Name: ________________________ Class: ___________________ Date: __________
Fall 2013 Midterm 2
Identify the choice that best completes the statement or answers the question.
1. Welfare economics is the study of how
a. the allocation of resources affects economic well-being.
b. a price ceiling compares to a price floor.
c. the government helps poor people.
d. a consumer’s optimal choice affects her demand curve.
2. Consumer surplus
a. is the amount of a good that a consumer can buy at a price below equilibrium price.
b. is the amount a consumer is willing to pay minus the amount the consumer actually pays.
c. is the number of consumers who are ...view middle of the document...
d. Earvin; more than $350 but less than or equal to $400
5. Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for
$425. Billie Jo's willingness to pay for the dishwasher is
6. If the cost of producing sofas decreases, then consumer surplus in the sofa market will
c. remain constant.
d. increase for some buyers and decrease for other buyers.
7. Refer to Figure 7-2. When the price is P1, consumer surplus is
8. Producer surplus is
a. measured using the demand curve for a good.
b. always a negative number for sellers in a competitive market.
c. the amount a seller is paid minus the cost of production.
d. the opportunity cost of production minus the cost of producing goods that go unsold.
9. Refer to Figure 7-8. When the price rises from P1 to P2, which area represents the increase in producer
surplus to existing producers?
____ 10. Refer to Figure 7-10. If the equilibrium price rises from $50 to $200, what is the producer surplus to new
____ 11. Producer surplus equals
a. Value to buyers - Amount paid by buyers.
b. Amount received by sellers - Costs of sellers.
c. Value to buyers - Costs of sellers.
d. Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers.
____ 12. Total surplus is
a. equal to producer surplus plus consumer surplus.
b. equal to the total cost to sellers minus the total value to buyers.
c. equal to consumers' willingness to pay plus producers’ cost.
d. greater than the sum of consumer surplus plus producer surplus.
____ 13. At the equilibrium price of a good, the good will be purchased by those buyers who
a. value the good more than price.
b. value the good less than price.
c. have the money to buy the good.
d. consider the good a necessity.
____ 14. Refer to Figure 7-16. Total surplus can be measured as the area
____ 15. Refer to Figure 7-19. The efficient price-quantity combination is
a. P1 and Q1.
b. P2 and Q2.
c. P3 and Q1.
d. P4 and 0.
____ 16. Refer to Figure 7-21. Buyers who value this good more than the equilibrium price are represented by which
____ 17. A simultaneous increase in both the demand for MP3 players and the supply of MP3 players would imply that
a. both the value of MP3 players to consumers and the cost of producing MP3...