The conclusion that the level of output is efficient at the market equilibrium rests on all of the following assumptions EXCEPT that __________ .
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A. buyers and sellers are well-informed
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B. there are no external costs or benefits
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C. the government regulates price and output
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D. the market is perfectly competitive
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Suppose that you are willing to pay $25 for a new shirt and the market price is $35. In this case __________ .
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A. you will not buy the good
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B. you will buy the good and receive a consumer surplus of $5
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C. you will buy the good and receive a consumer surplus of -$10
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D. you will buy the good and receive a consumer surplus of -$35
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Jody's bakery makes cakes and would be willing to sell each cake for $12.50. If Jody's bakery sells 10 cakes for $13 each, the total producer surplus for Jody's bakery would be equal to __________ .
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A. $5.00
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B. $12.50
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C. $125.00
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D. $130.00
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A ban on imported avocados would result in __________ .
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A. an increase in total surplus because domestic production will increase
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B. no change in total surplus because the reduction in consumer surplus will offset the increase in producer surplus
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C. a reduction in total surplus because a deadweight loss is created
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D. It is impossible to say what will happen to total surplus.
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You would be willing to pay a maximum of $1,000 for an airplane ticket to London during the summer, and you can buy an airplane ticket for $890. Your consumer surplus is __________ .
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A. $90
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B. $190
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C. $110
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D. $100
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If the government sets a maximum price for insulin below the equilibrium price, __________ .
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A. there will be an efficient level of insulin produced
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B. there will be excess supply of insulin
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C. total surplus will be lower than it would be at the market equilibrium price
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D. total surplus will be greater than it would be at the market equilibrium price
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Assume that linen pants are a normal good and consumer income rises. If the supply of linen pants remains constant, producer surplus __________ .
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A. will decrease
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B. will increase
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C. will remain constant
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D. may increase or decrease depending on the amount of the price increase
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Producer surplus is equal to __________ .
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A. the area under the supply curve
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B. the area above the supply curve below the good's price
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C. the area under the supply curve below the good's price
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D. the good's price times the quantity purchased
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Tom would be willing to pay a maximum of $2,500 to attend the Super Bowl this year, and he can buy a ticket for $2,050. His consumer surplus is __________ .
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A. $25
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B. $50
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C. $275
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D. $450
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Assume that production costs rise and demand remains constant. The equilibrium price will __________ and the producer surplus will __________ .
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A. increase; increase
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B. increase; decrease
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C. decrease; decrease
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D. decrease; increase
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If the market price of salmon is $8.99 per pound but the government will not allow salmon farmers to charge more than $4.99 per pound, which of the following will happen?
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A. The supply curve for salmon will shift to the left.
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B. There will be an excess demand for salmon.
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C. There will be an excess supply of salmon.
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D. The market will be in equilibrium at a price of $4.99.
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Consumer surplus can be defined as the __________ .
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A. value a consumer receives from a good minus the price paid for that good
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B. maximum amount the consumer would pay for a good
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C. actual amount paid for a good minus the benefit of using that good
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D. marginal utility of a good divided by its price
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If the equilibrium price of gasoline is $2.75 per gallon and the government will not allow oil companies to charge more than $2.00 per gallon, which of the following will happen?
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A. Demand must eventually decrease so that the market will come into equilibrium at a price of $2.00.
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B. Supply must eventually increase so that the market will come into equilibrium at a price of $2.00.
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C. Total surplus in the market will be lower than it would be if the price was $2.75 per gallon.
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D. The market will be in equilibrium at a price of $2.00.
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At the free market equilibrium, the efficient level of output is produced because __________ .
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A. government regulates the output level that must be produced
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B. firms are maximizing profit
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C. willingness to pay is the same for all consumers
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D. total surplus is maximized
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Mary has an old house built in 1950 that she would be willing to sell for $100,000. If someone offers to buy her house for $110,000, Mary's producer surplus would be equal to __________ .
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A. $5,000
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B. $10,000
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C. $55,000
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D. $100,000
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If the government imposes a maximum price for milk that is above the equilibrium price __________ .
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A. this maximum price for milk will have no economic impact
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B. quantity demanded of milk will be less than quantity supplied
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C. demand for milk will be greater than supply
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D. the available milk supply will have to be rationed
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Assume that the supply of smartphones remains constant, but the price of smartphones increases. Producer surplus __________ .
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A. will decrease
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B. will increase
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C. will remain constant
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D. may increase or decrease depending on the amount of the price increase
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