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Exam 4: Markets and Government

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Question 41

Multiple Choice

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Which is FALSE? When the price of gasoline is above equilibrium

A) some producer surplus is lost because the higher price causes some consumers not to buy.
B) producers benefit because some consumers still buy gasoline at the higher price.
C) some producer surplus is transferred from producers to consumers who buy the gasoline at the higher price.
D) deadweight loss is created.

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

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Question 42

Multiple Choice

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When the supply of a product rises, ceteris paribus, what happens to firms' willingness-to-sell and to the amount of producer surplus?

A) They both decrease.
B) They both increase.
C) The willingness to produce rises and producer surplus falls.
D) The willingness to produce falls and producer surplus rises.

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

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Question 43

Multiple Choice

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(Figure: Determining Surplus 3) In the graph, producer surplus is equal to

Suppose the actual price for good A is $20. John is willing to pay $30, Susie is willing to pay $28, Joseph is willing to pay $25, Jessica is willing to pay $23, and Jeremy is willing to pay $21. What is total consumer surplus?

Use the information in the following table to graph the demand curve for cupcakes and the supply curve for cupcakes. Label the area of deadweight loss on your graph if the price is set at $1.10. Also label the area of surplus transferred from sellers to buyers.

(Figure: Determining Surplus and Loss) In the graph, if the government sets a maximum price of $5, there is a shortage of 40 units.

(Figure: Determining Surplus and Loss) In the graph, which price would NOT allow for a binding price floor?

Producer surplus is shown graphically as the area _____ the market price.

(Figure: Determining Surplus 2) In the graph, producer surplus is equal to

(Figure: Determining Surplus 3) In the graph, consumer surplus is equal to

Which of these is the BEST example of a pure public good?

Suppose that a customer's willingness-to-pay for a product is $79, and the seller's willingness-to-sell is $64. If the negotiated price is $68, how much is producer surplus?

(Figure: Determining Surplus and Loss) In the graph, which price would NOT allow for a binding price ceiling?

If the price of guitar amplifiers increases, ceteris paribus, at the new price, consumer surplus for electric guitars falls.

If you are willing to sell your old bicycle for $30, but someone offers you $40 for it, the results of the transaction would yield

Which of these would be considered a public good?

Suppose that a customer's willingness-to-pay for a product is $5, and the seller's willingness-to-sell is $2. If the negotiated price is $4, consumer surplus is $2.

Which activity does NOT typically generate an external cost?

"Price gouging" laws are types of _____ and often result in _____ of a scarce good.

(Figure: Determining Surplus and Loss) In the graph, if the government sets a price of $5, this is an example of an effective price floor.