Download (consumer + producer surplus).

Chapter 3A
Practice Quiz
Consumer Surplus, Producer Surplus, and
Market Efficiency
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1. If Bill is willing to pay $10 for one good
X, $8 for a second, and $6 for a third, and
the market price is a $5, then Max’s
consumer surplus is
a. $24
b. $18
c. $9
d. $6
C. Consumer surplus is the difference
between the price consumers are willing
to pay and the cost. For one unit of good
X the surplus is $5, $3 for the second
unit, and $1 for the third. Therefore, the
total consumer surplus is $9.
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2. Suppose Gizmo Inc. is willing to sell one
gizmo for $10, a second gizmo for $12, a
third for $14, and a fourth for $20, and the
market price is $20. What is Gizmo Inc.’s
producer surplus?
a. $56
b. $24
c. $20
d. $10
B. Producer surplus is the difference between
the selling price and price producers are
willing to sell a gizmo. For one gizmo the
producer surplus is $10, $8 for the second
gizmo, and $6 for the third gizmo. Therefore,
the total producer surplus is $24.
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3. In an efficient market, deadweight loss is
_____________.
a. maximum
b. minimum
c. constant
d. zero
D. In equilibrium, there is no net loss of
either consumer or producer surplus.
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4. Deadweight loss results from
a. equilibrium.
b. underproduction.
c. overproduction.
d. none of the above are correct.
e. either b or c.
E. In equilibrium, the quantity demanded
equals the quantity supplied and there is
no deadweight loss.
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5. Total surplus equals
a. consumer surplus + producer surplus –
deadweight loss.
b. consumer surplus – producer surplus –
deadweight loss.
c. consumer surplus – producer surplus +
deadweight loss.
d. consumer surplus + producer surplus.
D. Deadweight loss is the value of potential
benefits loss, which is not subtracted
from or added to total surplus (consumer
+ producer surplus).
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6. Which of the following statements is
correct ?
a. Total surplus is the sum of consumer
and producer surplus.
b. Deadweight loss is the net loss of both
consumer and producer surplus.
c. Deadweight loss is a measure of market
inefficiency.
d. All of the above.
D. See Exhibit A-3 in the text.
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Exhibit A-7 Demand and Supply Curves for Good X
.
.
H
16 A
Price
per
unit
.
14
12
10
8
6
4
2B
.
0
S
.
F
C
.
E
.
.
G
D
.
I D
2
4
6
8 10 12 14 16
Quantity of good X
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7. In Exhibit A-7, suppose firms devote
resources sufficient to produce 4,000 units
of good X per month. The result is a
deadweight loss of triangle
a. ABE.
b. CDE.
c. EGE.
d. EDE.
B. Only at point C are 4,000 units sold and
triangle CDE is the deadweight loss of
potential value resulting from
underproduction of good X.
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8. Suppose in Exhibit A-7 that exchange in
the market for good X yields triangle
ABE. This means that which of the
following conditions exists in the market?
a. Only consumer surplus
b. Only producer surplus
c. Deadweight loss
d. Maximum consumer plus producer
surplus
D. Only at the equilibrium point E do both
consumers and producers receive
maximum surplus value.
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9. As shown in Exhibit A-7, assume that the
quantity of good X exchanged results in
triangle EIH. This would be caused by
__________ resources used by producers
to produce good X.
a. too many
b. too few
c. an optimal amount of
d. asymmetric
A. See Exhibit A-3 (c) in the text.
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10. As shown in Exhibit A-7, assume that the
quantity of good X exchanged results in
triangle CDE.This would be caused
by__________ resources being used by
producers to produce good X.
a. too many
b. too few
c. an optimal amount of
d. asymmetric
B. See Exhibit A-3 (b) in the text.
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