Problem Set 6 (Chapters 7 & 8 (151-156) Flashcards
The only four consumers in a market have the following willingness to pay for a good:
Buyer Willingness to Pay
Carlos $15
Homer $25
Wilbur $35
Jose $45
If the actual price of the good is $30, which consumers will purchase the product?
a.
Jose
b.
Jose and Wilbur
c.
Jose and Wilbur and Homer
d.
Jose and Wilbur and Homer and Carlos
B
The only four consumers in a market have the following willingness to pay for a good:
Buyer Willingness to Pay
Carlos $15
Homer $25
Wilbur $35
Jose $45
If the actual price of the good is $30, the total amount of consumer surplus in the market is ______. If the actual price of the good falls to $28, the total amount of consumer surplus will be _______.
a.$5, $10
b.$20, $24
c.$15, $25
d.$35, $45
B
The following table represents the minimum costs of five possible sellers to produce/sell their product in the market.
Seller Cost
Abby $1,600
Bobby $1,300
Dianne $1,100
Evaline $900
Carlos $800
If the actual price of the product is $1000, which producers will sell the product?
a.Abby
b.Abby and Bobby
c.Abby, Bobby and Dianne
d. Evaline and Carlos
D
The following table represents the minimum costs of five possible sellers to produce/sell their product in the market.
Seller Cost
Abby $1,600
Bobby $1,300
Dianne $1,100
Evaline $900
Carlos $800
If the actual price of the product is $1000, the total value of producer surplus in the market will be _______. If the price rises to $1200, the total value of producer surplus in the market will be _______.
Question 4 Select one:
a. $1000, $700
b. $300, $800
c. $900, $800
d. $1700, $2800
B
Jen values her time at $60 per hour (value of her time for 2 hours $120). She spends 2 hours giving Colleen a massage. Colleen was willing to pay as much as $300 for the massage, but they negotiate a price of $200. In this transaction
a.consumer surplus is $20 larger than producer surplus
b.consumer surplus is $40 larger than producer surplus
c.producer surplus is $20 larger than consumer surplus
d.producer surplus is $40 larger than consumer surplus
A
An efficient allocation of resources maximizes
a.consumer surplus
b.producer surplus
c.consumer surplus plus producer surplus
d.consumer surplus minus producer surplus
C
When a market is in equilibrium, the buyers are those with the ________ willingness to pay and the sellers are those with the _____ costs.
a.highest, highest
b.highest, lowest
c.lowest, highest
d.lowest, lowest
B
Producing less than the output that would exist at the equilibrium of supply and demand is inefficient because the value to the buyer, given the buyer’s price at that output, is
a.negative
b.zero
c.positive but less than the value of the seller’s price at that output
d.positive, but greater than the value of the seller’s price at that output
D
An early freeze in California sours/damages the lemon crop. This will ______ consumer surplus in the market for lemons, and _______ consumer surplus in the market for lemonade.
a.increase, increase
b.decrease, decrease
c.decrease, increase
d.increase, decrease
B
Suppose the demand for French bread rises. This will _______ producer surplus in the market for French bread, and ______ producer surplus in the market for flour.
Question 10 Select one:
a.increase, increase
b.decrease, decrease
c.increase, decrease
d.decrease, increase
A
If the government places a per unit tax on the sale of a good, the price that the buyer pays will _____, and the price that the seller receives will ______.
a.increase, increase
b.decrease, decrease
c.increase, decrease
d.decrease, increase
C
If the government places a per unit tax on the sale of a good, consumer surplus ______ and producer surplus _______.
a.increases, increases
b.decreases, decreases
c.increases, decreases
d.decreases, increases
B
The deadweight/welfare loss from a tax is represented by
a.lost consumer and producer surplus
b.the difference between consumer and producer surplus
c.the increase in tax revenue created by a tax
d.the distribution of tax revenue created from a tax
A
Supply: P = 10 + 2Q
Demand: P = 40 - 3Q
Suppose the supply and demand for widgets is given by the equations above. Solve for the equilibrium price and quantity.
a.P=$10, Q=40
b.P=$22, Q=6
c.P=$40, Q=10
d.P=$6, Q=22
B
Supply: P = 10 + 2Q
Demand: P = 40 - 3Q
Given the market equilibrium price and quantity in the market for widgets given the supply and demand above, the numerical value of consumer surplus is ________ and the numerical value of producer surplus is _________.
a.54, 36
b.36, 54
c.54, 66
d.108, 72
A
