Questions:
Question 1
If the government imposes a maximum price for milk that is above the equilibrium price __________ .
A. this maximum price for milk will have no economic impact
B. quantity demanded of milk will be less than quantity supplied
C. demand for milk will be greater than supply
D. the available milk supply will have to be rationed
Question 2
The difference between the maximum amount a person is willing to pay for a good and its current market price is known as __________ A. the paradox of value
B. profits
C. revealed preferences
D. consumer surplus
Question 3
Laura makes hand-made jewelry and she would be willing to sell pairs of earrings for $50. If Laura sells each pair of earrings for $65, her producer surplus per pair of earrings sold would be equal to __________ .
A. $115
B. $65
C. $15
D. $50
Question 4
Assume that production costs rise and demand remains constant. The equilibrium price will __________ and the producer surplus will __________ .
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
Question 5
Suppose that you are willing to pay $25 for a new shirt and the market price is $35. In this case __________ .
A. you will not buy the good
B. you will buy the good and receive a consumer surplus of $5
C. you will buy the good and receive a consumer surplus of -$10
D. you will buy the good and receive a consumer surplus of -$35
Question 6
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 __________ .
A. $5.00
B. $12.50
C. $125.00
D. $130.00
Question 7
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?
A. Demand must eventually decrease so that the market will come into equilibrium at a price of $2.00.
B. Supply must eventually increase so that the market will come into equilibrium at a price of $2.00.
C. Total surplus in the market will be lower than it would be if the price was $2.75 per gallon.
D. The market will be in equilibrium at a price of $2.00.
Question 8
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 __________ .
A. $25
B. $50
C. $275
D. $450
Question 9
Assume that there is rent control in Chicago. Which of the following is true?
A. All consumers in the rental market will benefit because the rent will be lower.
B. The total surplus will fall because there will be a shortage of apartments.
C. The total surplus will rise because consumer surplus will increase.
D. Consumer surplus will increase and as a result all consumers in the rental market will benefit.
Question 10
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?
A. The supply curve for salmon will shift to the left.
B. There will be an excess demand for salmon.
C. There will be an excess supply of salmon.
D. The market will be in equilibrium at a price of $4.99.
Question 11
Suppose you receive a consumer surplus of $50. The $50 represents __________ .
A. a monetary payment from the store
B. a monetary payment from the government
C. a reduction in the original price of the good
D. the fact that you paid $50 less than you were willing to pay for the good
Question 12
At the free market equilibrium, the efficient level of output is produced because __________ .
A. government regulates the output level that must be produced
B. firms are maximizing profit
C. willingness to pay is the same for all consumers
D. total surplus is maximized
Question 13
Assume that the supply of smartphones remains constant, but the price of smartphones increases. Producer surplus __________ .
A. will decrease
B. will increase
C. will remain constant
D. may increase or decrease depending on the amount of the price increase
Question 14
Consumer surplus can be defined as the __________ .
A. value a consumer receives from a good minus the price paid for that good
B. maximum amount the consumer would pay for a good
C. actual amount paid for a good minus the benefit of using that good
D. marginal utility of a good divided by its price
Question 15
A ban on imported avocados would result in __________ .
A. an increase in total surplus because domestic production will increase
B. no change in total surplus because the reduction in consumer surplus will offset the increase in producer surplus
C. a reduction in total surplus because a deadweight loss is created
D. It is impossible to say what will happen to total surplus.
Question 16
In the market equilibrium, with a price of $500 there are 2000 apartments. If the government decides to enact a rent control policy, with a maximum price of $400, it reduces the quantity to 1500 apartments. Due to the rent control decreasing the total surplus of the market, the policy generates a(n) __________ .
A. excess supply
B. equilibrium
C. higher price
D. deadweight loss
Question 17
If the government sets a minimum price above the equilibrium price for soybeans, which of the following statements will be correct?
A. There will be an efficient level of output produced.
B. There will be excess supply.
C. There will be excess demand.
D. all of the above
Question 18
Which of the following would result from a quota imposed on the quantity of cars that can be imported into the United States?
A. an increase in the total surplus
B. an increase in producer surplus
C. an increase in prices for consumers
D. an increase in consumer surplus
Question 19
If the government sets a maximum price for gasoline above the equilibrium price, __________ .
A. quantity demanded of gasoline will be equal to quantity supplied of gasoline
B. there will be excess demand for gasoline
C. there will be excess supply of gasoline
D. demand for gasoline will be less than supply of gasoline
Question 20
Assume that Crystal's demand for handbags remains constant, but the price of handbags increases. Crystal's consumer surplus __________ .
A. decreases
B. increases
C. remains constant
D. may increase or decrease depending on the amount of the price decrease