1. What name is given to the study of how the allocation of resources affects economic well-being?
a. consumer economics
c. welfare economics
d. supply-side economics
2. What is the likely effect of the equilibrium of supply and demand in a market?
a. It maximizes the profits of producers.
b. It can only be achieved with government intervention.
c. It produces both an efficient and equitable market outcome.
d. It maximizes total surplus in a competitive market.
3. What does willingness to pay measure?
a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays
b. the amount a seller actually receives for a good minus the minimum amount the seller is
willing to accept
c. the maximum amount a buyer is willing to pay minus the minimum amount a seller is
willing to accept
d. the maximum amount that a buyer will pay for a good
4. Belva is willing to pay $65.00 for a pair of shoes for a formal dance. She finds a pair at her favourite outlet
shoe store for $48.00. What is Belva's consumer surplus?
5. Suppose Lauren, Leslie, and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's
willingness to pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30.
What is the total consumer surplus for these three?
6. Shannon buys a new CD player for her car for $135. She receives consumer surplus of $25 on her purchase.
What is her willingness to pay?
d. $160 Table 7-1
Buyer Willingness to Pay
7. Refer to Table 7-1. If the table represents the willingness to pay of 4 buyers and the price of the product is
$15, who would be willing to purchase the product?
b. Mike and Sandy
c. Mike, Sandy, and Jonathan
d. Mike, Sandy, Jonathan, and Haley
8. Denise values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is
$650. What will Denise do?
a. buy the dishwasher and receive a consumer surplus of $150
b. buy the dishwasher and receive a consumer surplus of $500
c. not buy the dishwasher because her willingness to pay is greater than the price
d. not buy the dishwasher because her willingness to pay is less than the price
9. What is consumer surplus?
a. the quantity of a good consumers get free
b. the amount a consumer has to pay less the amount the consumer was willing to pay
c. the amount a consumer is willing to pay less the amount the consumer actually pays
d. the total value of a good to a consumer
10. Suppose there is an early freeze in California that ruins the lemon crop. What happens to consumer surplus in
the market for lemons?
a. It increases.
b. It decreases.
c. It is not affected by this change in market forces.
d. It increases very briefly, then decreases.
Buyer Willingness to Pay
11. Refer to Table 7-2. If the market price is $5.50, what is the consumer surplus in the market?
d. $21.00 12. Refer to Table 7-2. Which of the following statements is NOT correct?
a. At a price of $9.00, no buyer is willing to purchase the good.
b. The table shows the willingness to pay of the marginal buyer.
c. When the price is $3.50, each person would receive consumer surplus.
d. At a price of $4.00, total consumer surplus in the market will be $9.00.
13. What does the area below a demand curve and above the price measure?
a. producer surplus
b. total surplus
c. consumer surplus
d. willingness to pay
14. Refer to Figure 7-1. At the price of P 1, what is consumer surplus?
b. A + B
c. A + B + C
d. A + B + D
15. Refer to Figure 7-1. What does area C represent?
a. the decrease in consumer surplus that results from a downward-sloping demand curve
b. consumer surplus to new consumers who enter the market when the price falls from P to
c. an increase in producer surplus when quantity sold increases from Q to 2 1
d. a decrease in consumer surplus to each consumer in the market
16. Refer to Figure 7-1. When the price rises from P 1 to P2, which would NOT be correct?
a. The buyers who still buy the good are worse off because they now pay more.
b. Some buyers leave the market because they are not willing to buy the good at the higher
c. The total value of what is now purchased by buyers is actually higher.
d. Consumer surplus in the market falls. 17. What is cost a measure of?
a. the seller's willingness to sell
b. the seller's producer surplus
c. the producer shortage
d. the seller's willingness to buy
18. When is an allocation of resources said to be inefficient?
a. when a good is not being produced by the sellers with the lowest cost
b. when producer surplus is not at a minimum
c. when consumer surplus is not at a maximum
d. when equilibrium is not an equitable distribution of resources
19. What does producer surplus measure?
a. the well-being of sellers
b. production costs
c. the well-being of buyers and sellers
d. unsold inventories
20. Roger produces computer boards. His productioncost is $10 per board. He sells the boards for $25 each.
What is his producer surplus?
a. $10 per board
b. $15 per board
c. $25 per board
d. $35 per board