Chap 7

Consumer surplus is the area ________.

• above the supply curve and below the price

• below the demand curve and above the supply curve

• below the demand curve and above the price

• below the supply curve and above the price

• above the demand curve and below the price

A buyer's willingness to pay is ________.

• that buyer's consumer surplus

• that buyer's producer surplus

• that buyer's maximum amount they are willing to pay for a good

• that buyer's minimum amount they are willing to pay for a good

• none of the answer choices

If a buyer's willingness to pay for a new Toyota is $40,000 and they are able to actually buy it for $38,000, their consumer surplus is ________.

• $40,000

• $38,000

• $78,000

• $2,000

• $0

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

• decreases consumer surplus

• improves the material welfare of the buyers

• increases consumer surplus

• improves market efficiency

Suppose there are three identical mugs 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 mugs will be sold and what is the value of consumer surplus in this market?

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

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

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

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

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

Producer surplus is the area ________.

• above the demand curve and below the price

• below the supply curve and above the price

• below the demand curve and above the supply curve

• above the supply curve and below the price

• below the demand curve and above the price

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

• consumer surplus is maximized

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

• producer surplus is maximized

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

• total surplus is maximized

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

• consumer surplus is maximized

• producer surplus is maximized

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

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

• total surplus is maximized

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 answer choices

Total surplus is the area ________.

• above the supply curve and below the price

• below the demand curve and above the price

• below the supply curve and above the price

• below the demand curve and above the supply curve

• above the demand curve and below the price