Question 1

Markets can be missing if:

Accepted Answer

A)  there is a lack of technology that would make the exchanges possible.
B)  there is a ban on the sale of a particular good.
C)  there is a lack of accurate information between potential buyers and sellers.
D)  All of these are true.E) C) and D)
F) All of the above

Question 2

Assume there are three hardware stores in the market for hammers and that all three markets produce a single,standard model hammer.House Depot is an enormous mass producer of hammers and can offer a hammer for sale for a minimum of $7.Lace Hardware is a franchise and can offer the hammer for sale for a minimum of $10.Bob's Hardware store is a family owned and operated,independent hardware store and can offer hammers at a minimum price of $13.
Given the scenario described,if the market price of hammers decreased from $17 to $12:

Accepted Answer

A)  producer participation in the market would increase.
B)  producer participation in the market would decrease.
C)  producer participation in the market would not be affected.
D)  total producer surplus would remain unchanged.E) B) and C)
F) A) and D)

Question 3

Assume a market that has an equilibrium price of $8.If the market price is set at $7,consumer surplus:

Accepted Answer

A)  rises for some because of the increased price.
B)  decreases for some because of fewer transactions taking place.
C)  Both of these statements are true.
D)  Neither of these statements is true.E) B) and C)
F) B) and D)

Question 4

The willingness to pay of buyers' in a market:

Accepted Answer

A)  is represented by the demand curve.
B)  is represented by the supply curve.
C)  explains why the demand curve is bowed-out.
D)  explains why the demand curve is bowed-in.E) A) and B)
F) A) and C)

Question 5

What is the producer surplus earned by a seller whose willingness to sell is $10 below the market price of a good?

Accepted Answer

A)  $0
B)  $10
C)  (P* - $10) 
D)  None of these is correct.E) A) and C)
F) A) and D)

Question 6

Efficient markets:

Accepted Answer

A)  maximize total surplus.
B)  can occur without a central planner.
C)  occur when a market is in equilibrium.
D)  All of these are true.E) B) and D)
F) B) and C)

Question 7

A seller's willingness to sell:

Accepted Answer

A)  is the maximum price that a seller is willing to accept in exchange for a good or service.
B)  is the minimum price that a seller is willing to accept in exchange for a good or service.
C)  is their reserved minimum bid-price.
D)  must always equal the buyer's willingness to buy.E) All of the above
F) None of the above

Question 8

A market has four individuals considering buying a grill for his backyard.Further assume that grills come in only one size and model.Abe considers himself a grill-master,and finds a grill a necessity,so he is willing to pay $400 for a grill.Butch is a meat-lover,honing his grilling skills,and is willing to pay $350 for a grill.Collin just met the girl of his dreams,and she loves a good grilled steak,so in his effort to impress her he is willing to pay $320 for a grill.Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp,so he is willing to pay $200 for a grill.
Given the scenario described,if the market price of grills is $320,who participates in the market?

Accepted Answer

A)  Only Abe,Butch,and Collin participate.
B)  Only Collin and Daniel participate.
C)  Only Abe and Butch participate.
D)  Only Daniel participates.E) None of the above
F) All of the above

Question 9

Assume there are three hardware stores in the market for hammers and that all three markets produce a single,standard model hammer.House Depot is an enormous mass producer of hammers and can offer a hammer for sale for a minimum of $7.Lace Hardware is a franchise and can offer the hammer for sale for a minimum of $10.Bob's Hardware store is a family owned and operated,independent hardware store and can offer hammers at a minimum price of $13.
Given the scenario described,if the market price of hammers decreased from $13 to $11:

Accepted Answer

A)  total producer surplus would decrease from $9 to $5.
B)  total producer surplus would increase from $5 to $9.
C)  total producer surplus would decrease from $30 to $17.
D)  total producer surplus would remain unchanged.E) All of the above
F) A) and B)

Question 10

Total surplus:

Accepted Answer

A)  can never be negative.
B)  is always zero in an efficient market.
C)  can be negative when the market is not in equilibrium.
D)  None of these is true.E) None of the above
F) A) and B)

Question 11

The market to buy and sell organs:

Accepted Answer

A)  would increase the well being of those who interacted in it.
B)  would not be considered "missing," since surplus could be gained from it.
C)  would create negative surplus in those who could not afford an organ,but needed one.
D)  would never exist because it is unfair.E) A) and D)
F) B) and C)

Question 12

Total surplus:

Accepted Answer

A)  is producer and consumer surplus combined.
B)  is producer surplus minus consumer surplus.
C)  is consumer surplus minus producer surplus.
D)  None of these is true.E) All of the above
F) C) and D)

Question 13

Total surplus:

Accepted Answer

A)  can never be zero.
B)  can never fall below zero.
C)  is always above zero.
D)  None of these is true.E) A) and C)
F) All of the above

Question 14

Assume there are three hardware stores in the market for hammers and that all three markets produce a single,standard model hammer.House Depot is an enormous mass producer of hammers and can offer a hammer for sale for a minimum of $7.Lace Hardware is a franchise and can offer the hammer for sale for a minimum of $10.Bob's Hardware store is a family owned and operated,independent hardware store and can offer hammers at a minimum price of $13.
Given the scenario described,if the market price of hammers decreased from $15 to $13,which of the following can be said with certainty?

Accepted Answer

A)  Producer participation in the market would decrease.
B)  Total producer surplus would decrease.
C)  Only Bob's Hardware will experience a drop in producer surplus.
D)  Producer participation in the market will not be affected.E) None of the above
F) All of the above

Question 15

When a market is not in equilibrium:

Accepted Answer

A)  total surplus is not maximized.
B)  there are no exchanges that can make some better off without someone becoming worse off.
C)  the market is efficient.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 16

A market has four individuals considering buying a grill for his backyard.Further assume that grills come in only one size and model.Abe considers himself a grill-master,and finds a grill a necessity,so he is willing to pay $400 for a grill.Butch is a meat-lover,honing his grilling skills,and is willing to pay $350 for a grill.Collin just met the girl of his dreams,and she loves a good grilled steak,so in his effort to impress her he is willing to pay $320 for a grill.Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp,so he is willing to pay $200 for a grill.
Given the scenario described,if the market price of grills falls from $395 to $340,then we can say:

Accepted Answer

A)  Abe's consumer surplus increases from $5 to $60,and total consumer surplus increases from $5 to $70.
B)  Abe's consumer surplus decreases from $60 to $5,and total consumer surplus decreases from $70 to $5.
C)  Collin's consumer surplus increases from $0 to $20,and total consumer surplus increases from $5 to 70.
D)  Butch's consumer surplus decreases from $10 to $0,and total consumer surplus increases from $10 to $80.E) B) and C)
F) C) and D)

Question 17

Assume there are three hardware stores in the market for hammers and that all three markets produce a single,standard model hammer.House Depot is an enormous mass producer of hammers and can offer a hammer for sale for a minimum of $7.Lace Hardware is a franchise and can offer the hammer for sale for a minimum of $10.Bob's Hardware store is a family owned and operated,independent hardware store and can offer hammers at a minimum price of $13.
Given the scenario described,if the market price of hammers increased from $9 to $13:

Accepted Answer

A)  House Depot's producer surplus would increase by $4.
B)  Lace Hardware's producer surplus would increase by $3.
C)  Bob's Hardware's producer surplus would remain unchanged.
D)  All of these statements are true.E) A) and D)
F) C) and D)

Question 18

Surplus is:

Accepted Answer

A)  a better measure of the value that buyers and sellers get from participating in a market than price itself.
B)  maximized for individuals whose reservation price equals the market price.
C)  negative for those who do not participate in a market.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 19

The loss of total surplus that results when the quantity of a good that is bought and sold is below the market equilibrium quantity:

Accepted Answer

A)  is deadweight loss.
B)  occurs in inefficient markets.
C)  occurs when the market price is set above the equilibrium price.
D)  All of these are true.E) A) and D)
F) A) and B)

Question 20

A market has four individuals considering buying a grill for his backyard.Further assume that grills come in only one size and model.Abe considers himself a grill-master,and finds a grill a necessity,so he is willing to pay $400 for a grill.Butch is a meat-lover,honing his grilling skills,and is willing to pay $350 for a grill.Collin just met the girl of his dreams,and she loves a good grilled steak,so in his effort to impress her he is willing to pay $320 for a grill.Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp,so he is willing to pay $200 for a grill.
If the market price of grills is $320,given the scenario described,Abe's consumer surplus would be:

Accepted Answer

A)  $400.
B)  $350.
C)  $320.
D)  $80.E) None of the above
F) All of the above

Exam 5: Efficiency

What is the producer surplus earned by a seller whose willingness to sell is $10 below the market price of a good?

Correct Answer
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Assume a market that has an equilibrium price of $8.If the market price is set at $7,consumer surplus:

Correct Answer
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Surplus is:

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Total surplus:

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Markets can be missing if:

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Efficient markets:

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When a market is not in equilibrium:

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A seller's willingness to sell:

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The loss of total surplus that results when the quantity of a good that is bought and sold is below the market equilibrium quantity:

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Total surplus:

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The willingness to pay of buyers' in a market:

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Total surplus:

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The market to buy and sell organs:

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Exam 5: Efficiency

What is the producer surplus earned by a seller whose willingness to sell is $10 below the market price of a good?

Correct AnswerverifiedShow Answer

Assume a market that has an equilibrium price of $8.If the market price is set at $7,consumer surplus:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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Surplus is:

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Total surplus:

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Markets can be missing if:

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Efficient markets:

Correct AnswerverifiedShow Answer

When a market is not in equilibrium:

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A seller's willingness to sell:

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Correct AnswerverifiedShow Answer

The loss of total surplus that results when the quantity of a good that is bought and sold is below the market equilibrium quantity:

Correct AnswerverifiedShow Answer

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Total surplus:

Correct AnswerverifiedShow Answer

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The willingness to pay of buyers' in a market:

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Total surplus:

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The market to buy and sell organs:

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