consumer surplus
42. In which of the following circumstances would a buyer be indifferent about buying a good?
a. The amount of consumer surplus the buyer would experience as a result of buying the good is zero.
b. The price of the good is equal to the buyer’s willingness to pay for the good.
c. The price of the good is equal to the value the buyer places on the good.
d. All of the above are correct
d. All of the above are correct
44. If the demand for leather decreases, producer surplus in the leather market
a. increases.
b. decreases.
c. remains the same.
d. may increase, decrease, or remain the same.
b. decreases.
8. Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called
a. deadweight loss.
b. willingness to pay.
c. consumer surplus.
d. producer surplus.
b. willingness to pay.
When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,
a. consumer surplus increases and total surplus increases in the market for that good.
b. consumer surplus increases and total surplus decreases in the market for that good.
c. consumer surplus decreases and total surplus increases in the market for that good.
d. consumer surplus decreases and total surplus decreases in the market for that good.
d. consumer surplus decreases and total surplus decreases in the market for that good.
23. Domestic producers of a good become better off, and domestic consumers of a good become worse off, when a country begins allowing international trade in that good and
a. the country becomes an importer of the good as a result.
b. the world price exceeds the domestic price of the good that prevailed before international trade was allowed.
c. other countries have a comparative advantage, relative to the country in question, in producing the good.
d. total surplus does not change as a result.
b. the world price exceeds the domestic price of the good that prevailed before international trade was allowed.
43. On a graph, consumer surplus is represented by the area
a. between the demand and supply curves.
b. below the demand curve and above price.
c. below the price and above the supply curve.
d. below the demand curve and to the right of equilibrium price.
b. below the demand curve and above price.
40. The area below the demand curve and above the supply curve measures the producer surplus in a market.
a. True
b. False
b. False
15. Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.
a. True
b. False
a. True
1. When a nation first begins to trade with other countries and the nation becomes an importer of corn,
a. this is an indication that the world price of corn exceeds the nation’s domestic price of corn in the absence of trade.
b. this is an indication that the nation has a comparative advantage in producing corn.
c. the nation’s consumers of corn become better off and the nation’s producers of corn become worse off.
d. All of the above are correct.
c. the nation’s consumers of corn become better off and the nation’s producers of corn become worse off.
42. Spain is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Spain imposes a $5 tariff on chips. As a result,
a. Spanish consumers of chips and Spanish producers of chips both gain.
b. Spanish consumers of chips gain and Spanish producers of chips lose.
c. Spanish consumers of chips lose and Spanish producers of chips gain.
d. Spanish consumers of chips and Spanish producers of chips both lose.
c. Spanish consumers of chips lose and Spanish producers of chips gain.
Consumer surplus is
a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
b. the amount a buyer is willing to pay for a good minus the cost of producing the good.
c. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good.
d. a buyer's willingness to pay for a good plus the price of the good.
a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
The only four producers in a market have the following costs:
Evan $50, Selena $100, Angie $150, Kris $200.
If Evan, Selena, Angie, and Kris sell the good, and the resulting producer surplus is $700, then the price must have been
a. $200.
b. $300.
c. $500.
d. $700.
b. $300.
27. Inefficiency can be caused in a market by the presence of
a. market power.
b. externalities.
c. imperfectly competitive markets.
d. All of the above are correct.
d. All of the above are correct.
45. Suppose a country begins to allow international trade in steel. Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel?
a. The sum of consumer surplus and producer surplus for domestic traders of steel increases.
b. The quantity of steel demanded by domestic consumers increases.
c. Domestic producers of steel receive a higher price for steel.
d. The losses of the losers exceed the gains of the winners.
a. The sum of consumer surplus and producer surplus for domestic traders of steel increases.
21. Import quotas and tariffs produce similar results. Which of the following is not one of those results?
a. The domestic price of the good increases.
b. Consumer surplus of domestic consumers increases.
c. Producer surplus of domestic producers increases.
d. A deadweight loss is experienced by the domestic country.
b. Consumer surplus of domestic consumers increases.
7. When the demand for a good increases and the supply of the good remains unchanged, consumer surplus
a. decreases.
b. is unchanged.
c. increases.
d. may increase, decrease, or remain unchanged.
d. may increase, decrease, or remain unchanged.
39. Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is
a. $0.95.
b. $1.15.
c. $1.30.
d. $1.85.
d. $1.85.
10. A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay.
a. True
b. False
b. False
28. Opponents of free trade often want the United States to prohibit the import of goods made in overseas factories that pay wages below the U.S. minimum wage. Prohibiting such goods is likely to
a. cause these factories to pay the U.S. minimum wage.
b. increase the rate of technological advance in poor countries so that they can afford to pay higher wages.
c. increase poverty in poor countries and benefit U.S. firms which compete with these imports.
d. harm U.S. firms which compete with these imports.
c. increase poverty in poor countries and benefit U.S. firms which compete with these imports.
10. When a country allows trade and becomes an importer of bottled water, which of the following is not a consequence?
a. The gains of domestic consumers of bottled water exceed the losses of domestic producers of bottled water.
b. The losses of domestic producers of bottled water exceed the gains of domestic consumers of bottled water.
c. The price paid by domestic consumers of bottled water decreases.
d. The price received by domestic producers of bottled water decreases.
b. The losses of domestic producers of bottled water exceed the gains of domestic consumers of bottled water.
9. Consumer surplus is a good measure of economic welfare if policymakers want to
a. maximize total benefit.
b. minimize deadweight loss.
c. respect the preferences of sellers.
d. respect the preferences of buyers.
d. respect the preferences of buyers.
7. When the demand for a good increases and the supply of the good remains unchanged, producer surplus
a. decreases.
b. is unchanged.
c. increases.
d. may increase, decrease, or remain unchanged.
c. increases.
“Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run.” This observation helps to explain why many economists are skeptical about the
a. national-security argument.
b. infant-industry argument.
c. unfair-competition argument.
d. jobs argument.
b. infant-industry argument.
25. Assume, for England, that the domestic price of wine without international trade is higher than the world price of wine. This suggests that, in the production of wine,
a. England has a comparative advantage over other countries and England will export wine.
b. England has a comparative advantage over other countries and England will import wine.
c. other countries have a comparative advantage over England and England will export wine.
d. other countries have a comparative advantage over England and England will import wine.
d. other countries have a comparative advantage over England and England will import wine.
34. Suppose Ireland exports beer to China and imports pineapples from the United States. This situation suggests that
a. Ireland has a comparative advantage relative to the United States in producing pineapples, and China has a comparative advantage relative to Ireland in producing beer.
b. Ireland has a comparative advantage relative to China in producing beer, and the United States has a comparative advantage relative to Ireland in producing pineapples.
c. Ireland has an absolute advantage relative to the United States in producing pineapples, and China has an absolute advantage relative to Ireland in producing beer.
d. Ireland has an absolute advantage relative to China in producing beer, and the United States has an absolute advantage relative to Ireland in producing pineapples.
b. Ireland has a comparative advantage relative to China in producing beer, and the United States has a comparative advantage relative to Ireland in producing pineapples.