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Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is If 90 units of the good are produced and sold, then producer surplus amounts to $1,350. If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

A) True
B) False

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If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur?


A) The price of kidneys would rise to balance supply and demand.
B) The gains from trade would make both buyers and sellers better off.
C) Thousands of lives would be saved.
D) All of the above are correct.

E) A) and B)
F) C) and D)

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Figure 7-24 Figure 7-24 -Refer to Figure 7-24. If the government imposes a price floor at $18, then consumer surplus is A) ABF. B) AGH. C) HGCD. D) HGBF. -Refer to Figure 7-24. If the government imposes a price floor at $18, then consumer surplus is


A) ABF.
B) AGH.
C) HGCD.
D) HGBF.

E) B) and C)
F) A) and D)

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Table 7-5 For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. Table 7-5 For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. -Refer to Table 7-5. Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40? A) Allison B) Bob C) Charisse D) All three individuals experience the same loss of consumer surplus. -Refer to Table 7-5. Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40?


A) Allison
B) Bob
C) Charisse
D) All three individuals experience the same loss of consumer surplus.

E) B) and D)
F) A) and B)

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If the United States changed its laws to allow for the legal sale of a kidney, which of the following is least likely to occur?


A) The supply of kidneys would increase.
B) The shortage of kidneys would decrease.
C) Many lives would be saved.
D) The allocation of kidneys would be fair.

E) B) and C)
F) None of the above

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Table 7-7 Table 7-7 -Refer to Table 7-7. You have two essentially identical 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. You hold an auction to sell the two tickets. Who makes the winning bids, and what do they offer to pay for the tickets? A) Michael and Earvin; more than $350 but less than or equal to $400 B) Michael and Earvin; more than $400 but less than or equal to $500 C) Earvin and Larry; more than $300 but less than or equal to $350 D) Larry and Charles; less than $300 -Refer to Table 7-7. You have two essentially identical 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. You hold an auction to sell the two tickets. Who makes the winning bids, and what do they offer to pay for the tickets?


A) Michael and Earvin; more than $350 but less than or equal to $400
B) Michael and Earvin; more than $400 but less than or equal to $500
C) Earvin and Larry; more than $300 but less than or equal to $350
D) Larry and Charles; less than $300

E) A) and D)
F) A) and C)

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Suppose there is an early freeze in California that reduces the size of the lemon crop. 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 elastic or inelastic to make this determination.

E) A) and C)
F) B) and D)

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Figure 7-20 Figure 7-20 -Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer is A) greater than the cost to the marginal seller, so increasing the quantity increases total surplus. B) less than the cost to the marginal seller, so increasing the quantity increases total surplus. C) greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. D) less than the cost to the marginal seller, so decreasing the quantity increases total surplus. -Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer is


A) greater than the cost to the marginal seller, so increasing the quantity increases total surplus.
B) less than the cost to the marginal seller, so increasing the quantity increases total surplus.
C) greater than the cost to the marginal seller, so decreasing the quantity increases total surplus.
D) less than the cost to the marginal seller, so decreasing the quantity increases total surplus.

E) All of the above
F) None of the above

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Figure 7-23 Figure 7-23 -Refer to Figure 7-23. 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. -Refer to Figure 7-23. 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.

E) A) and D)
F) None of the above

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Figure 7-4 Figure 7-4 -Refer to Figure 7-4. Which area represents consumer surplus at a price of P1? A) BDF B) AFG C) ABDG D) ABC -Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?


A) BDF
B) AFG
C) ABDG
D) ABC

E) A) and D)
F) B) and C)

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If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will


A) increase consumer surplus.
B) reduce consumer surplus.
C) not affect consumer surplus.
D) Any of the above are possible.

E) B) and D)
F) B) and C)

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Consumer surplus


A) is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it.
B) is represented on a supply-demand graph by the area below the price and above the demand curve.
C) measures the benefit sellers receive from participating in a market.
D) measures the benefit buyers receive from participating in a market.

E) A) and B)
F) A) and C)

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Figure 7-4 Figure 7-4 -Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers? A) BDF B) AFG C) BCGD D) ABC -Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?


A) BDF
B) AFG
C) BCGD
D) ABC

E) C) and D)
F) A) and D)

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In order to conclude that markets are efficient, we assume that they are perfectly competitive.

A) True
B) False

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Table 7-7 Table 7-7 -Refer to Table 7-7. You have two essentially identical 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. You hold an auction to sell the two tickets. Michael and Earvin each offer to pay $360 for a ticket, and you sell them the two tickets. What is the total consumer surplus in the market? A) $720 B) $180 C) $140 D) $40 -Refer to Table 7-7. You have two essentially identical 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. You hold an auction to sell the two tickets. Michael and Earvin each offer to pay $360 for a ticket, and you sell them the two tickets. What is the total consumer surplus in the market?


A) $720
B) $180
C) $140
D) $40

E) A) and B)
F) A) and C)

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If the government allowed a free market for transplant organs such as kidneys to exist, the


A) shortage of organs would be eliminated, and there would be no surplus of organs.
B) shortage of organs would be eliminated, but a surplus of organs would develop.
C) shortage of organs would persist.
D) overall well-being of society would remain unchanged.

E) A) and C)
F) All of the above

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Figure 7-15 Figure 7-15 -Refer to Figure 7-15. Area B represents A) the combined profits of all producers when the price is P2. B) the increase in producer surplus to all producers as the result of an increase in the price from P1 to P2. C) producer surplus to new producers entering the market as the result of an increase in the price from P1 to P2. D) that portion of the increase in producer surplus that is offset by a loss in consumer surplus when the price increases from P1 to P2. -Refer to Figure 7-15. Area B represents


A) the combined profits of all producers when the price is P2.
B) the increase in producer surplus to all producers as the result of an increase in the price from P1 to P2.
C) producer surplus to new producers entering the market as the result of an increase in the price from P1 to P2.
D) that portion of the increase in producer surplus that is offset by a loss in consumer surplus when the price increases from P1 to P2.

E) A) and C)
F) A) and B)

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Denise values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $350. Denise's consumer surplus is


A) $150.
B) $350.
C) $500.
D) $850.

E) None of the above
F) B) and D)

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Figure 7-16 Figure 7-16 -Refer to Figure 7-16. Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to A) $200. B) $300. C) $400. D) $450. -Refer to Figure 7-16. Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to


A) $200.
B) $300.
C) $400.
D) $450.

E) B) and D)
F) A) and B)

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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

E) A) and D)
F) A) and C)

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