Econ 101 - Principles of Macroeconomics » Fall 2021 » Chapter Quiz Chapter 7

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Question #1
Consumer surplus is the area
A.   below the demand curve and above the supply curve.
B.   below the demand curve and above the price.
C.   above the supply curve and below the price.
D.   below the supply curve and above the price.
E.   above the demand curve and below the price.
Question #2
A buyer's willingness to pay is
A.   that buyer's minimum amount he is willing to pay for a good.
B.   that buyer's consumer surplus.
C.   that buyer's maximum amount he is willing to pay for a good.
D.   that buyer's producer surplus.
E.   none of the above.
Question #3
If a buyer's willingness to pay for a new Honda is $30,000 and she is able to actually buy it for $28,000, her consumer surplus is
A.   $2,000
B.   $30,000
C.   $0
D.   $28,000
E.   $58,000
Question #4
An increase in the price of a good along a stationary demand curve
A.   improves market efficiency.
B.   increases consumer surplus.
C.   decreases consumer surplus.
D.   improves the material welfare of the buyers.
Question #5
Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many vases will be sold and what is the value of consumer surplus in this market?
A.   Three vases will be sold, and consumer surplus is $80.
B.   One vase will be sold, and consumer surplus is $5.
C.   Two vases will be sold, and consumer surplus is $5.
D.   One vase will be sold, and consumer surplus is $30.
E.   Three vases will be sold, and consumer surplus is $0.
Question #6
Producer surplus is the area
A.   above the supply curve and below the price.
B.   above the demand curve and below the price.
C.   below the supply curve and above the price.
D.   below the demand curve and above the price.
E.   below the demand curve and above the supply curve.
Question #7
If a benevolent social planner chooses to produce less than the equilibrium quantity of a good, then
A.   the value placed on the last unit of production by buyers exceeds the cost of production.
B.   consumer surplus is maximized.
C.   total surplus is maximized.
D.   producer surplus is maximized.
E.   the cost of production on the last unit produced exceeds the value placed on it by buyers.
Question #8
If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then
A.   producer surplus is maximized.
B.   the cost of production on the last unit produced exceeds the value placed on it by buyers.
C.   total surplus is maximized.
D.   the value placed on the last unit of production by buyers exceeds the cost of production.
E.   consumer surplus is maximized.
Question #9
The seller's cost of production is
A.   the seller's producer surplus.
B.   the seller's consumer surplus.
C.   the maximum amount the seller is willing to accept for a good.
D.   the minimum amount the seller is willing to accept for a good.
E.   none of the above.
Question #10
Total surplus is the area
A.   above the supply curve and below the price.
B.   below the demand curve and above the price.
C.   below the supply curve and above the price.
D.   above the demand curve and below the price.
E.   below the demand curve and above the supply curve.
Question #11
An increase in the price of a good along a stationary supply curve
A.   improves market equity.
B.   decreases producer surplus.
C.   increases producer surplus.
D.   does all of the above.
Question #12
Adam Smith's "invisible hand" concept suggests that a competitive market outcome
A.   maximizes total surplus.
B.   minimizes total surplus.
C.   maximizes total surplus and generates equality among the members of society.
D.   generates equality among the members of society.
Question #13
In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should
A.   choose any price the planner wants because the losses to the sellers (buyers) from any change in price are exactly offset by the gains to the buyers (sellers).
B.   choose a price above the market equilibrium price.
C.   choose a price below the market equilibrium price.
D.   allow the market to seek equilibrium on its own.
Question #14
If buyers are rational and there is no market failure,
A.   free market solutions are efficient and maximize total surplus.
B.   free market solutions generate equality.
C.   all of the above are true.
Question #15
If a producer has market power (can influence the price of the product in the market) then free market solutions
A.   generate equality.
B.   are inefficient.
C.   are efficient.
D.   maximize consumer surplus.
Question #16
If a market is efficient, then
A.   the quantity produced in the market maximizes the sum of consumer and producer surplus.
B.   the market allocates buyers to the sellers who can produce the good at least cost.
C.   all of the choices are true
D.   the market allocates output to the buyers who value it the most.
E.   none of the above is true
Question #17
If a market generates a side effect or externality, then free market solutions
A.   are efficient.
B.   maximize producer surplus.
C.   generate equality.
D.   are inefficient.
Question #18
Medical care clearly enhances people's lives. Therefore, we should consume medical care until
A.   the benefit buyers place on medical care is equal to the cost of producing it.
B.   buyers receive no benefit from another unit of medical care.
C.   we must cut back on the consumption of other goods.
D.   everyone has as much as they would like.
Question #19
Joe has ten baseball gloves and Sue has none. A baseball glove costs $50 to produce. If Joe values an additional baseball glove at $100 and Sue values a baseball glove at $40, then to maximize
A.   efficiency, Joe should receive the glove.
B.   equality, Joe should receive the glove.
C.   consumer surplus, both should receive a glove.
D.   efficiency, Sue should receive the glove.
Question #20
Suppose that the price of a new bicycle is $300. Sue values a new bicycle at $400. It costs $200 for the seller to produce the new bicycle. What is the value of total surplus if Sue buys a new bike?
A.   $400
B.   $200
C.   $500
D.   $100
E.   $300

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