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A market has four individuals,each considering buying a grill for his backyard.Assume that grills come in only one size and model.Abe considers himself a grill-master,and finds a grill a necessity,so he is willing to pay $400 for a grill.Butch is a meat-lover,honing his grilling skills,and is willing to pay $350 for a grill.Collin just met the girl of his dreams,and she loves a good grilled steak,so in his effort to impress her he is willing to pay $320 for a grill.Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp,so he is willing to pay $200 for a grill. If the market price of grills falls from $375 to $330,given the scenario described,which of the following can be said?


A) Butch will join the market, but receive no consumer surplus.
B) Butch and Collin will join the market, and together will receive $30 in consumer surplus.
C) Abe will experience a decrease in consumer surplus of $45.
D) Abe will experience an increase in consumer surplus of $45.

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

Correct Answer

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The concept of surplus can:


A) show the benefits of introducing new markets.
B) show who benefits from a tax.
C) show who loses from minimum wage.
D) show any of these.

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

Correct Answer

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Assuming the market is in equilibrium in the graph shown with demand D and supply S<sub>1</sub>,total surplus is: A) greater than total surplus when market is in equilibrium at D and S<sub>2</sub>. B) less than total surplus when market is in equilibrium at D and S<sub>2</sub>. C) the same as total surplus when market is in equilibrium at D and S<sub>2</sub>. D) zero. Assuming the market is in equilibrium in the graph shown with demand D and supply S1,total surplus is:


A) greater than total surplus when market is in equilibrium at D and S2.
B) less than total surplus when market is in equilibrium at D and S2.
C) the same as total surplus when market is in equilibrium at D and S2.
D) zero.

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

Correct Answer

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According to the graph shown,if the market goes from equilibrium to having its price set at $10 then: A) $12 gets transferred from consumer to producer in surplus. B) $12 gets transferred from producer to consumer in surplus. C) all consumer surplus lost is gained by producers. D) all producer surplus lost is gained by consumers. According to the graph shown,if the market goes from equilibrium to having its price set at $10 then:


A) $12 gets transferred from consumer to producer in surplus.
B) $12 gets transferred from producer to consumer in surplus.
C) all consumer surplus lost is gained by producers.
D) all producer surplus lost is gained by consumers.

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

Correct Answer

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Assume the market in the graph shown with demand D and supply S<sub>1</sub> is in equilibrium at a quantity of 5 units.Producer surplus is: A) $5. B) $10. C) $15. D) $7.50. Assume the market in the graph shown with demand D and supply S1 is in equilibrium at a quantity of 5 units.Producer surplus is:


A) $5.
B) $10.
C) $15.
D) $7.50.

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

Correct Answer

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Which of the following prices could represent Sally's willingness to pay for a pair of shoes if she bought them for $45?


A) $15.00
B) $25.00
C) $44.99
D) $55.00

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

Correct Answer

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Assuming the market is in equilibrium in the graph shown with demand D and supply S<sub>2</sub> at a quantity of 8,consumer surplus is: A) $32. B) $11. C) $7. D) equal to the producer surplus. Assuming the market is in equilibrium in the graph shown with demand D and supply S2 at a quantity of 8,consumer surplus is:


A) $32.
B) $11.
C) $7.
D) equal to the producer surplus.

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

Correct Answer

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What consumer surplus is received by someone whose willingness to pay is $35 below the market price of a good?


A) $35
B) $0
C) ($35 x P*)
D) None of these is correct.

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

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Consider the hypothetical supply and demand of Kidneys. Consider the hypothetical supply and demand of Kidneys. Initially,kidneys are exchanged by donations only (price=0) .If the government decides to legalize kidney sales and the market reaches equilibrium,then: A) total surplus increases. B) consumer surplus remains the same. C) producer surplus remains the same. D) a shortage of kidneys will arise. Initially,kidneys are exchanged by donations only (price=0) .If the government decides to legalize kidney sales and the market reaches equilibrium,then:


A) total surplus increases.
B) consumer surplus remains the same.
C) producer surplus remains the same.
D) a shortage of kidneys will arise.

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

Correct Answer

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When the market price is set above the equilibrium price:


A) the market is not efficient.
B) total surplus is not maximized.
C) consumer surplus is decreased.
D) All of these are true.

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

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Assume there are three hardware stores,each willing to sell one standard model hammer in a given time period.House Depot can offer their hammer for a minimum of $7.Lace Hardware can offer the hammer for a minimum of $10.Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described,if the market price of hammers increased from $8 to $11:


A) total producer surplus would increase by $3.
B) total producer surplus would increase by $6.
C) total producer surplus would increase by $9.
D) total producer surplus would increase by $4.

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

Correct Answer

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If Sam's opportunity cost of a sweater is $37,which of the following prices would he have to observe in the market in order to sell a sweater?


A) $37
B) $37.01
C) $50
D) Sam would sell a sweater at any of these prices.

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

Correct Answer

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A market has four individuals,each considering buying a grill for his backyard.Assume that grills come in only one size and model.Abe considers himself a grill-master,and finds a grill a necessity,so he is willing to pay $400 for a grill.Butch is a meat-lover,honing his grilling skills,and is willing to pay $350 for a grill.Collin just met the girl of his dreams,and she loves a good grilled steak,so in his effort to impress her he is willing to pay $320 for a grill.Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp,so he is willing to pay $200 for a grill. Given the scenario described,if the market price of grills is $300,who participates in the market?


A) Only Abe, Butch, and Collin participate.
B) Only Collin and Daniel participate.
C) Only Abe and Butch participate.
D) Only Daniel participates.

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

Correct Answer

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Each seller's opportunity costs are:


A) determined monetarily, which is why they can never be zero.
B) determined by a number of factors, none of which is monetary.
C) determined by a number of factors, including monetary considerations.
D) less than the monetary costs of manufacturing the good or service.

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

Correct Answer

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When a perfectly competitive,well-functioning market is not in equilibrium:


A) total surplus is not maximized.
B) there are no exchanges that can make some better off without someone becoming worse off.
C) the market is efficient.
D) All of these are true.

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

Correct Answer

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A consumer's willingness to pay:


A) is the maximum price that a buyer would be willing to pay for a good or service.
B) is the minimum price that a buyer would be willing to pay for a good or service.
C) is his or her reserved minimum bid-price.
D) must always equal the seller's willingness to sell.

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

Correct Answer

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When a perfectly competitive,well-functioning market is not in equilibrium:


A) total surplus can be increased by a change in market price.
B) the market is not efficient.
C) there are exchanges that can make some better off without someone becoming worse off.
D) All of these are true.

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

Correct Answer

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According to the graph shown,if the market goes from equilibrium to having its price set at $10 then: A) area (B + C) gets transferred from consumer to producer. B) area (B + C) gets transferred from producer to consumer. C) area B gets transferred from consumer to producer. D) area B gets transferred from producer to consumer. According to the graph shown,if the market goes from equilibrium to having its price set at $10 then:


A) area (B + C) gets transferred from consumer to producer.
B) area (B + C) gets transferred from producer to consumer.
C) area B gets transferred from consumer to producer.
D) area B gets transferred from producer to consumer.

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

Correct Answer

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Assuming the market is in equilibrium in the graph shown with demand D and supply S<sub>1</sub>,consumer surplus is: A) greater than consumer surplus when market is in equilibrium at D and S<sub>2</sub>. B) less than consumer surplus when market is in equilibrium at D and S<sub>2</sub>. C) the same as consumer surplus when market is in equilibrium at D and S<sub>2</sub>. D) zero. Assuming the market is in equilibrium in the graph shown with demand D and supply S1,consumer surplus is:


A) greater than consumer surplus when market is in equilibrium at D and S2.
B) less than consumer surplus when market is in equilibrium at D and S2.
C) the same as consumer surplus when market is in equilibrium at D and S2.
D) zero.

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

Correct Answer

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According to the graph shown,producer surplus is area: A) A + B + C. B) B. C) A. D) A + B. According to the graph shown,producer surplus is area:


A) A + B + C.
B) B.
C) A.
D) A + B.

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

Correct Answer

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