478 ? Chapter 7/Consumers, Producers, and the Efficiency of Markets
67. Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for
$3,000. Michael's consumer surplus is a. $500. b. $3,000. c. $3,500. d. $6,500.
ANS: A
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
68. Denise values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is
$650. Denise
a. buys the dishwasher, and on her purchase she experiences a consumer surplus of $150. b. buys the dishwasher, and on her purchase she experiences a consumer surplus of $-150.
c. does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $150. d. does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $0.
ANS: D
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
69. Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's
willingness to pay is a. $13,000. b. $105,000. c. $118,000. d. $131,000.
ANS: D
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Willingness to pay
70. Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and
realizes consumer surplus of $700. How much did Jeff pay for his computer? a. $700 b. $2,300 c. $3,000 d. $3,700
ANS: B
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
71. Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs
but buys them on sale for $575. Cameron's consumer surplus from the purchase is a. $175. b. $575. c. $750. d. $1,325.
ANS: A
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
72. If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer
surplus relevant to that purchase is a. zero.
b. negative, and the consumer would not purchase the product. c. positive, and the consumer would purchase the product.
d. There is not enough information given to answer this question.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
Chapter 7/Consumers, Producers, and the Efficiency of Markets ? 479
73. Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to
consumer surplus in the market for lemons? a. Consumer surplus increases. b. Consumer surplus decreases.
c. Consumer surplus is not affected by this change in market forces.
d. We would have to know whether the demand for lemons is elastic or inelastic to make this
determination.
ANS: B
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
74. Suppose your own demand curve for tomatoes slopes downward. Suppose also that, for the last tomato you
bought this week, you paid a price exactly equal to your willingness to pay. Then a. you should buy more tomatoes before the end of the week. b. you already have bought too many tomatoes this week.
c. your consumer surplus on the last tomato you bought is zero.
d. your consumer surplus on all of the tomatoes you have bought this week is zero.
ANS: C
NAT: Analytic MSC: Analytical
DIF: 3 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
75. Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25).
If there are five buyers in the market, then
a. the marginal buyer's willingness to pay for the 100th unit of the good is $25.
b. the sum of the five buyers' willingness to pay for the 100th unit of the good is $25. c. the average of the five buyers' willingness to pay for the 100th unit of the good is $25. d. all of the five buyers are willing to pay at least $25 for the 100th unit of the good.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Marginal buyer
76. If the cost of producing sofas decreases, then consumer surplus in the sofa market will
a. increase. b. decrease.
c. remain constant.
d. increase for some buyers and decrease for other buyers.
ANS: A
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
77. All else equal, what happens to consumer surplus if the price of a good increases?
a. Consumer surplus increases. b. Consumer surplus decreases. c. Consumer surplus is unchanged.
d. Consumer surplus may increase, decrease, or remain unchanged.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
78. All else equal, what happens to consumer surplus if the price of a good decreases?
a. Consumer surplus increases. b. Consumer surplus decreases. c. Consumer surplus is unchanged.
d. Consumer surplus may increase, decrease, or remain unchanged.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
480 ? Chapter 7/Consumers, Producers, and the Efficiency of Markets 79. Which of the following will cause an increase in consumer surplus?
a. an increase in the production cost of the good
b. a technological improvement in the production of the good c. a decrease in the number of sellers of the good d. the imposition of a binding price floor in the market
ANS: B
NAT: Analytic MSC: Applicative
DIF: 3 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
80. Which of the following will cause a decrease in consumer surplus?
a. an increase in the number of sellers of the good b. a decrease in the production cost of the good
c. sellers expect the price of the good to be lower next month d. the imposition of a binding price floor in the market
ANS: D
NAT: Analytic MSC: Interpretive
DIF: 3 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
81. When there is a technological advance in the ice cream industry, consumer surplus in that market will
a. increase. b. decrease.
c. not change, since technology affects producers and not consumers.
d. not change, since consumers’ willingness to pay is unaffected by the technological advance.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
82. If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?
a. Consumer surplus increases. b. Consumer surplus decreases.
c. Consumer surplus will not change consumer surplus; only producer surplus changes. d. Consumer surplus depends on what event led to the increase in the price of oak lumber.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
83. Which of the following is not true when the price of a good or service falls?
a. Buyers who were already buying the good or service are better off. b. Some new buyers, who are now willing to buy, enter the market. c. The total consumer surplus in the market increases.
d. The total value of purchases before and after the price change is the same.
ANS: D DIF: 2 REF: 7-1 NAT: Analytic LOC: Supply and demand TOP: Consumer surplus | Willingness to pay MSC:
Interpretive
84. When the demand for a good increases and the supply of the good remains unchanged, consumer surplus
a. decreases. b. is unchanged. c. increases.
d. may increase, decrease, or remain unchanged.
ANS: D
NAT: Analytic MSC: Applicative
DIF: 3 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
Chapter 7/Consumers, Producers, and the Efficiency of Markets ? 481
85. Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result,
consumer surplus in the television market a. decreases. b. is unchanged. c. increases.
d. may increase, decrease, or remain unchanged.
ANS: D
NAT: Analytic MSC: Applicative
DIF: 3 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
86. Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline
market
a. decreases. b. is unchanged. c. increases.
d. may increase, decrease, or remain unchanged.
ANS: D
NAT: Analytic MSC: Applicative
DIF: 3 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
87. Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a
change in his tastes such that he values strawberries more than before. If the market price is the same as before, then
a. Dallas's consumer surplus would be unaffected. b. Dallas's consumer surplus would increase. c. Dallas's consumer surplus would decrease.
d. Dallas would be wise to buy fewer strawberries than before.
ANS: B
NAT: Analytic MSC: InterpretiveFigure 7-1
PriceDIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
AP2BP1CDFDemandQ2Q1Quantity88. Refer to Figure 7-1. When the price is P1, consumer surplus is
a. A. b. A+B. c. A+B+C. d. A+B+D.
ANS: C
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
482 ? Chapter 7/Consumers, Producers, and the Efficiency of Markets 89. Refer to Figure 7-1. When the price is P2, consumer surplus is
a. A. b. B. c. A+B. d. A+B+C.
ANS: A
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
90. Refer to Figure 7-1. When the price rises from P1 to P2, consumer surplus
a. increases by an amount equal to A. b. decreases by an amount equal to B+C. c. increases by an amount equal to B+C. d. decreases by an amount equal to C.
ANS: B
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
91. Refer to Figure 7-1. Area C represents the
a. decrease in consumer surplus that results from a downward-sloping demand curve.
b. consumer surplus to new consumers who enter the market when the price falls from P2 to P1. c. increase in producer surplus when quantity sold increases from Q2 to Q1.
d. decrease in consumer surplus to each consumer in the market when the price increases from P1 to
P2.
ANS: B
NAT: Analytic MSC: Applicative
DIF: 3 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus
92. Refer to Figure 7-1. When the price rises from P1 to P2, which of the following statements is not true?
a. The buyers who still buy the good are worse off because they now pay more.
b. Some buyers leave the market because they are not willing to buy the good at the higher price. c. Buyers place a higher value on the good after the price increase. d. Consumer surplus in the market falls.
ANS: C
NAT: Analytic MSC: Applicative
DIF: 3 REF: 7-1 LOC: Supply and demand
TOP: Consumer surplus