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Exam 4: Consumer and Producer Surplus

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Question 111

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Use the following to answer questions : Figure: Producer Surplus II -(Figure: Producer Surplus II) Look at the figure Producer Surplus II.At a price of P₁,producer surplus equals the area:

A) LMK.
B) P₁K0.
C) P₂M0.
D) P₂P₁KM.

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

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Question 112

Multiple Choice

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When a market is in equilibrium and there is no outside intervention to change the equilibrium price:

A) total surplus is minimized.
B) inefficiency is maximized.
C) no mutually beneficial trades are missed.
D) some mutually beneficial trades may be missed.

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

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Question 113

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Use the following to answer questions : $\begin{array}{l}\text { Table: Pumpkin Market }\\\begin{array} { l c c c c } \hline \begin{array} { l } \text { Quantity of } \\\text { Pumpkins }\end{array} & \begin{array} { c } \text { Andy's } \\\text { willingness to pay }\end{array} & \begin{array} { c } \text { Ben's willingness } \\\text { to pay }\end{array} & \text { Cindy's cost } & \text { Diane's cost } \\\hline \text { lst pumpkin } & \$ 12 & \$ 11 & \$ 3 & \$ 4 \\\text { 2nd pumpkin } & 10 & 9 & 5 & 6 \\\text { 3rd pumpkin } & 8 & 7 & 8 & 9 \\\text { 4th pumpkin } & 6 & 5 & 10 & 11 \\\hline\end{array}\end{array}$ -(Table: Pumpkin Market) There are two consumers,Andy and Ben,in the market for pumpkins.Their willingness to pay for each pumpkin is shown in the table Pumpkin Market.There are two producers of pumpkins,Cindy and Diane,and their costs are also shown.The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5.At the equilibrium price and quantity,Cindy sells _____ pumpkins,and her producer surplus is _____.

Use the following to answer questions : Figure: The Market for Hamburgers -(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the weekly market for hamburgers in Moncton.If the price of a hamburger falls from $2.00 to $1.50,the gain in consumer surplus to consumers who are persuaded to buy at the lower price (and who were not buying when the price was $2.00) is equal to:

If the price of a good rises along an upward-sloping supply curve,then producer surplus:

Use the following to answer questions : $\begin{array}{l}\text { Table: Willingness to Pay for Basketball Sneakers }\\\begin{array} { l c } \hline \text { Consumer } & \text { Willingness to Pay } \\\hline \text { Jamichael } & \$ 150 \\\text { Corey } & 140 \\\text { Rudy } & 120 \\\text { Ray } & 100 \\\text { Javon } & 80 \\\hline\end{array}\end{array}$ -(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers.Assume that each player wants to buy at most one pair of sneakers.If the price of basketball sneakers is $60,how many pairs will be purchased?

Efficiency deals with helping society decide what its goals should be.

The total surplus generated in the market for blackberries is the total net gain to consumers in that market.

When a monopolist prevents mutually beneficial trades from occurring,total surplus increases.

Use the following to answer questions : $\text {Table: Producer Surplus}$ $\begin{array}{lr}\hline \text { The table below shows the willingness}&\\\text { to sell The Nutty Nutcracker tickets by}&\\\text { five students who received their ticket}&\\\text { as part of their student activity fees. }&\\\text {Assume that each student only has one }&\\\text {ticket to sell.}&\\ \hline \text { Student } & \text { Willingness to Sell } \\\hline \text { Caitlin } & \$ 1 \\\text { Dudley } & 25 \\\text { Evan } & 60 \\\text { Francisco } & 90 \\\text { Grace } & 100\end{array}$ -(Table: Producer Surplus) Use Table: Producer Surplus.If the tickets to The Nutty Nutcracker are free and there is no other market for tickets,the total producer surplus for the five students is:

Use the following to answer questions : $\text {Table: Firm's Willingness}$ $\begin{array}{lc}\hline \text { The table below explains the relationship}&\\ \text { between the number of reports a firm is}&\\ \text { willing to prepare and the lowest price in}&\\ \text { dollars it would be willing to accept to}&\\ \text { prepare the respective number of reports.}&\\\hline \text { Reports } & \begin{array}{c}\text { Lowest Price Firm } \\\text { Is Willing to Accept }\end{array} \\\hline \text { 1st } & \$ 2 \\\text { 2nd } & 6 \\\text { 3rd } & 8 \\\text { 4th } & 11 \\\text { 5th } & 15 \\\hline\end{array}$ -(Table: Firm's Willingness) The table Firm's Willingness explains the relation between the number of reports a firm is willing to produce and the lowest price it is willing to accept to prepare those reports.If the price of a report is $12,what is the value of producer surplus for the firm?

Floyd's cost of selling haircuts is the lowest price at which he is willing to sell haircuts.

Along a given downward-sloping demand curve,an increase in the price of a good will _____ consumer surplus.

Ashley bought a new pair of jeans.When she walked out of the store,she thought,"I got such a great deal.I would have paid $40 more for these jeans!" This BEST represents the concept of:

Efficiency addresses the best way to achieve a goal once it has been determined.

Use the following to answer questions : $\begin{array}{l}\text { Table: Pumpkin Market }\\\begin{array} { l c c c c } \hline \begin{array} { l } \text { Quantity of } \\\text { Pumpkins }\end{array} & \begin{array} { c } \text { Andy's } \\\text { willingness to pay }\end{array} & \begin{array} { c } \text { Ben's willingness } \\\text { to pay }\end{array} & \text { Cindy's cost } & \text { Diane's cost } \\\hline \text { lst pumpkin } & \$ 12 & \$ 11 & \$ 3 & \$ 4 \\\text { 2nd pumpkin } & 10 & 9 & 5 & 6 \\\text { 3rd pumpkin } & 8 & 7 & 8 & 9 \\\text { 4th pumpkin } & 6 & 5 & 10 & 11 \\\hline\end{array}\end{array}$ -(Table: Pumpkin Market) There are two consumers,Andy and Ben,in the market for pumpkins.Their willingness to pay for each pumpkin is shown in the table Pumpkin Market.There are two producers of pumpkins,Cindy and Diane,and their costs are also shown.The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5.If Cindy sells one more pumpkin and Diane sells one fewer pumpkin than in equilibrium,total surplus will _____ by _____.

Consumer surplus is the amount buyers actually pay for a good minus the maximum amount they are willing to pay for it.

Use the following to answer question 83: -(Figure: Gain in Producer Surplus) Look at the figure Gain in Producer Surplus.Which areas represent producer surplus when the price is equal to P₂?

Suppose a competitive market has a downward-sloping demand curve and a horizontal supply curve.If the supply curve shifts downward,equilibrium price will _____,equilibrium quantity will _____,consumer surplus will _____,and producer surplus will _____.

Use the following to answer question 121: Figure: Change in the Total Surplus -(Figure: Change in Total Surplus) Look at the figure Change in Total Surplus.Which areas represent the change in total surplus when the price falls from P₂ to P₃?