8. MICRO-CH-7

Consumer surplus is the area

• above the supply curve and below the price

• below the supply curve and above the price

• above the demand curve and below the price

• below the demand curve and above the price

• below the demand curve and above the supply curve

A buyer's willingness to pay is

• that buyer's consumer surplus.

• that buyer's producer surplus.

• that buyer's maximum amount he is willing to pay for a good.

• that buyer's minimum amount he is willing to pay for a good.

• None of the answers is correct.

If a buyer's willingness to pay for a new Honda is $20,000 and he is able to actually buy it for $18,000, his consumer surplus is

• $0

• $2,000

• $18,000

• $20,000

• $38,000

An increase in the price of a good along a stationary demand curve

• increases consumer surplus

• decreases consumer surplus

• improves the material welfare of the buyers

• improves market efficiency

Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many vases will be sold and what is the value of consumer surplus in this market?

• One vase will be sold, and consumer surplus is $30

• One vase will be sold, and consumer surplus is $5

• Two vases will be sold, and consumer surplus is $5

• Three vases will be sold, and consumer surplus is $0

• Three vases will be sold, and consumer surplus is $80

Producer surplus is the area

• above the supply curve and below the price

• below the supply curve and above the price

• above the demand curve and below the price

• below the demand curve and above the price

• below the demand curve and above the supply curve

If a benevolent social planner chooses to produce less than the equilibrium quantity of a good, then

• producer surplus is maximized

• consumer surplus is maximized

• total surplus is maximized

• the value placed on the last unit of production by buyers exceeds the cost of production

• the cost of production of the last unit produced exceeds the value placed on it by buyers.

If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then

• producer surplus is maximized

• consumer surplus is maximized

• total surplus is maximized

• the value placed on the last unit of production by buyers exceeds the cost of production

• the cost of production of the last unit produced exceeds the value placed on it by buyers.

The seller's cost of production is

• the seller's consumer surplus.

• the seller's producer surplus.

• the maximum amount the seller is willing to accept for a good.

• the minimum amount the seller is willing to accept for a good.

• None of the answers is correct.

Total surplus is the area

• above the supply curve and below the price

• below the supply curve and above the price

• above the demand curve and below the price

• below the demand curve and above the price

• below the demand curve and above the supply curve.