Question

Consumer surplus. Producer surplus. Government intervention

1. If the price of a good rises while demand remains unchanged, then total consumer surplus will _________.

1. Decrease
2. Increase
3. Remain unchanged
4. We can’t say

2. Aisha is willing to spend $15 for a haircut. If she finds a salon where the price of a haircut is only $10, she will receive ______ in consumer surplus from this transaction.

1. $ 15
2. $ 5
3. $ 10
4. $ 0

3. Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is willing to pay $20. If the actual price of a flashlight turns out to be $14, what is the total consumer surplus for these three shoppers?

1. $ 20
2. $ 6
3. $ 0
4. - $ 8

4. If the price of a good rises while supply remains unchanged, then total producer surplus will ____________.

1. Decrease
2. Increase
3. Remain unchanged
4. We can’t say

5. You are willing to sell your coin collection for a minimum price of $1,000. You find a buyer who offers $1,800. In this transaction, you will receive ________ in producer surplus.

1. $800
2. $1,800
3. $1,000
4. $0

6. Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going rate for lawn mowing is $15, what is the total producer surplus received by the three of them?

1. $0
2. -$15
3. $5
4. $35

7. When a market is in equilibrium:

1. consumer surplus will be zero
2. producer surplus will be zero
3. total surplus is minimized
4. total surplus is maximized

8.Milk is an input in the production of cheese, and cheese and humus are substitutes. An increase in the price of milk will _________ the producer surplus in the market for humus.

1. Decrease
2. increase
3. not change
4. first increase and then decrease

1 9. Rubber is an input in the production of tires, and tires and cars are complements. An increase in the price of rubber will _________ the total surplus in the market for cars (assume that neither curve is perfectly inelastic).

1. Decrease
2. increase
3. not change
4. first increase and then decrease

10. If a price ceiling is imposed below the equilibrium price:

1. the quantity demanded will be higher than it would be otherwise
2. the quantity supplied will be higher than it would be otherwise
3. supply will increase above what it would be otherwise
4. demand will decrease below what it would be otherwise

11. The going rent in the market for 1-bedroom apartments in your neighborhood is $800. If the government imposes a price ceiling of $400 in this market:

1. Less people will rent apartments
2. More people will rent apartments
3. The same number of apartments will be rented
4. More people will be willing to rent apartments at every price

12. A price floor is:

1. a maximum price established by government intervention
2. a minimum price established by government intervention
3. the highest price a consumer will pay for a good
4. the lowest price a producer will accept for a good

13. A price floor in the market for wheat that is set above the current market price:

1. decreases the price received by farmers
2. decreases the price paid by consumers
3. does not change the price received by farmers
4. increases the price paid by consumers

1 14. The current price in the market for cab rides in your neighborhood is $1.00/mile. If the government imposes a price ceiling of $2.50/mile in this market total surplus in this market will:

1. decrease
2. increase
3. decrease first, and then increase
4. not change

15. The current price in the market for milk is $2.00 If the government imposed a price floor of $4.00 in this market total surplus would ____________.

1. decrease
2. increase
3. decrease first, and then increase
4. not change

Answer 1

1........a decrease

Explanation:- As actual price is rising, so C.S ( the difference between consumer's willingness to pay and actual price) will decrease

If initial price is $10 and willingness to pay is 15 then CS=15—10 =$5 , and now suppose price is 12 then cs will become 15—12 =$3

2. ...... b $5

C.S. = consumer's willingness to pay( WTP) — Actual price = 15—10 = $5

3........ b $6

Explanation:- Natasha and Nelson will not buy the good, as their WTP is lower than actual price, only Nikolie will buy, his CS = 20—14=6

4.....b increase

Explanation:- At higher price PS ( difference between actual price and producer's willingness to accept price) increases.

5. ........ a $ 800

Explanation:- P S = Actual price — producer's willingness to accept = 1800—1000=$800

6......... c $5

Explanation:- Only Ahmad will be able to mow loans ,and his producer's surplus = Actual price —willingness to pay = 15—10 = $5

7.... d total surplus is maximized .

At the equilibrium, neither shortage nor surplus exists, so total surplus is maximized.