Consumer Surplus Quiz
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Questions and Answers

What is consumer surplus?

  • The maximum price at which consumers would buy a good
  • The sum of the individual producer surpluses of all the sellers of a good
  • The difference between market price and what consumers would be willing to pay (correct)
  • The net gain to a seller from selling a good

What is total consumer surplus?

  • The sum of the individual consumer surpluses of all the buyers of a good (correct)
  • The difference between market price and what consumers would be willing to pay
  • The net gain to a seller from selling a good
  • The maximum price at which consumers would buy a good

How does a fall in the price of a good affect consumer surplus?

  • It increases consumer surplus through gains to producers who would have supplied the good even at the original, lower price
  • It has no effect on consumer surplus
  • It decreases consumer surplus through losses to consumers who would have bought at the original price and those who are persuaded to buy by the lower price
  • It increases consumer surplus through gains to consumers who would have bought at the original price and those who are persuaded to buy by the lower price (correct)

What is producer surplus?

<p>The net gain to a seller from selling a good (C)</p> Signup and view all the answers

What is total producer surplus?

<p>The sum of the individual producer surpluses of all the sellers of a good (C)</p> Signup and view all the answers

How does an increase in the price of a good affect producer surplus?

<p>It increases producer surplus through gains of those who would have supplied the good even at the original, lower price and... (C)</p> Signup and view all the answers

What is the total surplus generated in a market?

<p>The sum of the producer and the consumer surplus (B)</p> Signup and view all the answers

Why are both consumers and producers better off in a market?

<p>There are gains from trade (B)</p> Signup and view all the answers

What does market equilibrium do?

<p>Allocates consumption of the good to potential buyers who value it the most (C)</p> Signup and view all the answers

What are property rights in well-functioning markets?

<p>Rights of owners of valuable items to dispose of those items as they choose (C)</p> Signup and view all the answers

What are economic signals in well-functioning markets?

<p>Pieces of information that help people make better economic decisions (D)</p> Signup and view all the answers

What can cause markets to be inefficient?

<p>Gains from trade (D)</p> Signup and view all the answers

Why do societies sometimes choose to have governments intervene in markets?

<p>To increase equity even though it reduces efficiency (B)</p> Signup and view all the answers

What are some features that contribute to well-functioning markets?

<p>Property rights (C)</p> Signup and view all the answers

What is the total surplus generated in a market?

<p>The sum of the producer and the consumer surplus (B)</p> Signup and view all the answers

What do property rights refer to in well-functioning markets?

<p>The rights of owners to dispose of valuable items as they choose (B)</p> Signup and view all the answers

What is an economic signal in well-functioning markets?

<p>Any piece of information that helps people make better economic decisions (A)</p> Signup and view all the answers

Why do societies sometimes choose to have governments intervene in markets?

<p>To increase equity, even though it reduces efficiency (C)</p> Signup and view all the answers

How does market equilibrium maximize total surplus?

<p>By allocating consumption of the good to potential buyers who value it the most and allocating sales to potential sellers who most value the right to sell the good. (D)</p> Signup and view all the answers

What are some reasons for market inefficiency?

<p>Market power, externalities, information asymmetry, and public goods. (A)</p> Signup and view all the answers

What is consumer surplus?

<p>The difference between what a consumer is willing to pay for a good and what they actually pay (A)</p> Signup and view all the answers

What do well-functioning markets owe their effectiveness to?

<p>Property rights and the role of prices as economic signals (D)</p> Signup and view all the answers

What does market equilibrium ensure about transactions?

<p>It ensures that every consumer who makes a purchase values the good more than every seller who makes a sale, so that all transactions are mutually beneficial. (D)</p> Signup and view all the answers

What are some features that contribute to well-functioning markets?

<p>Property rights, economic signals, market equilibrium. (B)</p> Signup and view all the answers

What is producer surplus?

<p>The difference between what a producer receives for a good and the minimum amount they are willing to accept (B)</p> Signup and view all the answers

What is consumer surplus?

<p>The difference between market price and what consumers would be willing to pay (D)</p> Signup and view all the answers

How is total consumer surplus calculated?

<p>By summing the individual consumer surpluses of all buyers of a good (A)</p> Signup and view all the answers

What is individual producer surplus?

<p>The net gain to a seller from selling a good (A)</p> Signup and view all the answers

How is total producer surplus calculated?

<p>By summing the individual producer surpluses of all sellers of a good (C)</p> Signup and view all the answers

How does a fall in the price of a good affect consumer surplus?

<p>It increases consumer surplus through gains to consumers who would have bought at the original price and those who are persuaded to buy by the lower price (C)</p> Signup and view all the answers

How does an increase in the price of a good affect producer surplus?

<p>It increases producer surplus through gains of those who would have supplied the good even at the original, lower price and... (C)</p> Signup and view all the answers

What does willingness to pay for a good represent?

<p>The maximum amount a buyer is willing to pay for that good. (D)</p> Signup and view all the answers

What is potential seller's cost?

<p>The lowest price at which he or she is willing to sell a good. (C)</p> Signup and view all the answers

What does total consumer surplus represent?

<p>The sum of individual consumer surpluses of all buyers of a good. (B)</p> Signup and view all the answers

What happens when the price of a good rises with respect to producer surplus?

<p>Producer surplus increases through gains of those who would have supplied the good even at the original, lower price. (D)</p> Signup and view all the answers

What is consumer surplus?

<p>The difference between market price and what consumers would be willing to pay (A)</p> Signup and view all the answers

How is total consumer surplus calculated?

<p>By summing the individual consumer surpluses of all the buyers of a good (A)</p> Signup and view all the answers

What is producer surplus?

<p>The net gain to a seller from selling a good (D)</p> Signup and view all the answers

How is total producer surplus in a market calculated?

<p>By summing the individual producer surpluses of all the sellers of a good (B)</p> Signup and view all the answers

What happens when the price of a good rises with respect to producer surplus?

<p>Producer surplus increases through gains to those who would have supplied the good even at the original, lower price and gains to new suppliers (C)</p> Signup and view all the answers

How does an increase in the price of a good affect total producer surplus?

<p>Total producer surplus increases as the price of the good rises (B)</p> Signup and view all the answers

What does total surplus represent in a market?

<p>The total net gain to consumers and producers from trading in the market (A)</p> Signup and view all the answers

What does market equilibrium maximize?

<p>Total surplus (D)</p> Signup and view all the answers

What do well-functioning markets owe their effectiveness to?

<p>Property rights and economic signals (B)</p> Signup and view all the answers

What is an economic signal in well-functioning markets?

<p>Any piece of information that helps people make better economic decisions (A)</p> Signup and view all the answers

Why do societies sometimes choose to have governments intervene in markets?

<p>To increase equity, even though it reduces efficiency (D)</p> Signup and view all the answers

What is the reason behind everyone being better off participating in a market economy?

<p>The gains from trade (C)</p> Signup and view all the answers

What does property rights refer to in well-functioning markets?

<p>The rights of owners of valuable items to dispose of those items as they choose (A)</p> Signup and view all the answers

How does market equilibrium ensure that all transactions are mutually beneficial?

<p>It ensures that every potential buyer who doesn't make a purchase values the good less than every potential seller who doesn't make a sale (D)</p> Signup and view all the answers

Why are both consumers and producers better off because there is a market in this good?

<p>There are gains from trade (A)</p> Signup and view all the answers

What does total surplus represent in a market?

<p>The total net gain to consumers and producers from trading in the market (A)</p> Signup and view all the answers

What is an economic signal in well-functioning markets?

<p>Any piece of information that helps people make better economic decisions (D)</p> Signup and view all the answers

How does market equilibrium ensure that all transactions are mutually beneficial?

<p>By ensuring that every consumer who makes a purchase values the good more than every seller who makes a sale (B)</p> Signup and view all the answers

What are property rights in well-functioning markets?

<p>Rights of owners of valuable items to dispose of those items as they choose (A)</p> Signup and view all the answers

Why do societies sometimes choose to have governments intervene in markets?

<p>To increase equity even though it may reduce efficiency (C)</p> Signup and view all the answers

What is consumer surplus?

<p>The difference between what consumers are willing to pay for a good and what they actually pay (A)</p> Signup and view all the answers

What is producer surplus?

<p>The difference between what producers are willing to sell a good for and what they actually receive (C)</p> Signup and view all the answers

What does willingness to pay for a good represent?

<p>The maximum price a consumer is willing to pay for a unit of a good or service (B)</p> Signup and view all the answers

What can cause markets to be inefficient?

<p>Market power, externalities, information asymmetry, and public goods (C)</p> Signup and view all the answers

What do well-functioning markets owe their effectiveness to?

<p>Property rights and prices as economic signals (B)</p> Signup and view all the answers

What does market equilibrium maximize?

<p>Total surplus by allocating consumption and sales efficiently (D)</p> Signup and view all the answers

What is consumer surplus?

<p>The difference between market price and what consumers would be willing to pay (D)</p> Signup and view all the answers

How is total consumer surplus calculated?

<p>By summing the individual consumer surpluses of all the buyers of a good (B)</p> Signup and view all the answers

What does individual producer surplus represent?

<p>The net gain to a seller from selling a good (C)</p> Signup and view all the answers

How does an increase in the price of a good affect producer surplus?

<p>Producer surplus increases through two channels (B)</p> Signup and view all the answers

What is total producer surplus in a market?

<p>The sum of individual producer surpluses of all the sellers of a good (A)</p> Signup and view all the answers

What happens when the price of a good rises with respect to consumer surplus?

<p>Consumer surplus increases through two channels (B)</p> Signup and view all the answers

What does total surplus represent in a market?

<p>The sum of individual consumer surpluses of all the buyers of a good and individual producer surpluses of all the sellers of that good (B)</p> Signup and view all the answers

What does willingness to pay for a good represent?

<p>The maximum price at which consumers would buy that good and sellers are willing to sell it (A)</p> Signup and view all the answers

What do well-functioning markets owe their effectiveness to?

<p>Property rights, well-defined rules, enforcement mechanisms, and low transaction costs. (B)</p> Signup and view all the answers

How does market equilibrium ensure that all transactions are mutually beneficial?

<p>By ensuring that supply equals demand so that there is no excess supply or excess demand. (C)</p> Signup and view all the answers

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