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Exam 7: Consumers, Producers, and the Efficiency of Markets

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Question 101

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

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Question 102

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Figure 7-5 -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

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

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Question 103

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

Table 7-11 ​ ​ $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Quantity Supplied } \\\text { (Units) }\end{array} \\\hline 12.00 & 0 & 36 \\\hline 10.00 & 3 & 30 \\\hline 8.00 & 6 & 24 \\\hline 6.00 & 9 & 18 \\\hline 4.00 & 12 & 12 \\\hline 2.00 & 15 & 6 \\\hline 0.00 & 18 & 0 \\\hline\end{array}$ ​ -Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is

Table 7-4 For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Eric, who are the only three buyers of apples. Assume that only three apples can be supplied per day. ​ ​ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Willingness to Pay}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {(Dollars) }$ $\begin{array}{|c|c|c|c|} \hline& \text { First Apple } & \text { Second Apple } & \text { Third Apple } \\\hline \text { Bob } & 2.00 & 1.50 & 0.75 \\\hline \text { Sasha } & 1.50 & 1.00 & 0.60 \\\hline \text { Eric } & 0.75 & 0.25 & 0.00 \\\hline\end{array}$ -Refer to Table 7-4. If the market price of an apple increases from $0.80 to $1.05, then consumer surplus

The distinction between efficiency and equality can be described as follows:

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

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.

Scenario 7-1 Suppose market demand is given by the equation $Q ^ { D } = 40 - 2 P$ -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?

Total surplus = Value to buyers - Costs to sellers.

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

Table 7-11 ​ ​ $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Quantity Supplied } \\\text { (Units) }\end{array} \\\hline 12.00 & 0 & 36 \\\hline 10.00 & 3 & 30 \\\hline 8.00 & 6 & 24 \\\hline 6.00 & 9 & 18 \\\hline 4.00 & 12 & 12 \\\hline 2.00 & 15 & 6 \\\hline 0.00 & 18 & 0 \\\hline\end{array}$ ​ -Refer to Table 7-11. At a price of $2.00, total surplus is

A seller's opportunity cost measures the

Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to $Q ^ { S } = P$ By how much does total consumer surplus increase for those consumers who were already willing to purchase the good with the original supply curve?

Ticket scalping can increase total surplus in the market for tickets to sporting events.

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

An example of normative analysis is studying

Table 7-11 ​ ​ $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Quantity Supplied } \\\text { (Units) }\end{array} \\\hline 12.00 & 0 & 36 \\\hline 10.00 & 3 & 30 \\\hline 8.00 & 6 & 24 \\\hline 6.00 & 9 & 18 \\\hline 4.00 & 12 & 12 \\\hline 2.00 & 15 & 6 \\\hline 0.00 & 18 & 0 \\\hline\end{array}$ ​ -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

Alex tutors in his spare time for extra income. Students are willing to pay $48 per hour for as many hours Alex is willing to tutor. On a particular day, he is willing to tutor the first hour for $16, the second hour for $24.0, the third hour for $29.0, and the fourth hour for $48. Assume Alex is rational in deciding how many hours to tutor. His producer surplus is

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