1、Chapter 7Consumers, Producers, and the Efficiency of MarketsTRUE/FALSE1.Welfare economics is the study of the welfare system.ANS:FDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:WelfareMSC:Definitional2.The willingness to pay is the maximum amount that a buyer will pay for a good and measures how m

2、uch the buyer values the good.ANS:TDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Willingness to payMSC:Definitional3.For any given quantity, the price on a demand curve represents the marginal buyer's willingness to pay.ANS:TDIF:2REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Willingness to payM

3、SC:Interpretive4.A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay.ANS:FDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Willingness to payMSC:Definitional5.Consumer surplus is

4、 the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.ANS:FDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Definitional6.Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has t

5、o pay for it.ANS:TDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Definitional7.Consumer surplus measures the benefit to buyers of participating in a market.ANS:TDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Interpretive8.Consumer surplus can be measured a

6、s the area between the demand curve and the equilibrium price.ANS:TDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Interpretive9.Consumer surplus can be measured as the area between the demand curve and the supply curve.ANS:FDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consu

7、mer surplusMSC:Interpretive10.Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car. Susie's consumer surplus is $2,000.ANS:FDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandT

8、OP:Consumer surplusMSC:Interpretive11.If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $10.ANS:TDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Applicative12.If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus

9、 is $90.ANS:FDIF:1REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Applicative13.All else equal, an increase in supply will cause an increase in consumer surplus.ANS:TDIF:2REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Applicative14.Suppose there is an increase in sup

10、ply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market.ANS:TDIF:2REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Interpretive15.If the government imposes a binding price floor in

11、 a market, then the consumer surplus in that market will increase.ANS:FDIF:2REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Applicative16.If the government imposes a binding price floor in a market, then the consumer surplus in that market will decrease.ANS:TDIF:2REF:7-1NAT:AnalyticL

12、OC:Supply and demandTOP:Consumer surplusMSC:Applicative17.Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.ANS:TDIF:1REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Opportunity costMSC:Interpretive18.At a

13、ny quantity, the price given by the supply curve shows the cost of the lowest-cost seller.ANS:FDIF:2REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Opportunity costMSC:Interpretive19.In a competitive market, sales go to those producers who are willing to supply the product at the lowest price.ANS:TDIF:1

14、REF:7-2NAT:AnalyticLOC:Supply and demandTOP:EfficiencyMSC:Interpretive20.Producer surplus is the amount a seller is paid minus the cost of production.ANS:TDIF:1REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Definitional21.Producer surplus is the cost of production minus the amount a

15、 seller is paid.ANS:FDIF:1REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Definitional22.All else equal, an increase in demand will cause an increase in producer surplus.ANS:TDIF:2REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Applicative23.All else equal, a decrease

16、 in demand will cause an increase in producer surplus.ANS:FDIF:2REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Applicative24.If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $45.ANS:FDIF:1REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer

17、surplusMSC:Applicative25.If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $35.ANS:TDIF:1REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Applicative26.Connie can clean windows in large office buildings at a cost of $1 per window. The market pr

18、ice for window-cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $100.ANS:FDIF:2REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Applicative27.Connie can clean windows in large office buildings at a cost of $1 per window. The market price for wi

19、ndow-cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $200.ANS:TDIF:2REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Applicative28.The area below the price and above the supply curve measures the producer surplus in a market.ANS:TDIF:2REF:7-2N

20、AT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Interpretive29.The area below the demand curve and above the supply curve measures the producer surplus in a market.ANS:FDIF:2REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Interpretive30.If the government imposes a binding pri

21、ce ceiling in a market, then the producer surplus in that market will increase.ANS:FDIF:2REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Applicative31.When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing se

22、llers increases, and (2) new sellers enter the market.ANS:TDIF:2REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Producer surplusMSC:Interpretive32.Total surplus in a market is consumer surplus minus producer surplus.ANS:FDIF:1REF:7-3NAT:AnalyticLOC:Supply and demandTOP:Total surplusMSC:Definitional33.To

23、tal surplus = Value to buyers - Costs to sellers.ANS:TDIF:2REF:7-3NAT:AnalyticLOC:Supply and demandTOP:Total surplusMSC:Interpretive34.Total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve, up to the point of equilibrium.ANS:FDIF:2REF:7-3NA

24、T:AnalyticLOC:Supply and demandTOP:Total surplusMSC:Interpretive35.Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the soccer ball at $50. For this transaction, the total surplus in the market is $40.ANS:FDIF:2REF:7-3NAT:AnalyticLOC:Supply and demandTOP:Total surplu

25、sMSC:Applicative36.The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.ANS:TDIF:2REF:7-3NAT:AnalyticLOC:Supply and demandTOP:EfficiencyMSC:Interpretive37.Efficiency refers to whether a market outcome is fair, while equal

26、ity refers to whether the maximum amount of output was produced from a given number of inputs.ANS:FDIF:1REF:7-3NAT:AnalyticLOC:Supply and demandTOP:Efficiency | EqualityMSC:Definitional38.Efficiency is related to the size of the economic pie, whereas equality is related to how the pie gets sliced an

27、d distributed.ANS:TDIF:1REF:7-3NAT:AnalyticLOC:Supply and demandTOP:Efficiency | EqualityMSC:Definitional39.Free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost.ANS:TDIF:2REF:7-3NAT:Analy

28、ticLOC:Supply and demandTOP:EfficiencyMSC:Interpretive40.Economists generally believe that, although there may be advantages to society from ticket-scalping, the costs to society of this activity outweigh the benefits.ANS:FDIF:2REF:7-3NAT:AnalyticLOC:Supply and demandTOP:EfficiencyMSC:Interpretive41

29、.Economists argue that restrictions against ticket scalping actually drive up the cost of many tickets.ANS:TDIF:2REF:7-3NAT:AnalyticLOC:Supply and demandTOP:EfficiencyMSC:Interpretive42.If the United States legally allowed for a market in transplant organs, it is estimated that one kidney would sell

30、 for at least $100,000.ANS:FDIF:2REF:7-3NAT:AnalyticLOC:Supply and demandTOP:Efficiency | EqualityMSC:Interpretive43.Even though participants in the economy are motivated by self-interest, the "invisible hand" of the marketplace guides this self-interest into promoting general economic wel

31、l-being.ANS:TDIF:2REF:7-3NAT:AnalyticLOC:Supply and demandTOP:Invisible handMSC:Interpretive44.The current policy on kidney donation effectively sets a price ceiling of zero.ANS:TDIF:2REF:7-3NAT:AnalyticLOC:Supply and demandTOP:EfficiencyMSC:Interpretive45.Unless markets are perfectly competitive, t

32、hey may fail to maximize the total benefits to buyers and sellers.ANS:TDIF:2REF:7-4NAT:AnalyticLOC:Supply and demandTOP:EfficiencyMSC:Interpretive46.In order to conclude that markets are efficient, we assume that they are perfectly competitive.ANS:TDIF:2REF:7-4NAT:AnalyticLOC:Supply and demandTOP:Ef

33、ficiencyMSC:Applicative47.Markets will always allocate resources efficiently.ANS:FDIF:2REF:7-4NAT:AnalyticLOC:Supply and demandTOP:EfficiencyMSC:Applicative48.When markets fail, public policy can potentially remedy the problem and increase economic efficiency.ANS:TDIF:2REF:7-4NAT:AnalyticLOC:Supply

34、and demandTOP:Market failureMSC:Interpretive49.Market power and externalities are examples of market failures.ANS:TDIF:2REF:7-4NAT:AnalyticLOC:Supply and demandTOP:Market failureMSC:InterpretiveSHORT ANSWER1.Answer each of the following questions about demand and consumer surplus.a.What is consumer

35、surplus, and how is it measured?b.What is the relationship between the demand curve and the willingness to pay?c.Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.d.In what way does the demand curve represent the benefit consumers

36、 receive from participating in a market? In addition to the demand curve, what else must be considered to determine consumer surplus?ANS:a.Consumer surplus measures the benefit to buyers of participating in a market. It is measured as the amount a buyer is willing to pay for a good minus the amount

37、a buyer actually pays for it. For an individual purchase, consumer surplus is the difference between the willingness to pay, as shown on the demand curve, and the market price. For the market, total consumer surplus is the area under the demand curve and above the price, from the origin to the quant

38、ity purchased.b.Because the demand curve shows the maximum amount buyers are willing to pay for a given market quantity, the price given by the demand curve represents the willingness to pay of the marginal buyer.c.When the price of a good falls, consumer surplus increases for two reasons. First, th

39、ose buyers who were already buying the good receive an increase in consumer surplus because they are paying less (area B). Second, some new buyers enter the market because the price of the good is now lower than their willingness to pay (area C); hence, there is additional consumer surplus generated

40、 from their purchases. The graph should show that as price falls from P2 to P1, consumer surplus increases from area A to area A+B+C.d.Since the demand curve represents the maximum price the marginal buyer is willing to pay for a good, it must also represent the maximum benefit the buyer expects to

41、receive from consuming the good. Consumer surplus must take into account the amount the buyer actually pays for the good, with consumer surplus measured as the difference between what the buyer is willing to pay and what he/she actually paid. Consumer surplus, then, measures the benefit the buyer di

42、dn't have to "pay for."DIF:2REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Interpretive2.Tammy loves donuts. The table shown reflects the value Tammy places on each donut she eats:Value of first donut$0.60Value of second donut$0.50Value of third donut$0.40Value of four

43、th donut$0.30Value of fifth donut$0.20Value of sixth donut$0.10a.Use this information to construct Tammy's demand curve for donuts.b.If the price of donuts is $0.20, how many donuts will Tammy buy?c.Show Tammy's consumer surplus on your graph. How much consumer surplus would she have at a pr

44、ice of $0.20?d.If the price of donuts rose to $0.40, how many donuts would she purchase now? What would happen to Tammy's consumer surplus? Show this change on your graph.ANS:a.b.At a price of $0.20, Tammy would buy 5 donuts.c.The figure below shows Tammy's consumer surplus. At a price of $0

45、.20, Tammy's consumer surplus would be $1.00.d.If the price of donuts rose to $0.40, Tammy's consumer surplus would fall to $0.30 and she would purchase only 3 donuts.DIF:2REF:7-1NAT:AnalyticLOC:Supply and demandTOP:Consumer surplusMSC:Applicative3.Answer each of the following questions abou

46、t supply and producer surplus.a.What is producer surplus, and how is it measured?b.What is the relationship between the cost to sellers and the supply curve?c.Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.ANS:a.Producer

47、surplus measures the benefit to sellers of participating in a market. It is measured as the amount a seller is paid minus the cost of production. For an individual sale, producer surplus is measured as the difference between the market price and the cost of production, as shown on the supply curve.

48、For the market, total producer surplus is measured as the area above the supply curve and below the market price, between the origin and the quantity sold.b.Because the supply curve shows the minimum amount sellers are willing to accept for a given quantity, the supply curve represents the cost of t

49、he marginal seller.c.When the price of a good rises, producer surplus increases for two reasons. First, those sellers who were already selling the good have an increase in producer surplus because the price they receive is higher (area A). Second, new sellers will enter the market because the price

50、of the good is now higher than their willingness to sell (area B); hence, there is additional producer surplus generated from their sales. The graph should show that as price rises from P1 to P2, producer surplus increases from area C to area A+B+C.DIF:2REF:7-2NAT:AnalyticLOC:Supply and demandTOP:Pr

51、oducer surplusMSC:Interpretive4.Given the following equations two equations:1)Total Surplus = Consumer Surplus + Producer Surplus2)Total Surplus = Value to Buyers - Cost to SellersShow how equation (1) can be used to derive equation (2).ANS:Start with the equation: Total Surplus = Consumer Surplus +

52、 Producer Surplus. Then, since Consumer Surplus = Value to buyers - Amount paid by buyers, and since Producer Surplus = Amount received by sellers - Costs of sellers, then Total Surplus can be written as: Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers. Since

53、the Amount paid by buyers equals the Amount received by sellers, the middle two terms cancel out and the result is:Total Surplus = Value to buyers - Costs of sellers.DIF:2REF:7-3NAT:AnalyticLOC:Supply and demandTOP:Total surplusMSC:Analytical5.Answer the following questions based on the graph that r

54、epresents J.R.'s demand for ribs per week of ribs at Judy's rib shack.a.At the equilibrium price, how many ribs would J.R. be willing to purchase?b.How much is J.R. willing to pay for 20 ribs?c.What is the magnitude of J.R.'s consumer surplus at the equilibrium price?d.At the equilibrium

55、 price, how many ribs would Judy be willing to sell?e.How high must the price of ribs be for Judy to supply 20 ribs to the market?f.At the equilibrium price, what is the magnitude of total surplus in the market?g.If the price of ribs rose to $10, what would happen to J.R.'s consumer surplus?h.If the price of ribs fell to $5, what would happen to Judy's producer surplus?i.Explain why the graph that is shown verifies the fact that the market equilibrium (quantity) maximizes the sum o