Consumer surplus for an individual buyers paper


Consumer surplus for an individual buyer is equal to:

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the consumer’s willingness to pay for the good, minus the marginal cost of producing the good.

the price of the good, minus the marginal cost of producing the good.

the consumer’s willingness to pay for the good, minus the price of the good.

the marginal cost of the good, minus the consumer’s willingness to pay for the good.




Along a given demand curve, an increase in the price of a good will cause consumer surplus to:



not change.

The answer cannot be determined without information about the supply curve.



Along a given supply curve, a decrease in price will cause producer surplus to:



stay the same.

We cannot determine what producer surplus will do without information about the demand curve.


Reference: Ref 4-5


(Table: Music Downloads) Two consumers, Eli and Madison, like to download songs to their MP3 players. The table represents their willingness to pay for each downloaded song. If an individual song can be downloaded at a price of $1, what is the total consumer surplus received by these consumers?

A) $19.25 B) $18

C) $10 D) $11



Maria wants to get rid of her bookshelf. She is willing to give it away for free but her neighbor offers to pay $30 for it. Maria experiences a:

gain of consumer surplus.

loss of consumer surplus.

gain of producer surplus.

loss of producer surplus.



Producer surplus for an individual seller is equal to:

the price of the good, minus the marginal cost of producing the good.

the cost of the good, minus the willingness to pay for the good.

the willingness to pay for the good, minus the price of the good.

the cost of the good, minus the price of the good.


Reference: Ref 4-1


(Table: Consumer Surplus and Phantom Tickets) If the box-office price of a ticket to see Phantom of the Opera is $50, and there is no other market for tickets, then total consumer surplus for the five students is:

A) $100. B) $175. C) $230. D) $240.




Adie wants to take some online classes this semester. She is willing to pay $1,000 for the first class, $800 for the second, $700 for the third, and $500 for the fourth. If online classes cost $750, Adie will take

online classes and her consumer surplus will equal     .

A) 3; $350

B) 4; $600

C) 2; $400

D) 2; $300


Reference: Ref 4-13


(Figure: Producer Surplus III) If the price of the good increases from $3 to $4, producer surplus will increase by:

A) $5.

B) $15.

C) $25.

D) $35.



If a frost destroys much of the grapefruit crop, total surplus:

will increase.

will decrease.

will not change.

may change, but we cannot determine the change without more information.



If the market for grapefruit is in equilibrium without any government intervention:

total surplus is minimized.

there is some deadweight loss.

a few mutually beneficial trades are missed.

consumer and producer surplus are maximized.

the sum of the individual producer surpluses in this market.

the sum of all prices paid multiplied by the number of gallons of milk sold.

the total revenue of the milk producers in Wisconsin.

the total cost of selling milk in Wisconsin.




Figure: Gains from Trade


Reference: Ref 4-18


(Figure: Gain from Trade) As demand decreases from D2 to D1, total surplus:


does not change.


is indeterminant.



Suppose apartments rent for $1,600 in Boston. If the city of Boston forces each landlord to charge $1,200, there will be:

an increase in producer surplus for each landlord.

a surplus of new apartments in Boston.

an increase in consumer surplus for Bostonians who can find apartments for $1,200.

an increase in total surplus.

will increase.

will decrease.

will not change.

may change, but we cannot determine the change without more information.




If the cost to download a song from the Internet onto an MP3 player falls from $0.99 to $0.50, then we would predict that producer surplus would   in the market for MP3 players.



not change

We cannot determine what producer surplus will do without information about consumer surplus.




If total surplus falls, which of the following must have occurred?

There was an increase in demand or a decrease in supply.

There was an increase in demand and an increase in supply.

There was a decrease in demand or a decrease in supply.

There was a decrease in demand and an increase in supply.

Figure: Market for Sandwiches


Reference: Ref 4-27


(Figure: Market for Sandwiches) Referring again to the market for sandwiches during the lunch hour at a local deli, how much total surplus would be lost if a quota dictated that only eight sandwiches could be legally exchanged at a price of $5?

A) $3 B) $72 C) $27 D) $32



An excise tax is a tax charged on:

each unit of a good or service that is sold.


the ownership of real estate.

the inheritance of assets.



If the income elasticity of demand for a good is negative, the good is said to be a(n):

inferior good.

negative good.

positive good.

normal good.

If two goods are complements, their cross-price elasticity of demand should be:

less than 0.

equal to 0.

positive, yet almost equal to 0.

greater than 0.




If the absolute value of the price elasticity of demand is found to be 6, then demand is:



price unit-elastic.





Assume that as your income increases, your consumption of burgers increases. We can assume that burgers are considered a(n):

negative good.

positive good.

inferior good.

normal good.




Goods A and B have a positive cross-price elasticity of demand. This means Goods A and B are:

normal goods.



inferior goods.



Suppose at a price of $10, the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between the prices of $10 and $8, using the midpoint method, is approximately:

A) 1.17.

B) 1.50.

C) 0.85.

D) 1.00.


Gas prices recently increased by 25%. In response, purchases of gasoline decreased by 5%. Based on this data, the price elasticity of demand for gas is:


2. C) 0.2. D) 0.5.



A good is likely to have an inelastic demand curve if:

the consumer has significant time to respond to the price change.

the good has few available substitutes.

the good is a luxury.

the good accounts for a large share of consumer income.




If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the price of shirts increases from $8 to $12, then, for you, shoes and shirts are considered:

inferior goods.

luxury goods.

substitute goods.

complementary goods.




Generally speaking, a tax leads to a(n)           in consumer surplus and a(n)  in producer surplus.

increase; increase

increase; decrease

decrease; increase

decrease; decrease

Figure: Demand Curve for Crossings


Reference: Ref 5-14


(Figure: Demand Curve for Crossings) In the figure, demand is price          between $0.90 and $1.10, since total revenue   when price       .

-elastic; increases; decreases

-inelastic; stays the same; decreases

unit-elastic; stays the same; increases

-inelastic; increases; increases



Scenario: Price Elasticity

When calculating price elasticity with the following data, please use the midpoint method and take the absolute value.


Demand and Price Elasticity

Reference: Ref 5-6


(Scenario: Price Elasticity) Using the midpoint formula, what is the price elasticity of demand between

$1.75 and $1.50?

A) 0.42

B) 1.5

C) 1.86

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