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ECON 2100 SECTION 04 FALL 2021.pdf
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Study Guide for Exam 2 ECON 2100 SECTION 04 FALL 2021Multiple Choice
____ 1. Welfare economics is the study of
a. the well-being of less fortunate people.
b. welfare programs in the United States.
c. how the allocation of resources affects economic well-being.
d. the effect of income redistribution on work effort.
____ 2. On a graph, the area below a demand curve and above the price measures
a. producer surplus.
b. consumer surplus.
c. deadweight loss.
d. willingness to pay.
Table 7-4
The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St.
Louis Cardinal’s baseball game at Wrigley Field.
Buyer Willingness to Pay
Jennifer $10
Bryce $15
Dan $20
David $25
Ken $50
Lisa $60
____ 3. Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus
in the market?
a. $25
b. $35
c. $60
d. $110
____ 4. A drought in California destroys many red grapes. As a result of the drought, the
consumer surplus in the market for red grapes
a. increases, and the consumer surplus in the market for red wine increases.
b. increases, and the consumer surplus in the market for red wine decreases.
c. decreases, and the consumer surplus in the market for red wine increases.
d. decreases, and the consumer surplus in the market for red wine decreases.
____ 5. Chad is willing to pay $5.00 to get his first cup of morning latté. He buys a cup from a
vendor selling latté for $3.75 per cup. Chad's consumer surplus is
a. $8.75.
b. $5.00.
c. $3.75.
d. $1.25.
1
,____ 6. 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.
Figure 7-1
Price
A
P2
B
C
P1
D F
Demand
Q2 Q1 Quantity
____ 7. Refer to Figure 7-1. When the price is P2, consumer surplus is
a. A.
b. B.
c. A+B.
d. A+B+C.
____ 8. 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.
Figure 7-2
2
, Price
A
B D
P1
C F G
P2
Demand
Q1 Q2 Quantity
____ 9. Refer to Figure 7-2. When the price falls from P1 to P2, which area represents the
increase in consumer surplus to new buyers entering the market?
a. ABD
b. ACG
c. BCDF
d. DFG
Figure 7-4
Price
170
160
150 Supply
140
130
120
110
100
90
80
70
60
50
40
30
20
10
Demand
25
2 4 5 6 8 10 12 14 16 18 20 22 24 26 28 Quantity
____ 10. Refer to Figure 7-4. If the government imposes a price floor of $120 in this market,
then consumer surplus will decrease by
a. $75.
b. $125.
c. $225.
3
, d. $300.
Figure 7-5
Price
250
225
200
175
150
125
100
75
50
25
Demand
25 50 75 100 125 150 Quantity
____ 11. Refer to Figure 7-5. What is the consumer surplus if the price is $100?
a. $2,500
b. $5,000
c. $10,000
d. $20,000
____ 12. A seller’s opportunity cost measures the
a. value of everything she must give up to produce a good.
b. amount she is paid for a good minus her cost of providing it.
c. consumer surplus.
d. out of pocket expenses to produce a good but not the value of her time.
____ 13. If Roberta sells a shirt for $30, and her producer surplus from the sale is $23, her cost
must have been
a. $53.
b. $30.
c. $7.
d. We would have to know the consumer surplus in order to make this determination.
____ 14. Ronnie operates a lawn-care service. On each day, the cost of mowing the first lawn is
$10, the cost of mowing the second lawn is $12, and the cost of mowing the third lawn is $15. His
producer surplus on the first three lawns of the day is $53. If Ronnie charges all customers the same price
for lawn mowing, that price is
a. $25.
b. $30.
c. $36.
d. $45.
Table 7-7
The only four producers in a market have the following cost:
Seller Cost
Charlie $50
4
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