Question

49)There is a……………………relationship between the change in the price of a good and the change in……………….in a market.

(a)Direct, consumer surplus

(b)Negative, producer surplus

(c)Negative, consumer surplus

(d)Inverse, producer surplus

(50)Suppose the price that wheat farmers receive for a bushel of wheat in a market is $8.50 per bushel and the minimum price they will accept to produce that bushel of wheat is $4.75, would these wheat farmers experience an improvement in their welfare?

(a)Yes

(b)No

(c)More information needed to make a decision

(d)None of the above

(51)Suppose the initial area of a farmer’s surplus is calculated to be $185 and a subsequent calculation of the farmer’s surplus is $243, the net difference in the farmer’s surplus is:

(a)$85

(b)$58

(c)$95

(d)None of the above

(52)Which of the following statements is false?

The difference between the monetary values of the farmer’s surplus referenced in Q#51 is a_____________________

(a)Measure of an improvement in the farmer’s welfare

(b)Signal that the farmer’s market price has increased

(c)Signal that the farmer’s market price has decreased

(d)All of the above

(53)Given ceteris paribus, would consumer surplus be expected to rise or fall for the consumers in the market referenced in Q#52 above?

(a)Rise, then fall

(b)Fall then rise

(c)Fall

(d)Rise

(54)Producers’ surplus is the difference between the________________________ for a good and the _______________________ for a good.

(a)Market price, maximum price

(b)Minimum acceptable price, maximum price

(c)Market price, minimum acceptable price

(d)Willingness to pay price, actual price

Answer 1

There is a negative relationship between the change in the price of a good and the change in consumer surplus.in a market. With an increase in price of a good, the consumer surplus falls and vice versa. Also there is direct or positive relation between price of a good and producer surplus.

The price that wheat farmers receive for a bushel of wheat in a market is $8.50 per bushel and the minimum price they will accept to produce that bushel of wheat is $4.75 The producers will have surplus of 8.50-4.75 = $3.75. So answer is YES they will experience improvement in their welfare because they are getting more than what they are willing to accept for their produce.

If the initial area of a farmer’s surplus is calculated to be $185 and a subsequent calculation of the farmer’s surplus is $243, the net difference in the farmer’s surplus is 243-185 = $58.

The difference between the monetary values of the farmer’s surplus referenced in Q#51 is a Signal that the farmer’s market price has increased. There is a direct relation between price of a good and producer surplus. The farmer must have gained from an increase in price.The statement that a Signal that the farmer’s market price has decreased is FALSE.

Given ceteris paribus, would consumer surplus be expected to fall for the consumers in the market referenced. This is clear that the market price must have increased. increase price will result in decreased consumer surplus and increased producer/farmer surplus or welfare..

Producers’ surplus is the difference between the market price for a good and the minimum acceptable price for a good.