Question 1

Producer surplus tends to be large when

Accepted Answer

A)   supply is price elastic.
B)   demand is price elastic.
C)   supply is price inelastic.
D)   demand is price inelastic.E) A) and D)
F) A) and C)

Question 2

Yusuf produces nails at a cost of R2 000 per ton. If he sells the nails for R3 500 per ton, his producer surplus per ton is

Accepted Answer

A)   R1 500.
B)   R2 000.
C)   R3 500.
D)   R5 500.E) All of the above
F) A) and B)

Question 3

If buyers are irrational then:

Accepted Answer

A)   free market solutions are inefficient.
B)   free market solutions maximise total surplus.
C)   all of these answers are true.
D)   free market solutions are equitable.E) B) and C)
F) A) and C)

Question 4

Suppose that the price of a new bicycle is R3 000. Natalie values a new bicycle at R4 000. It costs R2 000 for the seller to produce the new bicycle. What is the value of total surplus if Natalie buys a new bike?

Accepted Answer

A)   R5000
B)   R3000
C)   R2000
D)   R4000
E)   R1000F) B) and E)
G) D) and E)

Question 5

What is the relationship between the cost to sellers and the supply curve?

Accepted Answer

Because the supply curve shows...

Question 6

Consumer surplus is the area

Accepted Answer

A)   below the demand curve and above the price.
B)   above the supply curve and below the price.
C)   above the demand curve and below the price.
D)   below the supply curve and above the price.
E)   below the demand curve and above the supply curve.F) A) and E)
G) None of the above

Question 7

Given the following two equations:
1) Total Surplus = Consumer Surplus + Producer Surplus
2) Total Surplus = Value to Buyers - Cost to Sellers
Show how equation (1) can be used to derive equation (2).

Accepted Answer

Start with the equation: Total Surplus =...

Question 8

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

Accepted Answer

A)   total surplus is maximised.
B)   the value placed on the last unit of production by buyers exceeds the cost of production.
C)   producer surplus is maximised.
D)   the cost of production on the last unit produced exceeds the value placed on it by buyers.
E)   consumer surplus is maximised.F) A) and D)
G) B) and D)

Question 9

Producer surplus is a measure of the unsold inventories of suppliers in a market.

Accepted Answer

A) True 
 B)False

Question 10

If demand increases when supply is perfectly price elastic, then

Accepted Answer

A)   consumer surplus will remain the same.
B)   consumer surplus will increase.
C)   it is not possible to predict the change in consumer surplus.
D)   consumer surplus will decrease with the increase in price.E) A) and B)
F) A) and C)

Question 11

Consumer surplus is the buyer's willingness to pay minus the seller's cost.

Accepted Answer

A) True 
 B)False

Question 12

The seller's cost of production is

Accepted Answer

A)   the proportion of total cost allocated to profit
B)   the minimum amount the seller is willing to accept for a good.
C)   the seller's producer surplus.
D)   the maximum amount the seller is willing to accept for a good.
E)   the seller's consumer surplus.F) C) and D)
G) C) and E)

Question 13

-Refer to the image above. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be

Accepted Answer

A)   lower than P1.
B)   P1.
C)   between P1 and P2.
D)   higher than P2.E) B) and D)
F) B) and C)

Question 14

An example of positive analysis is studying

Accepted Answer

A)   how market forces produce equilibrium.
B)   whether equilibrium outcomes are fair.
C)   whether equilibrium outcomes are socially desirable.
D)   if income distributions are fair.E) B) and D)
F) None of the above

Question 15

The major advantage of allowing free markets to allocate resources is that the outcome of the allocation is efficient when particular assumptions hold true.

Accepted Answer

A) True 
 B)False

Question 16

What is producer surplus, and how is it measured?

Accepted Answer

Producer surplus measures the benefit to...

Question 17

This table refers to five possible buyers' willingness to pay for a take-away meal.
  Buyer Willingness To  Pay  David  R85.00  Laura  R70.00  Megan  R55.00  Mallory  R40.00  Audrey  R35.00 \begin{array}{l}	ext { Buyer Willingness To }\\begin{array} { l l } & 	ext { Pay } \	ext { David } & 	ext { R85.00 } \	ext { Laura } & 	ext { R70.00 } \	ext { Megan } & 	ext { R55.00 } \	ext { Mallory } & 	ext { R40.00 } \	ext { Audrey } & 	ext { R35.00 }\end{array}\end{array} Buyer Willingness To  David  Laura  Megan  Mallory  Audrey ​ Pay  R85.00  R70.00  R55.00  R40.00  R35.00 ​​ 
-Refer to the table above. If the market price is R55.00, the consumer surplus in the market will be

Accepted Answer

A)   R30.00.
B)   R45.00.
C)   R155.00.
D)   R210.00. E) A) and C)
F) B) and D)

Question 18

What is the relationship between the demand curve and the willingness to pay?

Accepted Answer

Because the demand curve shows...

Question 19

This table refers to five possible buyers' willingness to pay for a take-away meal.
  Buyer Willingness To  Pay  David  R85.00  Laura  R70.00  Megan  R55.00  Mallory  R40.00  Audrey  R35.00 \begin{array}{l}	ext { Buyer Willingness To }\\begin{array} { l l } & 	ext { Pay } \	ext { David } & 	ext { R85.00 } \	ext { Laura } & 	ext { R70.00 } \	ext { Megan } & 	ext { R55.00 } \	ext { Mallory } & 	ext { R40.00 } \	ext { Audrey } & 	ext { R35.00 }\end{array}\end{array} Buyer Willingness To  David  Laura  Megan  Mallory  Audrey ​ Pay  R85.00  R70.00  R55.00  R40.00  R35.00 ​​ 
-Refer to the table above. If the market price is R38.00,

Accepted Answer

A)   David's consumer surplus is R47.00 and total consumer surplus for the five individuals is R95.00.
B)   Megan's consumer surplus is R17.00 and total consumer surplus for the five individuals is R96.00.
C)   David, Laura, and Megan will be the only buyers of a take-away meal.
D)   The demand curve for the take-away meal, taking the five individuals into account, is horizontal. E) B) and C)
F) None of the above

Question 20

Producer surplus is the area above the supply curve and below the price.

Accepted Answer

A) True 
 B)False

Exam 7: Consumers, Producers and the Efficiency of Markets

Correct Answer
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What is the relationship between the demand curve and the willingness to pay?

Correct Answer
verified
Because the demand curve shows...
View Answer

Correct Answer
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-Refer to the image above. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be

Correct Answer
verified

If demand increases when supply is perfectly price elastic, then

Correct Answer
verified

Producer surplus is a measure of the unsold inventories of suppliers in a market.

Correct Answer
verified

An example of positive analysis is studying

Correct Answer
verified

What is the relationship between the cost to sellers and the supply curve?

Correct Answer
verified
Because the supply curve shows...
View Answer

Suppose that the price of a new bicycle is R3 000. Natalie values a new bicycle at R4 000. It costs R2 000 for the seller to produce the new bicycle. What is the value of total surplus if Natalie buys a new bike?

Correct Answer
verified

Given the following two equations: 1) Total Surplus = Consumer Surplus + Producer Surplus 2) Total Surplus = Value to Buyers - Cost to Sellers Show how equation (1) can be used to derive equation (2).

Correct Answer
verified
Start with the equation: Total Surplus =...
View Answer

Yusuf produces nails at a cost of R2 000 per ton. If he sells the nails for R3 500 per ton, his producer surplus per ton is

Correct Answer
verified

What is producer surplus, and how is it measured?

Correct Answer
verified
Producer surplus measures the benefit to...
View Answer

Consumer surplus is the area

Correct Answer
verified

Producer surplus is the area above the supply curve and below the price.

Correct Answer
verified

Producer surplus tends to be large when

Correct Answer
verified

Consumer surplus is the buyer's willingness to pay minus the seller's cost.

Correct Answer
verified

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

Correct Answer
verified

If buyers are irrational then:

Correct Answer
verified

The seller's cost of production is

Correct Answer
verified

The major advantage of allowing free markets to allocate resources is that the outcome of the allocation is efficient when particular assumptions hold true.

Correct Answer
verified

Exam 7: Consumers, Producers and the Efficiency of Markets

Correct AnswerverifiedShow Answer

What is the relationship between the demand curve and the willingness to pay?

Correct AnswerverifiedBecause the demand curve shows...View AnswerShow Answer

Correct AnswerverifiedShow Answer

-Refer to the image above. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be

Correct AnswerverifiedShow Answer

If demand increases when supply is perfectly price elastic, then

Correct AnswerverifiedShow Answer

Producer surplus is a measure of the unsold inventories of suppliers in a market.

Correct AnswerverifiedShow Answer

An example of positive analysis is studying

Correct AnswerverifiedShow Answer

What is the relationship between the cost to sellers and the supply curve?

Correct AnswerverifiedBecause the supply curve shows...View AnswerShow Answer

Suppose that the price of a new bicycle is R3 000. Natalie values a new bicycle at R4 000. It costs R2 000 for the seller to produce the new bicycle. What is the value of total surplus if Natalie buys a new bike?

Correct AnswerverifiedShow Answer

Given the following two equations: 1) Total Surplus = Consumer Surplus + Producer Surplus 2) Total Surplus = Value to Buyers - Cost to Sellers Show how equation (1) can be used to derive equation (2).

Correct AnswerverifiedStart with the equation: Total Surplus =...View AnswerShow Answer

Yusuf produces nails at a cost of R2 000 per ton. If he sells the nails for R3 500 per ton, his producer surplus per ton is

Correct AnswerverifiedShow Answer

What is producer surplus, and how is it measured?

Correct AnswerverifiedProducer surplus measures the benefit to...View AnswerShow Answer

Consumer surplus is the area

Correct AnswerverifiedShow Answer

Producer surplus is the area above the supply curve and below the price.

Correct AnswerverifiedShow Answer

Producer surplus tends to be large when

Correct AnswerverifiedShow Answer

Consumer surplus is the buyer's willingness to pay minus the seller's cost.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If buyers are irrational then:

Correct AnswerverifiedShow Answer

The seller's cost of production is

Correct AnswerverifiedShow Answer

The major advantage of allowing free markets to allocate resources is that the outcome of the allocation is efficient when particular assumptions hold true.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Because the demand curve shows...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Because the supply curve shows...
View Answer

Correct Answer
verified

Correct Answer
verified
Start with the equation: Total Surplus =...
View Answer

Correct Answer
verified

Correct Answer
verified
Producer surplus measures the benefit to...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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