost of production.
c. less than the cost of production.
d. at least as great as the cost of production.
13. An increase in the price of a good will cause
a. both producer and consumer surplus to increase.
b. both producer and consumer surplus to decrease.
c. an increase in producer surplus and a decrease in consumer surplus.
d. a decrease in producer surplus and an increase in consumer surplus.
14. Producer surplus can be defined as the
a. Value to buyers Costs of sellers.
b. Value to buyers Amount paid by buyers.
c. Amount received by sellers Costs of sellers.
d. Value to buyers Amount paid by buyers + Amount received by sellers Costs
sellers.

of

15. Denea produces greeting cards. Her production cost is $2 per box. She sells the cards for
$8 per box. Her producer surplus is
a. $2 per box.
b. $6 per box.
c. $8 per box.
d. $10 per box.
16. Total surplus in a market is equal to
a. producer surplus plus consumer surplus.
b. the total costs to sellers less the total value to buyers.
c. consumers willingness to pay plus producer costs.
d. an amount greater than consumer surplus plus producer surplus.

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17. In the figure shown, at the equilibrium price, consumer surplus would be
a. $240.
b. $300.
c. $450.
d. $600.
18. In the figure shown, at the equilibrium price, producer surplus would be
a. $240.
b. $300.
c. $450.
d. $600.
19. In the figure shown, if the price increases from $10 to $14, the increase in producer surplus
to new producers entering the market would be equal to
a. $20.
b. $40.
c. $60.
d. $80.
20. In the figure shown, if the price decreases from $19 to $14, the consumer surplus would
a. increase by $75.
b. increase by $225.
c. decrease by $75.
d. decrease by $225.
21. In the figure shown, at the equilibrium price total surplus is equal to
a. $240.
b. $300.
c. $450.
d. $540.
22. In the figure shown, the efficient price-quantity combination is
a. $19 and a quantity of 30.
b. $14 and a quantity of 30.
c. $14 and a quantity of 60.
d. $10 and a quantity of 30.
23. According to the graph, if this market were currently at a quantity of 90, we would know that
a. cost to sellers is equal to the value to buyers.
b. the value to buyers is greater than the cost to sellers.
c. the cost to sellers is greater than the value to buyers.
d. producer surplus would be greater than consumer surplus.

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24. The invisible hand is a term used

a. to describe the welfare system in the United States.
b. to describe the way illegal drugs enter a country.
c. by Adam Smith to describe the virtues of free markets.
d. by some economists to describe what the role of government should be in an economy
present but invisible.
25. Markets will NOT allocate resources efficiently if
a. there are externalities.
b. there is perfect competition.
c. there are many buyers and sellers.
d. the market is allowed to reach equilibrium.

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