Question 1
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 __________ .
A. $5,000
B. $10,000
C. $55,000
D. $100,000
Question 2
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 3
Assume that linen pants are a normal good and consumer income rises. If the supply of linen pants remains constant, 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 4
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 5
Recall the application about price controls and the candy bars. During World War II, the U.S. government imposed price controls to set maximum prices on all different products, including candy bars. How did the candy bar producers respond to maximum prices?
A. Producers increased the supply of candy bars.
B. Producers shrank the weight of the candy bars.
C. A lot of the producers dropped out of candy bar market.
D. none of the above
Question 6
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 7
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 8
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 9
At the market equilibrium, resources are allocated efficiently because __________ .
A. the marginal cost of producing another unit is equal to zero
B. the price buyers pay accurately reflects the marginal cost of the resources used to produce the good
C. the price buyers pay is greater than sellers' willingness to sell
D. all of the above
Question 10
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 11
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
Question 12
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 13
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 14
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 15
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 16
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 17
The conclusion that the level of output is efficient at the market equilibrium rests on all of the following assumptions EXCEPT that __________ .
A. buyers and sellers are well-informed
B. there are no external costs or benefits
C. the government regulates price and output
D. the market is perfectly competitive
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
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 __________ .
A. $90
B. $190
C. $110
D. $100
Question 20
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
