Name: Class: Date:

chapter 3

Indicate whether the statement is true or false.

1. Markets will always allocate resources efficiently.

a. True
b. False

2. Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window-cleaning
services is $3 per window. If Connie cleans 100 windows, her producer surplus is $100.
a. True
b. False

3. When markets fail, public policy can potentially remedy the problem and increase economic efficiency.
a. True
b. False

4. All else equal, an increase in supply will cause an increase in consumer surplus.
a. True
b. False

5. 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

6. The lower the price, the lower the producer surplus, all else equal.
a. True
b. False

7. The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer
values the good.
a. True
b. False

8. All else equal, an increase in demand will cause an increase in producer surplus.
a. True
b. False

9. Producer surplus is the amount a seller is paid minus the cost of production.
a. True
b. False

10. Total surplus = Value to buyers - Costs to sellers.

a. True
b. False

11. When demand increases so that market price increases, producer surplus increases because (1) producer surplus
Copyright Cengage Learning. Powered by Cognero. Page 1
Name: Class: Date:

chapter 3
received by existing sellers increases, and (2) new sellers enter the market.
a. True
b. False

12. In order to calculate consumer surplus in a market, we need to know willingness to pay and price.
a. True
b. False

13. Efficiency is related to the size of the economic pie, whereas equality is related to how the pie gets sliced and
distributed.
a. True
b. False

14. All else equal, an increase in demand will always increase consumer surplus.
a. True
b. False

15. If the government imposes a binding price ceiling in a market, then the producer surplus in that market will increase.
a. True
b. False

16. The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating
in that market.
a. True
b. False

17. In order to conclude that markets are efficient, we assume that they are perfectly competitive.
a. True
b. False

18. If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $45.
a. True
b. False

19. Producer surplus measures the benefit to sellers from receiving a price above their costs.
a. True
b. False

20. If the United States legally allowed for a market in transplant organs, it is estimated that one kidney would sell for at
least $100,000.
a. True
b. False

21. Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased since she paid $8,000 for the
car but would have been willing to pay $11,000 for the car. Susie's consumer surplus is $2,000.
a. True
Copyright Cengage Learning. Powered by Cognero. Page 2
Name: Class: Date:

chapter 3

b. False

22. Producer surplus is the cost of production minus the amount a seller is paid.
a. True
b. False

23. Economists generally believe that, although there may be advantages to society from ticket-scalping, the costs to
society of this activity outweigh the benefits.
a. True
b. False

24. For any given quantity, the price on a demand curve represents the marginal buyer's willingness to pay.
a. True
b. False

25. The cost of production plus producer surplus is the price a seller is paid.
a. True
b. False

26. Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay
for it.
a. True
b. False

27. Ticket scalping can increase total surplus in the market for tickets to sporting events.
a. True
b. False

28. Suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer
surplus received by existing buyers increases and (2) new buyers enter the market.
a. True
b. False

29. Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is P = 15 + (1/3)
QS . If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.
a. True
b. False

30. If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $35.
a. True
b. False

31. Economists argue that restrictions against ticket scalping actually drive up the cost of many tickets.
a. True
b. False

Copyright Cengage Learning. Powered by Cognero. Page 3

Name: Class: Date:

chapter 3
32. Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is P = 10 +
(1/4)QS . If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.
a. True
b. False

33. The lower the price, the lower the consumer surplus, all else equal.
a. True
b. False

34. Consumer surplus can be measured as the area between the demand curve and the supply curve.
a. True
b. False

35. Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window-cleaning
services is $3 per window. If Connie cleans 100 windows, her producer surplus is $200.
a. True
b. False

36. If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175, the price of the tickets is $625.
a. True
b. False

37. Consumer surplus can be measured as the area between the demand curve and the equilibrium price.
a. True
b. False

38. Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.
a. True
b. False

39. Total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve,
up to the point of equilibrium.
a. True
b. False

40. Efficiency refers to whether a market outcome is fair, while equality refers to whether the maximum amount of output
was produced from a given number of inputs.
a. True
b. False

41. Wendy is willing to pay $50 for a concert ticket and Bruce would like to receive $25. If the market price is $40 for this
transaction, then the total surplus would be $15.
a. True
b. False

42. Suppose you sell a kayak for $600, but you were willing to sell it for $450. The buyer was willing to pay $650. The
Copyright Cengage Learning. Powered by Cognero. Page 4
Name: Class: Date:

chapter 3
total surplus is $200.
a. True
b. False

43. The area below the demand curve and above the supply curve measures the producer surplus in a market.
a. True
b. False

44. Consumer surplus measures the benefit to buyers of participating in a market.

a. True
b. False

45. Suppose you buy an iPod for $100. If your consumer surplus is $30, your willingness to pay is $70.
a. True
b. False

46. Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the soccer ball at $50. For this
transaction, the total surplus in the market is $40.
a. True
b. False

47. In a competitive market, sales go to those producers who are willing to supply the product at the lowest price.
a. True
b. False

48. If a market is in equilibrium, then it is impossible for a social planner to raise economic welfare by increasing or
decreasing the quantity of the good.
a. True
b. False

49. Total surplus in a market is consumer surplus minus producer surplus.

a. True
b. False

50. If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase.
a. True
b. False

51. Free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods
to the sellers who can produce them at least cost.
a. True
b. False

52. If the government imposes a binding price floor in a market, then the consumer surplus in that market will decrease.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 5
Name: Class: Date:

chapter 3

53. At any quantity, the price given by the supply curve shows the cost of the lowest-cost seller.
a. True
b. False

54. If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $10.
a. True
b. False

55. If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $90.
a. True
b. False

56. Even though participants in the economy are motivated by self-interest, the "invisible hand" of the marketplace guides
this self-interest into promoting general economic well-being.
a. True
b. False

57. The current policy on kidney donation effectively sets a price ceiling of zero.
a. True
b. False

58. All else equal, a decrease in demand will cause an increase in producer surplus.
a. True
b. False

59. An increase in price increases consumer surplus.

a. True
b. False

60. If the government removes a binding price ceiling in a market, then the producer surplus in that market will increase.
a. True
b. False

61. Market power and externalities are examples of market failures.

a. True
b. False

62. Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay
for it.
a. True
b. False

63. The area below the price and above the supply curve measures the producer surplus in a market.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 6
Name: Class: Date:

chapter 3

64. Welfare economics is the study of the welfare system.

a. True
b. False

65. Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost
of producing the product.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.

Table 7-10

Cost
Seller
(Dollars)
LeBron 700
Kobe 600
Kevin 450
Steve 400

66. Refer to Table 7-10. You want to hire a professional photographer to take pictures of your family. The table shows
the costs of the four potential sellers in the local photography market. Which of the following graphs represents the
market supply curve?
a.

b.

Copyright Cengage Learning. Powered by Cognero. Page 7

Name: Class: Date:

chapter 3

c.

d.

Figure 7-5

67. Refer to Figure 7-5. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer
Copyright Cengage Learning. Powered by Cognero. Page 8
Name: Class: Date:

chapter 3
surplus?
a. Producer surplus increases by $625.
b. Producer surplus increases by $1,875.
c. Producer surplus decreases by $625.
d. Producer surplus decreases by $1,875.

68. Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in
his tastes such that he values strawberries more than before. If the market price is the same as before, then
a. Dallas's consumer surplus would be unaffected.
b. Dallas's consumer surplus would increase.
c. Dallas's consumer surplus would decrease.
d. Dallas should buy fewer strawberries than before.

Table 7-6
During the last two days, Harry purchased a latte from two different stores. The table below shows Harry's willingness to
pay on each day and his consumer surplus from each purchase.

Harry's Willingness to Pay Harry's Consumer Surplus

(Dollars) (Dollars)
First Day 4.50 2.25
Second Day 3.00 0.75

69. Refer to Table 7-6. The price that Harry paid for a latte on the first day is
a. $2.25.
b. $3.75.
c. $0.75.
d. $4.5.

Table 7-11

Price Quantity Demanded Quantity Supplied

(Dollars per unit) (Units) (Units)
12.00 0 36
10.00 3 30
8.00 6 24
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0

70. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units
are bought and sold, producer surplus will be
a. $16.
b. $18.
c. $24.
Copyright Cengage Learning. Powered by Cognero. Page 9
Name: Class: Date:

chapter 3

d. $26.

Table 7-5

Willingness to Pay
Buyer
(Dollars)
Charisse 550
Keira 450
Erica 400
Michael 350

71. Refer to Table 7-5. You are selling extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA
basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the
game. Which of the following graphs represents the market demand curve?
a.

b.

c.

Copyright Cengage Learning. Powered by Cognero. Page 10

Name: Class: Date:

chapter 3

d.

72. Justin builds furniture for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places
on his own time amount to his
a. producer surplus.
b. producer deficit.
c. cost of building furniture.
d. profit.

73. Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie
Jo's willingness to pay for the dishwasher is
a. $150.
b. $425.
c. $500.
d. $850.

Table 7-7

Cost
Seller
(Dollars)
Mike 1,600
Laura 1,400
Sasha 1,100
David 900
Codi 700

Copyright Cengage Learning. Powered by Cognero. Page 11

Name: Class: Date:

chapter 3

74. Refer to Table 7-7. If the market price is $1,000, the producer surplus in the market is
a. $100.
b. $400.
c. $300.
d. $700.

Figure 7-6

75. Refer to Figure 7-6. Area A represents

a. producer surplus to new producers entering the market as the result of an increase in price from P1 to P2.
b. the increase in consumer surplus that results from an upward-sloping supply curve.
c. the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2.
d. the increase in producer surplus to those producers already in the market when the price increases from P1 to
P2.

76. What happens to consumer surplus in the cell phone market if cell phones are normal goods and income of the
cell phone buyers rises?
a. Consumer surplus decreases.
b. Consumer surplus remains unchanged.
c. Consumer surplus increases.
d. Consumer surplus may increase, decrease, or remain unchanged.

77. A supply curve can be used to measure producer surplus because it reflects

Copyright Cengage Learning. Powered by Cognero. Page 12

Name: Class: Date:

chapter 3

a. the actions of sellers.

b. quantity supplied.
c. sellers' costs.
d. the amount that will be purchased by consumers in the market.

78. Mike and Laura sell lemonade on the corner for $3.20 per cup. It costs them $0.20 to make each cup. On a certain day,
their producer surplus is $60. How many cups did Mike and Laura sell?
a. 10
b. 60
c. 4
d. 20

Table 7-4
For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Ava, who are
the only three buyers of apples. Assume that only three apples can be supplied per day.

Willingness to Pay
(Dollars)
First Apple Second Apple Third Apple
Bob 2.00 1.50 0.75
Sasha 1.50 1.00 0.60
Ava 0.75 0.25 0.00

79. Refer to Table 7-4. Who experiences the largest gain in consumer surplus when the price of an apple decreases from
$1.05 to $0.75?
a. Bob
b. Sasha
c. Ava
d. Bob and Sasha experience the same gain in consumer surplus, and Ava's gain is zero

Figure 7-5

Copyright Cengage Learning. Powered by Cognero. Page 13

Name: Class: Date:

chapter 3

80. Refer to Figure 7-5. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the
producer surplus?
a. $625
b. $1,250
c. $2,500
d. $5,000

Table 7-3

Willingness to Pay for a

Buyer Baseball Game Ticket
(Dollars)
Nancy 6
Tom 9
Kevin 12
Sasha 15
Erica 18
Biyu 21

81. Refer to Table 7-3. If you have 2 (essentially) identical tickets that you sell to the group in an auction, assuming that
each person can only buy one ticket, which of the following is closest to the selling price for each ticket?
a. $7
b. $16
c. $10
Copyright Cengage Learning. Powered by Cognero. Page 14
Name: Class: Date:

chapter 3

d. $21

Figure 7-1

82. Refer to Figure 7-1. When the price falls from P2 to P1, consumer surplus
a. increases by an amount equal to B.
b. increases by an amount equal to B+C.
c. decreases by an amount equal to B+C.
d. decreases by an amount equal to C.

Table 7-7

Cost
Seller
(Dollars)
Mike 1,600
Laura 1,400
Sasha 1,100
David 900
Codi 700

83. Refer to Table 7-7. Suppose each of the five sellers can supply at most one unit of the good. The market quantity
supplied is exactly 2 if the price is
a. $1,150.
b. $1,400.
c. $700.
Copyright Cengage Learning. Powered by Cognero. Page 15
Name: Class: Date:

chapter 3

d. $950.

Table 7-11

Price Quantity Demanded Quantity Supplied

(Dollars per unit) (Units) (Units)
12.00 0 36
10.00 3 30
8.00 6 24
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0

84. Refer to Table 7-11. The equilibrium price is

a. $10.00.
b. $8.00.
c. $6.00.
d. $4.00.

85. Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?
a. Profits and costs to firms
b. Consumer and producer surplus
c. The equilibrium price and quantity
d. Incomes of and prices paid by buyers

Table 7-8

Cost
Seller
(Dollars)
Evan 50
Selena 100
Angie 150
Kris 200

86. Refer to Table 7-8. If the sellers bid against each other for the right to sell the good to a consumer, then the good will
sell for
a. $50 or slightly more.
b. $100 or slightly less.
c. $150 or slightly less.
d. $200 or slightly more.

Figure 7-4

Copyright Cengage Learning. Powered by Cognero. Page 16

Name: Class: Date:

chapter 3

87. Refer to Figure 7-4. When the price rises from P1 to P2,
which area represents the increase in producer surplus due to new producers entering the market?
a. BCG
b. ACH
c. AHGB
d. DGH

88. The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of
chocolate
a. increases, and producer surplus increases.
b. increases, and producer surplus decreases.
c. decreases, and producer surplus increases.
d. decreases, and producer surplus decreases.

Figure 7-6

Copyright Cengage Learning. Powered by Cognero. Page 17

Name: Class: Date:

chapter 3

89. Refer to Figure 7-6. When the price is P2, producer surplus is
a. A.
b. A+C.
c. A+B+C.
d. D+G.

Figure 7-9

Copyright Cengage Learning. Powered by Cognero. Page 18

Name: Class: Date:

chapter 3

90. Refer to Figure 7-9. The equilibrium price is

a. P1.
b. P2.
c. P3.
d. P4.

91. If an allocation of resources is efficient, then

a. consumer surplus is maximized.
b. producer surplus is maximized.
c. all potential gains from trade among buyers are sellers are being realized.
d. the allocation achieves equality as well.

Table 7-11

Price Quantity Demanded Quantity Supplied

(Dollars per unit) (Units) (Units)
12.00 0 36
10.00 3 30
8.00 6 24
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0

Copyright Cengage Learning. Powered by Cognero. Page 19

Name: Class: Date:

chapter 3

92. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus
is
a. $24.
b. $36.
c. $42.
d. $48.

93. Refer to Table 7-12. Both the demand curve and the supply curve are straight lines. At equilibrium, producer surplus
is
a. $24.
b. $32.
c. $48.
d. $64.

94. Which of the following events would increase producer surplus?

a. Sellers' costs stay the same and the price of the good increases.
b. Sellers' costs increase and the price of the good stays the same.
c. Sellers' costs increase and the price of the good decreases.
d. Sellers' costs stay the same and the price of the good decreases.

95. Efficiency in a market is achieved when

a. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and
sellers' costs.
b. the sum of producer surplus and consumer surplus is maximized.
c. all firms are producing the good at the same low cost per unit.
d. no buyer is willing to pay more than the equilibrium price for any unit of the good.

96. A simultaneous increase in both the demand for tablets and the supply of tablets would imply that
a. both the value of tablets to consumers and the cost of producing tablets has increased.
b. both the value of tablets to consumers and the cost of producing tablets has decreased.
c. the value of tablets to consumers has decreased, and the cost of producing tablets has increased.
d. the value of tablets to consumers has increased, and the cost of producing tablets has decreased.

97. On a graph, the area below a demand curve and above the price measures
a. deadweight loss.
b. consumer surplus.
c. producer surplus.
d. willingness to pay.

Table 7-4
For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Ava, who are
the only three buyers of apples. Assume that only three apples can be supplied per day.

Willingness to Pay
Copyright Cengage Learning. Powered by Cognero. Page 20
Name: Class: Date:

chapter 3

(Dollars)
First Apple Second Apple Third Apple
Bob 2.00 1.50 0.75
Sasha 1.50 1.00 0.60
Ava 0.75 0.25 0.00

98. Refer to Table 7-4. Who experiences the largest loss of consumer surplus when the price of an apple increases from
$0.70 to $1.40?
a. Bob
b. Sasha
c. Ava
d. All three individuals experience the same loss of consumer surplus

Figure 7-1

99. Refer to Figure 7-1. Suppose that the price falls from P2 to P1. Area B represents the
a. decrease in producer surplus that results from a downward-sloping demand curve.
b. additional consumer surplus to initial consumers when the price falls.
c. consumer surplus to new consumers who enter the market.
d. decrease in producer surplus in the market when the price increases from P1 to P2.

100. Moving production from a high-cost producer to a low-cost producer will

a. lower total surplus.
b. raise total surplus.

Copyright Cengage Learning. Powered by Cognero. Page 21

Name: Class: Date:

chapter 3

c. lower producer surplus.

d. raise producer surplus but lower consumer surplus.

101. Producer surplus is

a. measured using the demand curve for a good.
b. always a negative number for sellers in a competitive market.
c. the amount a seller is paid minus the cost of production.
d. the opportunity cost of production minus the cost of producing goods that go unsold.

102. Evan purchases a wall calendar for $9, and his consumer surplus is $1. How much is Evan willing to pay for the
wall calendar?
a. $9
b. $5
c. $10
d. $8

103. If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus
relevant to that purchase is
a. zero.
b. negative, and the consumer would not purchase the product.
c. positive, and the consumer would purchase the product.
d. There is not enough information given to answer this question.

104. If a consumer places a value of $14 on a particular good and if the price of the good is $12, then the
a. consumer does not purchase the good.
b. consumer enjoys consumer surplus if he or she buys the good.
c. market is not a competitive market.
d. price of the good will rise due to market forces.

105. Welfare economics implies that the equilibrium price of a product is considered to be the best price because it
a. minimizes costs and maximizes output.
b. maximizes the combined welfare of buyers and sellers.
c. is not socially desirable.
d. minimizes the level of welfare payments.

106. Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises,
what happens to consumer surplus in the market for lemons?
a. Consumer surplus increases
b. Consumer surplus decreases
c. Consumer surplus is not affected by this change in market forces
d. We would have to know whether the demand for lemons is relatively elastic or inelastic to make this
determination

Figure 7-5

Copyright Cengage Learning. Powered by Cognero. Page 22

Name: Class: Date:

chapter 3

107. Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the increase in
producer surplus due to new producers entering the market?
a. $625
b. $2,500
c. $3,125
d. $5,625

108. A seller's opportunity cost measures the

a. value of everything she must give up to produce a good.
b. amount she is paid for a good minus her cost of providing it.
c. consumer surplus.
d. out-of-pocket expenses to produce a good but not the value of her time.

109. A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it
a. maximizes both the total revenue for firms and the quantity supplied of the product.
b. maximizes the combined welfare of buyers and sellers.
c. minimizes costs and maximizes output.
d. minimizes the level of welfare payments.

Table 7-11

Price Quantity Demanded Quantity Supplied

(Dollars per unit) (Units) (Units)
12.00 0 36
10.00 3 30
Copyright Cengage Learning. Powered by Cognero. Page 23
Name: Class: Date:

chapter 3

8.00 6 24
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0

110. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units
are bought and sold, consumer surplus will be
a. $21.
b. $28.
c. $36.
d. $42.

Figure 7-9

111. Refer to Figure 7-9. At equilibrium, producer surplus is represented by the area
a. F.
b. F+G.
c. D+H+F.
d. D+H+F+G+I.

112. Cost is a measure of the

a. seller's willingness to sell.
b. seller's producer surplus.

Copyright Cengage Learning. Powered by Cognero. Page 24

Name: Class: Date:

chapter 3

c. producer shortage.
d. seller's willingness to buy.

113. You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the
ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative
activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear
Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum,
how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?
a. $0
b. $10
c. $40
d. $50

Table 7-2

Willingness to Pay
Buyer
(Dollars)
David 15
Alexa 18
Erica 21
Biyu 27

114. Refer to Table 7-2. If the price is $17, then consumer surplus in the market is
a. $33, and Erica and Biyu purchase the good.
b. $54, and David and Alexa purchase the good.
c. $15, and Alexa, Erica, and Biyu purchase the good.
d. $36, and David, Alexa, Erica, and Biyu purchase the good.

Table 7-11

Price Quantity Demanded Quantity Supplied

(Dollars per unit) (Units) (Units)
12.00 0 36
10.00 3 30
8.00 6 24
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0

115. Refer to Table 7-11. At a price of $2.00, total surplus is

a. larger than it would be at the equilibrium price.
b. smaller than it would be at the equilibrium price.
c. the same as it would be at the equilibrium price.
Copyright Cengage Learning. Powered by Cognero. Page 25
Name: Class: Date:

chapter 3

d. There is insufficient information to make this determination.

Table 7-4
For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Ava, who are
the only three buyers of apples. Assume that only three apples can be supplied per day.

Willingness to Pay
(Dollars)
First Apple Second Apple Third Apple
Bob 2.00 1.50 0.75
Sasha 1.50 1.00 0.60
Ava 0.75 0.25 0.00

116. Refer to Table 7-4. If the market price of an apple increases from $0.80 to $1.05, then consumer surplus
a. increases by $0.75.
b. decreases by $0.95.
c. decreases by $0.75.
d. decreases by $1.00.

Figure 7-1

117. Refer to Figure 7-1. When the price is P2, consumer surplus is
a. A+B+C.
b. A+B+D.
c. A.

Copyright Cengage Learning. Powered by Cognero. Page 26

Name: Class: Date:

chapter 3

d. A+B.

118. The distinction between efficiency and equality can be described as follows:
a. Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing
the gains from trade among buyers and sellers.
b. Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade
among buyers and sellers.
c. Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least
possible cost.
d. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among
members of society.

Figure 7-2

119. Refer to Figure 7-2. If the government imposes a price floor of $110 in this market, then consumer surplus will
decrease by
a. $800.
b. $200.
c. $600.
d. $400.

Figure 7-9

Copyright Cengage Learning. Powered by Cognero. Page 27

Name: Class: Date:

chapter 3

120. Refer to Figure 7-9. If the price were P3, consumer surplus would be represented by the area
a. A.
b. A+B+C.
c. D+H+F.
d. A+B+C+D+H+F.

121. Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market
a. decreases.
b. is unchanged.
c. increases.
d. may increase, decrease, or remain unchanged.

Table 7-4
For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Ava, who are
the only three buyers of apples. Assume that only three apples can be supplied per day.

Willingness to Pay
(Dollars)
First Apple Second Apple Third Apple
Bob 2.00 1.50 0.75
Sasha 1.50 1.00 0.60
Ava 0.75 0.25 0.00

122. Refer to Table 7-4. Which of the following statements is correct?

Copyright Cengage Learning. Powered by Cognero. Page 28

Name: Class: Date:

chapter 3

a. Neither Sasha's consumer surplus nor Ava's consumer surplus can exceed Bob's consumer surplus, for any
price of an orange.
b. All three individuals will buy at least one orange only if the price of an orange is less than $0.25.
c. If the price of an orange is $0.60, then consumer surplus is $4.90.
d. Ava will always have the highest consumer surplus.

123. Which of the following will cause an increase in producer surplus?

a. The imposition of a binding price ceiling in the market
b. Buyers expect the price of the good to be lower next month
c. The price of a substitute increases
d. Income increases and buyers consider the good to be inferior

124. At Sarah's Bakery, the cost of making one cake is $1.00. If Sarah sells 20 cakes and gains producer surplus of
$40.00, then Sarah must be selling her cakes for
a. $1.00 each.
b. $2.00 each.
c. $3.00 each.
d. $20.00 each.

125. We can say that the allocation of resources is efficient if

a. producer surplus is maximized.
b. consumer surplus is maximized.
c. total surplus is maximized.
d. sellers' costs are minimized.

Figure 7-5

Copyright Cengage Learning. Powered by Cognero. Page 29

Name: Class: Date:

chapter 3

126. Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the increase in
producer surplus to existing producers?
a. $625
b. $2,500
c. $3,125
d. $5,625

127. Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of
bananas falls from 50 cents a pound to 40 cents a pound,
a. Henry experiences an increase in consumer surplus, but Janine does not.
b. Janine experiences an increase in consumer surplus, but Henry does not.
c. both Janine and Henry experience an increase in consumer surplus.
d. neither Janine nor Henry experiences an increase in consumer surplus.

128. If the cost of producing tables increases causing the price of tables to increase, consumer surplus in the table market
will
a. decrease.
b. increase.
c. remain constant.
d. increase for some buyers and decrease for other buyers.

Table 7-2

Willingness to Pay
Buyer
(Dollars)
Copyright Cengage Learning. Powered by Cognero. Page 30
Name: Class: Date:

chapter 3

David 15
Alexa 18
Erica 21
Biyu 27

129. Refer to Table 7-2. If there is only one unit of the good and if the buyers bid against each other for the right to
purchase it, then the good will sell for
a. $15 or slightly less.
b. $18 or slightly more.
c. $21 or slightly more.
d. $27 or slightly less.

Table 7-4
For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Ava, who are
the only three buyers of apples. Assume that only three apples can be supplied per day.

Willingness to Pay
(Dollars)
First Apple Second Apple Third Apple
Bob 2.00 1.50 0.75
Sasha 1.50 1.00 0.60
Ava 0.75 0.25 0.00

130. Refer to Table 7-4. If the market price of an apple is $0.70, then the market quantity of apples demanded per day is
a. 7.
b. 8.
c. 4.
d. 6.

Table 7-9

Opportunity Cost for

Seller Providing 10 Piano Lessons
(Dollars)
Marcia 200
Jan 250
Cindy 350
Greg 400
Peter 700
Bobby 800

131. Refer to Table 7-9. The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in
the market?
a. $0
Copyright Cengage Learning. Powered by Cognero. Page 31
Name: Class: Date:

chapter 3

b. $300
c. $400
d. $700

132. An example of positive analysis is studying

a. whether equilibrium outcomes are fair.
b. whether equilibrium outcomes are socially desirable.
c. how market forces produce equilibrium.
d. if income distributions are fair.

Table 7-11

Price Quantity Demanded Quantity Supplied

(Dollars per unit) (Units) (Units)
12.00 0 36
10.00 3 30
8.00 6 24
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0

133. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units
are bought and sold, total surplus will be
a. $42.
b. $48.
c. $54.
d. $60.

134. Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, total surplus is
a. $44.
b. $56.
c. $72.
d. $96.

Figure 7-4

Copyright Cengage Learning. Powered by Cognero. Page 32

Name: Class: Date:

chapter 3

135. Refer to Figure 7-4. Which area represents producer surplus when the price is P2?
a. ACH
b. BCG
c. ABGD
d. DGH

Figure 7-9

Copyright Cengage Learning. Powered by Cognero. Page 33

Name: Class: Date:

chapter 3

136. Refer to Figure 7-9. At equilibrium, consumer surplus is represented by the area
a. A.
b. A+B+C.
c. D+H+F.
d. A+B+C+D+H+F.

Figure 7-5

Copyright Cengage Learning. Powered by Cognero. Page 34

Name: Class: Date:

chapter 3

137. Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the change in
producer surplus?
a. Producer surplus increases by $3,125
b. Producer surplus increases by $5,625
c. Producer surplus decreases by $3,125
d. Producer surplus decreases by $5,625

Figure 7-6

Copyright Cengage Learning. Powered by Cognero. Page 35

Name: Class: Date:

chapter 3

138. Refer to Figure 7-6. When the price falls from P2 to P1, producer surplus
a. decreases by an amount equal to C.
b. decreases by an amount equal to A+B.
c. decreases by an amount equal to A+C.
d. increases by an amount equal to A+B.

Figure 7-5

Copyright Cengage Learning. Powered by Cognero. Page 36

Name: Class: Date:

chapter 3

139. Refer to Figure 7-5. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the
producer surplus?
a. $625
b. $1,250
c. $2,500
d. $5,000

140. 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.

141. As a result of a decrease in price,

a. new buyers enter the market, increasing consumer surplus.
b. new buyers enter the market, decreasing consumer surplus.
c. existing buyers exit the market, increasing consumer surplus.
d. existing buyers exit the market, decreasing consumer surplus.

142. The maximum price that a buyer will pay for a good is called
a. consumer surplus.
b. producer surplus.
c. efficiency.
d. willingness to pay.
Copyright Cengage Learning. Powered by Cognero. Page 37
Name: Class: Date:

chapter 3

143. Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit
of the lower prices to
a. only existing customers who now get lower prices on the gowns they were already planning to purchase.
b. only new customers who enter the market because of the lower prices.
c. both existing customers who now get lower prices on the gowns they were already planning to purchase and
new customers who enter the market because of the lower prices.
d. Consumer surplus does not increase; it decreases.

144. Amir tutors in his spare time for extra income. Students are willing to pay $54 per hour for as many hours Amir is
willing to tutor. On a particular day, he is willing to tutor the first hour for $18, the second hour for $27.0, the third hour
for $32.0, and the fourth hour for $54. Assume Amir is rational in deciding how many hours to tutor. His producer surplus
is
a. $63.0.
b. $85.0.
c. $149.0.
d. $77.0.

145. Which of the following is true when the price of a good or service falls?
a. Buyers who were already buying the good or service are worse off.
b. More buyers enter the market.
c. The total consumer surplus in the market decreases.
d. The total value of purchases before and after the price change is the same.

146. Producer surplus directly measures

a. the well-being of society as a whole.
b. the well-being of buyers and sellers.
c. the well-being of sellers.
d. sellers' willingness to sell.

Figure 7-9

Copyright Cengage Learning. Powered by Cognero. Page 38

Name: Class: Date:

chapter 3

147. Refer to Figure 7-9. At equilibrium, total surplus is represented by the area
a. A+B+C.
b. A+B+D+F.
c. A+B+C+D+H+F.
d. A+B+C+D+H+F+G+I.

Figure 7-7

Copyright Cengage Learning. Powered by Cognero. Page 39

Name: Class: Date:

chapter 3

148. Refer to Figure 7-7. If the government imposes a price ceiling of $55 in this market, then total surplus will be
a. $187.50.
b. $125.00.
c. $250.00.
d. $266.67.

149. Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will
a. increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for
spaghetti noodles.
b. increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for
spaghetti noodles.
c. decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for
spaghetti noodles.
d. decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for
spaghetti noodles.

150. Steak and chicken are substitutes. A sharp reduction in the supply of steak would
a. increase consumer surplus in the market for steak and decrease producer surplus in the market for chicken.
b. increase consumer surplus in the market for steak and increase producer surplus in the market for chicken.
c. decrease consumer surplus in the market for steak and increase producer surplus in the market for chicken.
d. decrease consumer surplus in the market for steak and decrease producer surplus in the market for chicken.

Table 7-7

Seller Cost
Copyright Cengage Learning. Powered by Cognero. Page 40
Name: Class: Date:

chapter 3

(Dollars)
Mike 1,600
Laura 1,400
Sasha 1,100
David 900
Codi 700

151. Refer to Table 7-7. If the price is $1,050, who would be willing to supply the product?
a. Mike and Laura
b. Mike, Laura, and Sasha
c. David and Codi
d. Sasha, David and Codi

Table 7-4
For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Ava, who are
the only three buyers of apples. Assume that only three apples can be supplied per day.

Willingness to Pay
(Dollars)
First Apple Second Apple Third Apple
Bob 2.00 1.50 0.75
Sasha 1.50 1.00 0.60
Ava 0.75 0.25 0.00

152. Refer to Table 7-4. The market quantity of apples demanded per day is exactly seven if the price of an orange, P,
satisfies
a. $0.60 < P < $0.75.
b. $0.60 < P < $2.00.
c. $0.25 < P < $0.75.
d. $0.25 < P < $0.60.

153. Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If
there are five buyers in the market, then
a. the marginal buyer's willingness to pay for the 100th unit of the good is $25.
b. the sum of the five buyers' willingness to pay for the 100th unit of the good is $25.
c. the average of the five buyers' willingness to pay for the 100th unit of the good is $25.
d. all of the five buyers are willing to pay at least $25 for the 100th unit of the good.

Table 7-1

Willingness to Pay
Buyer
(Dollars)
Calvin 150
Sam 135
Copyright Cengage Learning. Powered by Cognero. Page 41
Name: Class: Date:

chapter 3

Andrew 115
Sasha 100

154. Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product?
a. Calvin
b. Calvin and Sam
c. Calvin, Sam, and Andrew
d. Calvin, Sam, Andrew, and Sasha

155. Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result,
consumer surplus in the television market
a. decreases.
b. is unchanged.
c. increases.
d. may increase, decrease, or remain unchanged.

Figure 7-3

156. Refer to Figure 7-3. If the price of the good is $12.00, then producer surplus is
a. $14.00.
b. $13.00.
c. $14.50.
d. $3.00.

157. The distinction between efficiency and equality can be described as follows:
Copyright Cengage Learning. Powered by Cognero. Page 42
Name: Class: Date:

chapter 3

a. Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing
the gains from trade among buyers and sellers.
b. Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade
among buyers and sellers.
c. Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least
possible cost.
d. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among
members of society.

158. A drought in Spain destroys many red grapes causing the prices of both red grapes and red wine to rise. As a result,
the consumer surplus in the market for red grapes
a. increases, and the consumer surplus in the market for red wine increases.
b. increases, and the consumer surplus in the market for red wine decreases.
c. decreases, and the consumer surplus in the market for red wine increases.
d. decreases, and the consumer surplus in the market for red wine decreases.

Figure 7-8

159. Refer to Figure 7-8. Total surplus can be measured as the area
a. JNK.
b. JNML.
c. JRL.
d. JNL.

Figure 7-2

Copyright Cengage Learning. Powered by Cognero. Page 43

Name: Class: Date:

chapter 3

160. Refer to Figure 7-2. At the equilibrium price, consumer surplus is

a. $600.
b. $800.
c. $200.
d. $1,600.

161. Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for
widgets to $6, producer surplus
a. would necessarily increase even if the higher price resulted in a surplus of widgets.
b. would necessarily decrease because the higher price would create a surplus of widgets.
c. might increase or decrease.
d. would be unaffected.

Figure 7-6

Copyright Cengage Learning. Powered by Cognero. Page 44

Name: Class: Date:

chapter 3

162. Refer to Figure 7-6. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must
be
a. lower than P1.
b. P1.
c. between P1 and P2.
d. higher than P2.

Table 7-3

Willingness to Pay for a

Buyer Baseball Game Ticket
(Dollars)
Nancy 6
Tom 9
Kevin 12
Sasha 15
Erica 18
Biyu 21

163. Refer to Table 7-3. If you have a ticket that you sell to the group in an auction, who will buy the ticket?
a. Kevin
b. Sasha
c. Erica
Copyright Cengage Learning. Powered by Cognero. Page 45
Name: Class: Date:

chapter 3

d. Biyu

164. Which of the following will cause an increase in consumer surplus?

a. An increase in the number of sellers of the good
b. A technological improvement in the production of the good
c. A decrease in the production cost of the good
d. The imposition of a binding price floor in the market

Scenario 7-1
Suppose market demand is given by the equation

165. Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much additional consumer surplus
do consumers initially in the market at the $10 price receive?

Figure 7-11

166. Refer to Figure 7-11. If the market equilibrium price is $25, how much is total producer surplus in this market?

167. Answer each of the following questions about supply and producer surplus.
a. What is producer surplus, and how is it measured?
b. What is the relationship between the cost to sellers and the supply curve?
Other things equal, what happens to producer surplus when the price of a good rises?
c.
Illustrate your answer on a supply curve.

Table 7-13
The following table shows the cost of producing a good for the only four producers in a market.

Producer Cost
W $40
X $30
Y $20
Copyright Cengage Learning. Powered by Cognero. Page 46
Name: Class: Date:

chapter 3

Z $10

168. Refer to Table 7-13. If the market price is $28, which producers will supply units in the market?

Figure 7-13

169. Refer to Figure 7-13. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price.
How much is total consumer surplus in this market at the new equilibrium price?

Figure 7-11

170. Refer to Figure 7-11. If the market equilibrium price rises from $25 to $35, how much is the producer surplus for
the producers entering the market after the price increase?

Scenario 7-2
Suppose market demand and market supply are given by the equations:

Copyright Cengage Learning. Powered by Cognero. Page 47

Name: Class: Date:

chapter 3

QD = 40 - P
QS = P - 4

171. Refer to Scenario 7-2. How much is total consumer surplus at the equilibrium price in this market?

172. Given the following two equations:

1) Total Surplus = Consumer Surplus + Producer Surplus
2) Total Surplus = Value to Buyers - Cost to Sellers
Show how equation (1) can be used to derive equation (2).

Figure 7-12

173. Refer to Figure 7-12. At what price will total surplus be maximized in this market?

174. Refer to Figure 7-12. If the government imposed a price ceiling at $20 in this market, how much are consumer
surplus, producer surplus, and total surplus?

Table 7-14

Willingness to
Buyer Pay ($) Seller Cost ($)
A 15 W 10
B 30 X 20
C 45 Y 30
D 60 Z 40

175. Refer to Table 7-14. How much is total producer surplus at the equilibrium price in this market?

Figure 7-14

Copyright Cengage Learning. Powered by Cognero. Page 48

Name: Class: Date:

chapter 3

176. Refer to Figure 7-14. Suppose there is initially a price floor set at $10 in this market. If the government removed the
price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when
the price floor was in place?

Table 7-12
The following table shows the willingness to pay for a good for the only four consumers in a market.

Consumer Willingness to Pay

A $25
B $40
C $15
D $30

177. Refer to Table 7-12. If the price of the good is $20, how many units will be demanded?

Figure 7-12

Copyright Cengage Learning. Powered by Cognero. Page 49

Name: Class: Date:

chapter 3

178. Refer to Figure 7-12. How much are consumer surplus, producer surplus, and total surplus at the market equilibrium
price?

Scenario 7-1
Suppose market demand is given by the equation

179. Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the change in total consumer
surplus in the market?

180. Refer to Scenario 7-1. If the market equilibrium price is $10, how much is total consumer surplus in this market?

Figure 7-14

181. Refer to Figure 7-14. Suppose there is initially a price floor set at $10 in this market. If the government removed the
price floor, by how much would total producer surplus change, assuming the producers with the lowest cost were the ones
supplying the market when the price floor was in place?

Table 7-13
The following table shows the cost of producing a good for the only four producers in a market.

Producer Cost
W $40
X $30
Y $20
Z $10

182. Refer to Table 7-13. If the market equilibrium price is $28, what is total producer surplus in the market?

183. If John’s willingness to pay for a good is $20 and the price of the good is $15, how much is John’s consumer surplus
from purchasing the good?

Copyright Cengage Learning. Powered by Cognero. Page 50

Name: Class: Date:

chapter 3
Table 7-14

Willingness to
Buyer Pay ($) Seller Cost ($)
A 15 W 10
B 30 X 20
C 45 Y 30
D 60 Z 40

184. Refer to Table 7-14. How much is total surplus at the equilibrium price in this market?

185. Refer to Table 7-14. How much is total consumer surplus at the equilibrium price in this market?

Figure 7-10

186. Refer to Figure 7-10. If the market equilibrium price falls from $120 to $80, how much is the change in total
consumer surplus in the market?

Scenario 7-2
Suppose market demand and market supply are given by the equations:

QD = 40 - P
QS = P - 4

187. Refer to Scenario 7-2. How much is total producer surplus at the equilibrium price in this market?

Figure 7-14

Copyright Cengage Learning. Powered by Cognero. Page 51

Name: Class: Date:

chapter 3

188. Refer to Figure 7-14. Suppose there is initially a price ceiling set at $4 in this market. If the government removed
the price ceiling, by how much would total producer surplus increase for those producers entering the market after the
price ceiling is removed?

Figure 7-12

189. Refer to Figure 7-12. If the government imposed a price floor at $35 in this market, how much is consumer surplus?

Scenario 7-2
Suppose market demand and market supply are given by the equations:

QD = 40 - P
QS = P - 4

Copyright Cengage Learning. Powered by Cognero. Page 52

Name: Class: Date:

chapter 3
190. Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to

By how much does total consumer surplus increase for those consumers who were already willing to purchase the good
with the original supply curve?

Figure 7-14

191. Refer to Figure 7-14. Suppose the government imposes a price floor at $10 per unit in this market. With the price
floor, how much is total producer surplus assuming those producers with the lowest cost are the ones who supply the
market?

Scenario 7-2
Suppose market demand and market supply are given by the equations:

QD = 40 - P
QS = P - 4

192. Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to

How much total consumer surplus goes to new consumers who enter the market after the supply curve shifts?

193. Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to

By how much does total producer surplus increase as a result of this supply shift?

Figure 7-14

Copyright Cengage Learning. Powered by Cognero. Page 53

Name: Class: Date:

chapter 3

194. Refer to Figure 7-14. Suppose there is initially a price floor set at $10 in this market. If the government removed the
price floor, by how much would total consumer surplus increase?

Figure 7-13

195. Refer to Figure 7-13. How much is total consumer surplus in this market at the equilibrium price?

Scenario 7-1
Suppose market demand is given by the equation

196. Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, what is the change in total consumer
surplus in the market?

Copyright Cengage Learning. Powered by Cognero. Page 54

Name: Class: Date:

chapter 3
Figure 7-10

197. Refer to Figure 7-10. If the market equilibrium price falls from $120 to $80, how much consumer surplus do
consumers entering the market after the price drop receive?

Figure 7-11

198. Refer to Figure 7-11. If the market equilibrium price is $35, how much is total producer surplus in this market?

Figure 7-13

Copyright Cengage Learning. Powered by Cognero. Page 55

Name: Class: Date:

chapter 3

199. Refer to Figure 7-13. How much is total producer surplus in this market at the equilibrium price?

200. Refer to Figure 7-13. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price.
How much is total producer surplus in this market at the new equilibrium price?

Figure 7-11

201. Refer to Figure 7-11. If the market equilibrium price rises from $25 to $35, how much is the increase in producer
surplus to the producers supplying units at the initial $25 price?

Figure 7-13

Copyright Cengage Learning. Powered by Cognero. Page 56

Name: Class: Date:

chapter 3

202. Refer to Figure 7-13. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price.
How much is total surplus in this market at the new equilibrium price?

Figure 7-14

203. Refer to Figure 7-14. Suppose the government imposes a price floor at $10 per unit in this market. With the price
floor, how much is total consumer surplus?

Figure 7-13

Copyright Cengage Learning. Powered by Cognero. Page 57

Name: Class: Date:

chapter 3

204. Refer to Figure 7-13. How much is total surplus in this market at the equilibrium price?

Table 7-13
The following table shows the cost of producing a good for the only four producers in a market.

Producer Cost
W $40
X $30
Y $20
Z $10

205. Refer to Table 7-13. If these four producers bid in an auction to supply one unit to a consumer, at what price will the
good be sold?

Figure 7-10

Copyright Cengage Learning. Powered by Cognero. Page 58

Name: Class: Date:

chapter 3

206. Refer to Figure 7-10. If the market equilibrium price is $120, how much is total consumer surplus?

Scenario 7-1
Suppose market demand is given by the equation

207. Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do
consumers entering the market after the price drop receive?

208. Answer the following questions based on the graph that represents J.R.'s demand for ribs per week at Judy's Rib
Shack.
a. At the equilibrium price, how many ribs would J.R. be willing to purchase?
b. How much is J.R. willing to pay for 20 ribs?
c. What is the magnitude of J.R.'s consumer surplus at the equilibrium price?
d. At the equilibrium price, how many ribs would Judy be willing to sell?
e. How high must the price of ribs be for Judy to supply 20 ribs to the market?
f. At the equilibrium price, what is the magnitude of total surplus in the market?
g. If the price of ribs rose to $10, what would happen to J.R.'s consumer surplus?
h. If the price of ribs fell to $5, what would happen to Judy's producer surplus?
Explain why the graph that is shown verifies the fact that the market equilibrium
i.
(quantity) maximizes the sum of producer and consumer surplus.

Table 7-12
The following table shows the willingness to pay for a good for the only four consumers in a market.

Consumer Willingness to Pay

A $25
B $40
C $15
D $30

209. Refer to Table 7-12. If the price of the good is $20, how much is the total consumer surplus?

Figure 7-14
Copyright Cengage Learning. Powered by Cognero. Page 59
Name: Class: Date:

chapter 3

210. Refer to Figure 7-14. Suppose there is initially a price floor set at $10 in this market. If the government removed the
price floor, by how much would total consumer surplus increase for those consumers who enter the market after the price
floor is removed?

211. Tammy loves donuts. The table shown reflects the value Tammy places on each donut she eats:

Value of first donut $0.60

Value of second donut $0.50
Value of third donut $0.40
Value of fourth donut $0.30
Value of fifth donut $0.20
Value of sixth donut $0.10

a. Use this information to construct Tammy's demand curve for donuts.

b. If the price of donuts is $0.20, how many donuts will Tammy buy?
Show Tammy's consumer surplus on your graph. How much consumer surplus would
c.
she have at a price of $0.20?
If the price of donuts rose to $0.40, how many donuts would she purchase now? What
d.
would happen to Tammy's consumer surplus? Show this change on your graph.

212. Answer each of the following questions about demand and consumer surplus.
a. What is consumer surplus, and how is it measured?
b. What is the relationship between the demand curve and the willingness to pay?
Other things equal, what happens to consumer surplus if the price of a good falls? Why?
c.
Illustrate using a demand curve.
In what way does the demand curve represent the benefit consumers receive from
d. participating in a market? In addition to the demand curve, what else must be considered
to determine consumer surplus?

Figure 7-14

Copyright Cengage Learning. Powered by Cognero. Page 60

Name: Class: Date:

chapter 3

213. Refer to Figure 7-14. Suppose there is initially a price ceiling set at $4 in this market. How much is total producer
surplus with the price ceiling in place?

214. Suppose John’s cost for performing some carpentry work is $120. If John is paid $200 for the carpentry work, what
is his producer surplus?

Scenario 7-2
Suppose market demand and market supply are given by the equations:

QD = 40 - P
QS = P - 4

215. Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to

By how much does total consumer surplus increase as a result of this supply shift?

Figure 7-14

Copyright Cengage Learning. Powered by Cognero. Page 61

Name: Class: Date:

chapter 3

216. Refer to Figure 7-14. Suppose there is initially a price ceiling set at $4 in this market. If the government removed
the price ceiling, by how much would total producer surplus change?

Scenario 7-2
Suppose market demand and market supply are given by the equations:

QD = 40 - P
QS = P - 4

217. Refer to Scenario 7-2. How much is total surplus at the equilibrium price in this market?

Figure 7-10

218. Refer to Figure 7-10. If the market equilibrium price falls from $120 to $80, how much is the increase in consumer
Copyright Cengage Learning. Powered by Cognero. Page 62
Name: Class: Date:

chapter 3
surplus to the consumers who were initially in the market at the $120 price?

219. What do economists call the highest amount a consumer will pay to purchase a good?

Copyright Cengage Learning. Powered by Cognero. Page 63