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 price.
B.   below the supply curve and above the price.
C.   above the demand curve and below the price.
D.   below the demand curve and above the supply curve.
E.   above the supply curve and below the price.
Question #2
A buyer's willingness to pay is
A.   that buyer's consumer surplus.
B.   that buyer's producer surplus.
C.   that buyer's maximum amount he is willing to pay for a good.
D.   that buyer's minimum amount he is willing to pay for a good.
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.   $30,000
B.   $2,000
C.   $28,000
D.   $58,000
E.   $0
Question #4
An increase in the price of a good along a stationary demand curve
A.   improves the material welfare of the buyers.
B.   improves market efficiency.
C.   decreases consumer surplus.
D.   increases consumer surplus.
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.   One vase will be sold, and consumer surplus is $5.
B.   Three vases will be sold, and consumer surplus is $80.
C.   One vase will be sold, and consumer surplus is $30.
D.   Three vases will be sold, and consumer surplus is $0.
E.   Two vases will be sold, and consumer surplus is $5.
Question #6
Producer surplus is the area
A.   above the demand curve and below the price.
B.   below the demand curve and above the supply curve.
C.   below the supply curve and above the price.
D.   below the demand curve and above the price.
E.   above the supply curve and below the price.
Question #7
If a benevolent social planner chooses to produce less than the equilibrium quantity of a good, then
A.   the cost of production on the last unit produced exceeds the value placed on it by buyers.
B.   producer surplus is maximized.
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 #8
If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then
A.   the cost of production on the last unit produced exceeds the value placed on it by buyers.
B.   the value placed on the last unit of production by buyers exceeds the cost of production.
C.   total surplus is maximized.
D.   consumer surplus is maximized.
E.   producer surplus is maximized.
Question #9
The seller's cost of production is
A.   the minimum amount the seller is willing to accept for a good.
B.   the seller's producer surplus.
C.   the seller's consumer surplus.
D.   the maximum amount the seller is willing to accept for a good.
E.   none of the above.
Question #10
Total surplus is the area
A.   below the supply curve and above the price.
B.   below the demand curve and above the price.
C.   below the demand curve and above the supply curve.
D.   above the supply curve and below the price.
E.   above the demand curve and below the price.
Question #11
An increase in the price of a good along a stationary supply curve
A.   increases producer surplus.
B.   decreases producer surplus.
C.   improves market equity.
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.   maximizes total surplus and generates equality among the members of society.
C.   minimizes total surplus.
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.   allow the market to seek equilibrium on its own.
B.   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).
C.   choose a price below the market equilibrium price.
D.   choose a price above the market equilibrium price.
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.   maximize consumer surplus.
B.   are efficient.
C.   generate equality.
D.   are inefficient.
Question #16
If a market is efficient, then
A.   the market allocates output to the buyers who value it the most.
B.   the quantity produced in the market maximizes the sum of consumer and producer surplus.
C.   the market allocates buyers to the sellers who can produce the good at least cost.
D.   all of the choices are true
E.   none of the above is true
Question #17
If a market generates a side effect or externality, then free market solutions
A.   maximize producer surplus.
B.   are inefficient.
C.   generate equality.
D.   are efficient.
Question #18
Medical care clearly enhances people's lives. Therefore, we should consume medical care until
A.   we must cut back on the consumption of other goods.
B.   buyers receive no benefit from another unit of medical care.
C.   everyone has as much as they would like.
D.   the benefit buyers place on medical care is equal to the cost of producing it.
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.   equality, Joe should receive the glove.
B.   consumer surplus, both should receive a glove.
C.   efficiency, Joe should receive the 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.   $100
D.   $300
E.   $500

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