Macroeconomics Canadian 1st Edition Karlan Test Bank 1

Test Bank for Macroeconomics Canadian 1st Edition
Karlan Morduch Alam Wong 007026094X

9780070260948
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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) In economics, the concept of surplus:

A) is the worst way to look at the benefits people receive from successful transactions.
B) measures the benefit that people receive when they sell something for less than they would
have been willing to accept.
C) measures the benefit that people receive when they buy something for more than they would
have been willing to pay.
D) measures the benefit that people receive when they buy something for less than they would
have been willing to pay.
Answer: D
2) The concept of surplus can:

A) show who benefits from a tax. B) show who loses from minimum wage.
C) show who loses from international trade. D) show any of these.
Answer: D
3) The maximum price that a buyer would be willing to pay for a good or service is also called:
A) the reservation price. B) the reserved max price.
C) the buyer-max price. D) None of these terms is used.
Answer: A
4) A consumer's willingness to pay:

A) is the minimum price that a buyer would be willing to pay for a good or service.
B) is his or her reserved minimum bid-price.
C) must always equal the seller's willingness to sell.
D) is the maximum price that a buyer would be willing to pay for a good or service.
Answer: D
1
5) Which of the following prices could represent Sally's willingness to pay for a pair of shoes if she
bought them for $45?
A) $55.00 B) $15.00 C) $25.00 D) $44.99
Answer: A
6) If Billy's reservation price on a snowboard is $250, how many snowboards would he buy if the
market price of snowboards is $500?
A) 2
B) 0
C) 1
D) The amount of snowboards purchased would depend on Billy's income.
Answer: B
2
7) If Claire's reservation price on a sweater is $37, which of the following prices would she have to
observe in the market in order to buy a sweater?
A) $37.01
B) $38.00
C) $37.00
D) Claire would not buy a sweater at any of these prices.
Answer: C
8) Which of the following prices could represent Eli's willingness to pay for a baseball glove if he
observed the market price of $43 and decided not to buy one?
A) $50
B) $45
C) $37
D) None of these could represent Eli's willingness to pay.
Answer: C
9) A seller's willingness to sell:

A) is his or her reserved minimum bid-price.
B) must always equal the buyer's willingness to buy.
C) is the maximum price that a seller is willing to accept in exchange for a good or service.
D) is the minimum price that a seller is willing to accept in exchange for a good or service.
Answer: D
10) A buyer always wants to:

A) buy for a price that is as low as possible, but never lower than his minimum. B)
buy for a price that is as high as possible, but never lower than his minimum. C)
buy for a price that is as low as possible, but never higher than his maximum. D)
buy for a price that is as high as possible, but never higher than his maximum.
Answer: C
11) Willingness to pay represents:

A) The lowest price a buyer would take it for.
B) The lowest price a seller is willing to sell for.
C) the point at which the benefit that a person will get from a good is equal to the benefit of
spending the money on another alternative.
D) the buyer's desire for a product.
Answer: C
12) The willingness to pay of buyers' in a market:

A) is represented by the demand curve.
B) explains why the demand curve is bowed-in.
C) is represented by the supply curve.
D) explains why the demand curve is bowed-out.
Answer: A
3
13) At prices above a consumers' reservation price:
A) the buyer will purchase the good.
B) the opportunity cost is less than the benefit from having the good.
C) the opportunity cost is greater than the benefit from having the good.
D) None of these is true.
Answer: C
14) At prices below a consumer's maximum willingness to pay:

A) the buyer will not participate in the market because the opportunity cost is less than the benefit
from consuming the good.
B) the buyer will participate in the market because the opportunity cost is more than the benefit
C) the buyer will not participate in the market because the opportunity cost is more than the
benefit from consuming the good.
D) the buyer will participate in the market because the opportunity cost is less than the benefit
Answer: D
15) When someone's willingness to pay is the same as the actual price paid for an item:
A) the individual will not purchase the item. B) surplus cannot be maximized.
C) the individual's surplus is zero. D) All of these are true.
Answer: C
16) When Bob's willingness to pay for a cup of coffee is $1, and the price of a cup of coffee is $1:
A) Bob will have negative surplus by purchasing the coffee.
B) Bob is indifferent about purchasing the coffee.
C) Bob will get extra surplus by purchasing the coffee.
D) Bob will get less surplus by purchasing the coffee.
Answer: B
17) Surplus is:

A) maximized for individuals whose reservation price equals the market price.
B) a better measure of the value that buyers and sellers get from participating in a market than
price itself.
C) negative for those who do not participate in a market.
D) All of these are true.
Answer: B
18) Each seller's opportunity costs are:

A) determined by a number of factors, none of which is monetary.
B) determined by a number of factors, including monetary considerations.
C) determined monetarily, which is why they can never be zero.
Answer: B
4
19) If Thelma's willingness to sell her homemade fudge is $4, then at which of the following prices
would Thelma sell her fudge?
A) $3.99
B) $2
C) $4.01
D) Thelma would not sell her fudge at any of these prices.
Answer: C
20) If Sam's opportunity cost of a sweater is $37, which of the following prices would he have to
observe in the market in order to sell a sweater?
A) $37
B) $50
C) $37.01
D) Sam would sell a sweater at any of these prices.
Answer: D
21) Surplus is:

A) how much money the supplier made.
B) how much extra quantity is produced.
C) How much extra product was created.
D) a way of measuring who gains from transactions and by how much.
Answer: D
22) Surplus is:

A) how much the supplier made
B) the difference between the willingness to pay and the actual price paid.
C) how much extra quantity is produced.
D) how much extra product was created.
Answer: B
23) A market has four individuals, each considering buying a grill for his backyard. Further assume that
grills come in only one size and model. Abe considers himself a grill-master, and finds a grill a
necessity, so he is willing to pay $400 for a grill. Butch is a meat-lover, honing his grilling skills,
and is willing to pay $350 for a grill. Collin just met the girl of his dreams, and she loves a good
grilled steak, so in his effort to impress her he is willing to pay $320 for a grill. Daniel loves grilled
shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every
time he wants grilled shrimp, so he is willing to pay $200 for a grill. If the market price of grills is
$300, given the scenario described, the total consumer surplus would be:
A) $1,070. B) $200.
C) $170. D) None of these is true.
Answer: C
5
time he wants grilled shrimp, so he is willing to pay $200 for a grill. Given the scenario described, if
the market price of grills is $320, who participates in the market?
A) Only Daniel participates. B) Only Abe and Butch participate.
C) Only Abe, Butch, and Collin participate. D) Only Collin and Daniel participate.
Answer: C
time he wants grilled shrimp, so he is willing to pay $200 for a grill. If the market price of grills
increases from $300 to $320, given the scenario described:
A) Daniel drops out of the market.
B) Collin is the only consumer who would be affected in terms of surplus.
C) Collin loses any surplus he had.
D) Collin drops out of the market
Answer: C
time he wants grilled shrimp, so he is willing to pay $200 for a grill. If the market price of grills
increases from $310 to $350, given the scenario described:
A) total consumer surplus would rise.
B) total consumer surplus would fall.
C) Collin would experience a decrease in consumer surplus, but Abe and Butch would experience
a rise in consumer surplus.
D) Collin and Butch would experience a decrease in consumer surplus, but Abe's consumer
surplus would rise.
Answer: B
6
$350, given the scenario described, total consumer surplus would be:
A) $400. B) $50. C) $750. D) $870.
Answer: B
$320, given the scenario described, Abe's consumer surplus would be:
A) $80. B) $320. C) $400. D) $350.
Answer: A
time he wants grilled shrimp, so he is willing to pay $200 for a grill. If the market price of grills falls
from $375 to $330, given the scenario described, which of the following can be said?
A) Butch will join the market, but receive no consumer surplus.
B) Abe will experience an increase in consumer surplus of $45.
C) Abe will experience a decrease in consumer surplus of $45.
D) Butch and Collin will join the market, and together will receive $30 in consumer surplus.
Answer: B
7
time he wants grilled shrimp, so he is willing to pay $200 for a grill. Given the scenario described, if
the market price of grills falls from $395 to $340, then we can say:
A) Abe's consumer surplus decreases from $60 to $5, and total consumer surplus decreases from
$70 to $5.
B) Abe's consumer surplus increases from $5 to $60, and total consumer surplus increases from $5
to $70.
C) Butch's consumer surplus decreases from $10 to $0, and total consumer surplus increases from
$10 to $80.
D) Collin's consumer surplus increases from $0 to $20, and total consumer surplus increases from
$5 to $70.
Answer: B
31) Assuming the market is in equilibrium in the graph shown with demand D, supply S 1 and equilibriu
quantity of 5 units. Consumer surplus is:
A) $10. B) $9. C) $5. D) $45.

Answer: C
8
32) Assume the market is in equilibrium in the graph shown at demand D and supply S1 (and a quantity
supply curve shifts to S2, and a new equilibrium is reached (at a quantity of 7), which of the followin
A) Consumer surplus decreases by $9. B) Consumer surplus increases by $5.

C) Consumer surplus increases by $9. D) Consumer surplus decreases by $5.
Answer: C
33) What consumer surplus is received by someone whose willingness to pay is $35 below the market
price of a good?
A) ($35 x P*) B) $0
C) $35 D) None of these is correct.
Answer: B
9
34) According to the graph shown, consumer surplus is:
A) $120 B) $36. C) $72. D) None of these.

Answer: B
10
A) the area above the supply curve and below the price.
B) the area under the demand curve and above the market price.
C) the area above the demand curve and below the price.
D) the area under the supply curve and above the price.
Answer: B
10
36) According to the graph shown, if the market is in equilibrium, consumer surplus is:
A) $30. B) $20. C) $60. D) $50.

Answer: A
37) According to the graph shown, if the market is in equilibrium, consumer surplus is area:
A) D + E. B) A + B + C.
C) A + B + C + D + E. D) A.
Answer: B
11
38) Assume there are three hardware stores in the market for hammers and that all three markets
produce a single, standard model hammer. House Depot is an enormous mass producer of hammers
and can offer a hammer for sale for a minimum of $7. Lace Hardware is a franchise and can offer
the hammer for sale for a minimum of $10. Bob's Hardware store is a family owned and operated,
independent hardware store and can offer hammers at a minimum price of $13. Given the scenario
described, if the market price of hammers was $13, then total producer surplus would be:
A) $30. B) $7. C) $9. D) $17.
Answer: C
A) $45. B) $15. C) $30. D) $90.

Answer: B
described, if the market price of hammers was $12, then total producer surplus would be:
A) $9. B) $7. C) $17. D) $30.
Answer: B
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described, if the market price of hammers was $10, then:
A) only House Depot and Bob's Hardware would supply hammers to the market.
B) House Depot, Lace Hardware, and Bob's Hardware would all supply hammers to the market,
but Bob's would lose surplus.
C) only House Depot and Lace Hardware would gain surplus by supplying hammers to the market.
D) only House Depot would gain surplus by supplying hammers to the market.
Answer: D
described, if the market price of hammers increased from $7 to $11:
A) both Bob's Hardware and Lace Hardware would lose surplus.
B) producer participation in the market would increase.
C) House Depot is the only producer that will gain surplus.
D) only Bob's Hardware would still lose surplus.
Answer: B
described, if the market price of hammers decreased from $15 to $13, which of the following can be
said with certainty?
A) Producer participation in the market would decrease.
B) Total producer surplus would decrease.
C) Producer participation in the market will not be affected.
D) Only Bob's Hardware will experience a drop in producer surplus.
Answer: B
13
described, if the market price of hammers decreased from $17 to $12:
A) producer participation in the market would decrease.
B) producer participation in the market would increase.
C) total producer surplus would remain unchanged.
D) producer participation in the market would not be affected.
Answer: A
A) total producer surplus would decrease from $9 to $5.
B) total producer surplus would decrease from $30 to $17.
C) total producer surplus would increase from $5 to $9.
D) total producer surplus would remain unchanged.
Answer: A
A) total producer surplus would fall by $4.
B) House Depot's producer surplus falls by $4.
C) producer surplus for each producer falls by $4.
D) total producer surplus falls by $8.
Answer: B
14
A) Bob's Hardware no longer sells hammers.
B) producer surplus for each producer falls by $5.
C) total producer surplus falls by $15.
D) total producer surplus falls by $5.
Answer: A
A) total producer surplus would increase.
B) total producer surplus would decrease.
C) total producer surplus would remain unchanged.
D) Total producer surplus cannot be determined with the information given.
Answer: C
A) producer participation in the market would decrease.
B) producer participation in the market would remain unchanged.
C) producer participation in the market would increase.
D) total producer surplus would increase by $2.
Answer: C
15
A) total producer surplus would increase by $9.
B) total producer surplus would increase by $4.
C) total producer surplus would increase by $3.
D) total producer surplus would increase by $6.
Answer: B
A) total producer surplus would decrease to $1.
B) total producer surplus would increase to $5. C)
total producer surplus would decrease to $7. D)
total producer surplus would increase to $17.
Answer: B
A) producer surplus would increase for each producer.
B) producer surplus would remain unchanged for Bob's Hardware.
C) producer surplus would increase by $4 for Lace Hardware.
D) producer surplus would increase only for House Depot.
Answer: B
described, if the market price of hammers increased from $8 to $12, total producer surplus would:
A) increase by $4 for House Depot. B) increase by $4 for each producer.
C) increase from $8 to $12. D) All of these statements are true.
Answer: A
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described, if the market price of hammers increased from $9 to $12, total producer surplus would
be:
A) $3. B) $17. C) $7. D) $6.
Answer: C
described, if the market price of hammers increased from $8 to $14, total producer surplus would:
A) increase from $7 to $30. B) increase from $8 to $14.
C) increase from $1 to $12. D) decrease from $14 to $8.
Answer: C
A) Lace Hardware's producer surplus would decrease by $3.
B) Bob's Hardware's producer surplus would increase.
C) House Depot's producer surplus would decrease by $4.
D) House depot’s producer surplus would increase by $4
Answer: D
17
57) Assuming the market is in equilibrium in the graph shown with demand is D and supply S 1 with an
equilibrium quantity of 5 units. Producer surplus is:
A) $7.50. B) $15. C) $10. D) $5.

Answer: A
18
58) Assume the market is in equilibrium in the graph shown at demand D and supply S1. If the supply cu
to S2, and a new equilibrium is reached, equilibrium quantity will increase from 5 to 7 units. Which
following is true?
A) Producer surplus decreases by $8.50. B) Producer surplus increases by $7.50.

C) Producer surplus decreases by $16. D) Producer surplus increases by $3.00.
Answer: D
59) What is the producer surplus earned by a seller whose willingness to sell is $10 below the market
price of a good?
A) $10 B) $0
C) (P* - $10) D) None of these is correct.
Answer: A
19
60) According to the graph shown, producer surplus is:
A) $120. B) $72. C) $36. D) None of these.

Answer: C
20
A) the area above the supply curve and below the price.
B) the area under the supply curve and above the price.
C) the area under the demand curve and above the market price.
D) the area above the demand curve and below the price.
Answer: A
21
62) According to the graph shown, if the market is in equilibrium, producer surplus is:
A) $50. B) $20. C) $60. D) $30.

Answer: B
63) According to the graph shown, if the market is in equilibrium, producer surplus is area:
A) A + B + C. B) A + B + C + D + E.
C) A. D) D + E.
Answer: D
22
A) $20. B) $2. C) $6. D) $10.

Answer: D
65) According to the graph shown, producer surplus is area:
A) B. B) A + B. C) A. D) A + B + C.
Answer: A
23
66) According to the graph shown, total surplus is area:
A) A. B) B. C) A + B. D) A + B + C.
Answer: C
67) According to the graph shown, consumer surplus is area:
A) A + B + C. B) A + B. C) A. D) B.
Answer: C
24
68) According to the graph shown, total surplus is:
A) $50. B) $90. C) $25. D) $130.

Answer: C
25
69) According to the graph shown:
A) consumer surplus is greater than producer surplus.

B) total surplus is smaller than consumer surplus.
C) total surplus is smaller than producer surplus.
D) producer surplus is greater than consumer surplus.
Answer: A
26
70) According to the graph shown, if the price increased (all else staying the same):
A) consumer surplus would decrease. B) total surplus would increase.

C) consumer surplus would increase. D) None of these statements is true.
Answer: A
27
71) According to the graph shown, if the price decreased (all else staying the same):
A) producer surplus would increase. B) total surplus would increase.

C) producer surplus would decrease. D) None of these statements is true.
Answer: C
28
72) Assume an equilibrium price of $7 and equilibrium quantity of 8 units at demand D and supply S 2 in
the graph shown. Total surplus is:
A) $16. B) $32. C) $4. D) $8.

Answer: B
29
73) Assuming the market is in equilibrium in the graph shown with demand D and supply S 2 at a quantit
of 8, consumer surplus is:
A) $32. B) $7.
C) $11. D) equal to producer surplus.
Answer: D
30
74) Assuming the market is in equilibrium in the graph shown with demand D and supply S 2 at a
quantity of 8, producer surplus is:
A) less than consumer surplus. B) $32.

C) greater than consumer surplus. D) equal to consumer surplus.
Answer: D
31
75) Assuming the market is in equilibrium in the graph shown with demand D and supply S 1, total
surplus is:
A) $32.
B) greater than total surplus when market is in equilibrium at D and S 2.
C) less than total surplus when market is in equilibrium at D and S 2.
D) the same as total surplus when market is in equilibrium at D and S 2.
Answer: C
32
76) Assuming the market is in equilibrium in the graph shown with demand D and supply S 1, consumer
surplus is:
A) $32.
B) the same as consumer surplus when market is in equilibrium at D and S 2.
C) greater than consumer surplus when market is in equilibrium at D and S 2.
D) less than consumer surplus when market is in equilibrium at D and S 2.
Answer: D
33
77) Assuming the market is in equilibrium in the graph shown with demand D, supply S 1 and equilibriu
quantity of 5 units. Total surplus is:
A) $15. B) $12.50. C) $5. D) $60.

Answer: B
34
78) Assume the market is in equilibrium in the graph shown at demand D and supply S 1. If the supply
curve shifts to S 2, and a new equilibrium is reached, which of the following is true?
A) Consumer surplus decreases, but producer surplus increases.

B) Both consumer and producer surplus increases.
C) Both consumer and producer surplus decreases.
D) Consumer surplus increases, but producer surplus decreases.
Answer: B
35
79) Assume the market is in equilibrium in the graph shown at demand D and supply S1 (at a quantity of
supply curve shifts to S2, and a new equilibrium is reached (at a quantity of 7), which of the followin
A) Total surplus increases by $15.50. B) Total surplus decreases by $12.50.

C) Total surplus decreases by $15.50. D) Total surplus increases by $12.50.
Answer: A
36
A) Consumer surplus decreases, and total surplus decreases.

B) Consumer surplus increases, andtotal surplus increases.
C) Consumer surplus decreases, and total surplus increases.
D) Consumer surplus increases, and total surplus decreases.
Answer: B
37
A) Producer surplus would increase, and total surplus would decrease.

B) Producer surplus would decrease, and total surplus would increase.
C) Producer surplus would increase, and total surplus would increase. D)
Producer surplus would decrease, and total surplus would decrease.
Answer: D
38
82) Assume the market is in equilibrium in the graph shown at demand D and supply S 2 (at a quantity
of 6). If the supply curve shifts to S1, and a new equilibrium is reached (at a quantity of 4), which of
following is true?
A) Total surplus would increase by $32. B) Total surplus would decrease by $16.50.
C) Total surplus would decrease by $14.00. D) Total surplus would increase by $7.50.
Answer: C
83) Total surplus:

A) can never fall below zero. B) can never be zero.
C) is always above zero. D) None of these is true.
Answer: A
84) Total surplus:

A) is always zero in an efficient market.
B) can never be negative.
C) can be negative when the market is not in equilibrium.
Answer: B
85) Total surplus:

A) is consumer surplus minus producer surplus.
B) is producer and consumer surplus combined.
C) is producer surplus minus consumer surplus.
Answer: B
39
86) According to the graph shown, if the market is in equilibrium, total surplus is:
A) $20. B) $30. C) $50. D) $60.

Answer: C
87) According to the graph shown, if the market is in equilibrium, total surplus is area(s):
A) D + E. B) A + B + C + D + E.
C) A + B + C. D) A.
Answer: B
40
88) When the market price is set above the equilibrium price:
A) producer surplus is increased B) efficiency occurs.
C) total surplus is maximized. D) consumer surplus is increased.
Answer: B
89) When the market price is set below the equilibrium price:
A) total surplus is not maximized. B) efficiency occurs.
C) producer surplus is increased. D) consumer surplus is increased.
Answer: A
90) When a market is not in equilibrium:

A) total surplus can be decreased by a change in market price.
B) total surplus can be increased by a change in market price.
C) the market is efficient.
D) there are exchanges that can make some worse off without someone becoming better off.
Answer: B
91) When a market is not in equilibrium:

A) the market is efficient.
B) there are no exchanges that can make some better off without someone becoming worse off.
C) total surplus is not maximized.
Answer: C
92) When a market is in equilibrium,

A) total surplus is maximized. B) producer surplus is minimized.
C) consumer surplus is minimized. D) All of these are true.
Answer: A
93) When a market is in equilibrium,

A) total well being of all participants in the market is as low as possible.
B) total surplus is minimized.
C) total surplus is maximized.
D) the market is inefficient.
Answer: C
94) When a market is efficient,

A) there is no exchange that can make anyone better off without someone becoming worse off.
B) only increased prices can benefit those involved.
C) a central planner must be involved.
Answer: A
41
95) Efficient markets:
A) can occur with a central planner. B) minimize total surplus
C) occur when a market is in disequilibrium. D) maximize total surplus.
Answer: D
96) According to the graph shown, if the market goes from equilibrium to having its price set at $10 then
A) consumer surplus (B + C) will transfer to producers.

B) consumer surplus will increase from (A + B + C) to (A) only.
C) consumer surplus will decrease from (A + B + C) to (A) only.
Answer: C
42
A) producer surplus will change from (D + B) to (D + E).

B) producer surplus will change from (D + E) to (D + E + B + C).
C) producer surplus will change from (D + E) to (D + B).
D) producer surplus will change from (B + C + D + E) to D only.
Answer: C
43
98) Assume the market was in equilibrium in the graph shown.
If the market price were set to $12, which of the following is true?
A) Consumers gain the surplus of those sellers who dropped out of the market.
B) For those still interacting in the market, some surplus is transferred from buyer to seller.
C) Producers gain the surplus of those buyers who dropped out of the market.
D) For those still interacting in the market, some surplus is transferred from seller to buyer.
Answer: B
44
If the market price were set to $6, which of the following is true?
A) For those still interacting in the market, some surplus is transferred from buyer to seller.
B) For those still interacting in the market, some surplus is transferred from seller to buyer.
C) Consumers gain the surplus of those sellers who dropped out of the market.
D) Producers gain the surplus of those buyers who dropped out of the market.
Answer: B
45
If the market price gets set to $7, which of the following is true?
A) Some producers gain surplus, but total surplus falls.

B) Some producers lose surplus, buttotal surplus rises.
C) Some consumers gain surplus, but total surplus falls.
D) Some consumers lose surplus, but total surplus rises.
Answer: C
46
If the market price gets set to $14, which of the following is true?
A) Some consumers lose surplus, but total surplus rises.

B) Some consumers gain surplus, but total surplus falls.
C) Some producers gain surplus, but total surplus falls.
D) Some producers lose surplus, but total surplus rises.
Answer: C
102) Assume a market price gets set artificially high–that is, it gets set above the equilibrium price. This
change means:
A) Every producer gains surplus, due to the higher price now being charged.
B) Every consumer loses surplus, and it all gets transferred to producers.
C) Some consumers drop out of the market, and those left lose some surplus.
Answer: C
103) Assume a market price gets set artificially low–that is, it gets set below the equilibrium price. This
change means:
A) Every consumer gains surplus, due to the lower price now being charged.
B) Some producers drop out of the market, and those left lose some surplus.
C) Every producer loses surplus, and it all gets transferred to consumers.
Answer: B
47
104) Assume a market that has an equilibrium price of $4. If the market price is set at $8, which of the
following is true?
A) All surplus is transferred from consumers to producers, and total surplus stays the same.
B) Some surplus is transferred from consumers to producers, but total surplus falls.
C) Some surplus is transferred from consumers to producers, causing total surplus to increase.
D) Some surplus is transferred from producers to consumers, but total surplus falls.
Answer: B
105) Assume a market that has an equilibrium price of $7. If the market price is set at $3, which of the
following is true?
A) Some surplus is transferred from consumers to producers, causing total surplus to increase.
B) All surplus is transferred from consumers to producers, and total surplus stays the same.
C) Some surplus is transferred from consumers to producers, but total surplus falls.
D) Some surplus is transferred from producers to consumers, but total surplus falls.
Answer: D
106) Assume a market that has an equilibrium price of $5. If the market price is set at $9, producer
surplus:
A) decreases for some because of fewer transactions taking place.
B) rises for some because of the increased price.
C) Both of these statements are true.
D) Neither of these statements is true.
Answer: C
107) Assume a market that has an equilibrium price of $8. If the market price is set at $7, consumer
surplus:
A) decreases for some because of fewer transactions taking place.
B) rises for some because of the decreased price.
C) Both of these statements are true.
D) Neither of these statements is true.
Answer: C
48
A) producer surplus rises by area B + C, but falls by area D + E.

B) producer surplus rises by area B, but falls by area E.
C) producer surplus rises by area B + C, but falls by area E.
D) producer surplus rises by area B, but falls by area D + E.
Answer: B
49
A) area (B + C) gets transferred from producer to consumer.

B) area B gets transferred from producer to consumer.
C) area (B + C) gets transferred from consumer to producer.
D) area B gets transferred from consumer to producer.
Answer: D
50
A) all consumer surplus lost is gained by producers.

B) $12 gets transferred from consumer to producer in surplus.
C) all producer surplus lost is gained by consumers.
D) $12 gets transferred from producer to consumer in surplus.
Answer: B
51
A) area D is lost surplus due to fewer transactions taking place.

B) area B gets transferred from consumer surplus to producer surplus.
C) area A is lost surplus due to fewer transactions taking place.
Answer: B
52
A) $12 of surplus gets transferred from producer to consumers.

B) area (C + E) is deadweight loss.
C) area (A+B) is consumer surplus.
D) area B is transferred surplus from producer to consumer.
Answer: B
53
A) total surplus will increase. B) deadweight loss will not

occur.
C) the market ceases to be efficient. D) area (B+D) represent the deadweight loss.
Answer: C
54
114) According to the graph shown, if the market goes from equilibrium to having its price set at $10:
A) produce surplus will increase B) deadweight loss will not

occur.
C) eight fewer market transactions will occur. D) consumer surplus will increase.
Answer: A
55
115) According to the graph shown, if the market goes from equilibrium to having its price set at $10:
A) market transactions will decrease by 7.

B) market transactions will decrease by 10.
C) market transactions will not change, only price has changed.
D) market transactions will decrease by 3.
Answer: A
116) Deadweight loss:

A) is increased due to increased market transactions.
B) is lost surplus due to increased market transactions.
C) occurs in markets that are inefficient.
D) occurs when markets are in equilibrium.
Answer: C

A) always occurs in markets.
B) is the loss of total surplus that results when the quantity of a good that is bought and sold is
above the market equilibrium quantity.
C) is the loss of total surplus that results when the quantity of a good that is bought and sold is
below the market equilibrium quantity.
D) creates efficiency in markets.
Answer: C
56
A) is the loss of total surplus that results when the quantity of a good that is bought and sold is at
the market equilibrium quantity.
B) occurs when the market price is set above the equilibrium price.
C) occurs when the market price is set at the equilibrium price.
Answer: B
119) The loss of total surplus that results when the quantity of a good that is bought and sold is below the
market equilibrium quantity:
A) is deadweight loss.
B) occurs when the market price is set at the equilibrium price.
C) occurs in efficient markets.
Answer: A
120) The loss of total surplus that results when the quantity of a good that is bought and sold is below the
market equilibrium quantity is called:
A) consumer surplus. B) total surplus.
C) deadweight loss. D) producer surplus.
Answer: C
121) We say a market is "missing" when:

A) there is an abundance of a well-functioning market, and total surplus is less than it could be.
B) there is an abundance of a well-functioning market, and total surplus is higher than it could be.
C) there is a place for potential buyers and sellers to exchange a particular good or service.
D) the quantity being exchanged is at or close to zero.
Answer: D
122) Markets can be missing:

A) because of an abundance of accurate information between potential buyers and sellers.
B) because public policy prevents the market from existing.
C) when the production of a particular good is legalized.
Answer: B
123) Markets can be missing:

A) when the sale of a particular service is banned.
B) when miscommunication of information between buyers and sellers leads to the wrong
equilibrium price.
C) because public policy taxes a market.
Answer: A
57
124) Markets can be missing if:
A) there is a lack of technology that would make the exchanges possible.
B) because public policy taxes a market.
C) when miscommunication of information between buyers and sellers leads to the wrong
equilibrium price.
D) when the production of a particular good is legalized.
Answer: A
125) Total surplus can be increased if:

A) existing markets are improved. B) new markets are prohibited.
C) markets get further from equilibrium. D) All of these can increase total surplus.
Answer: A
126) Well-being can be increased by:

A) increasing the availability of inaccurate information.
B) policies that help people do business more effectively.
C) technologies that help people share more and worse information.
Answer: B
127) Creating a market that was previously "missing":

A) redistributes surplus from one market to the one that was previously missing.
B) creates more total surplus.
C) redistributes surplus from seller to buyer.
D) redistributes surplus from buyer to seller.
Answer: B
128) The creation of markets that were previously "missing":

A) decreases economic wellbeing.
B) benefits those who interact in the new markets.
C) decreases total surplus.
Answer: B
129) The market to buy and sell organs:

A) is missing.
B) would create less surplus for those who would interact in it.
C) has been legalized by public policy.
Answer: A
58
130) An example of a "missing" market would be:
A) the market to buy and sell chicken.
B) the market to buy and sell a alcohol.
C) the market to buy and sell children for adoption.
D) All of these markets are missing.
Answer: C
131) The market to buy and sell organs:

A) would never exist because it is unfair.
B) would create negative surplus in those who could not afford an organ, but needed one.
C) would not be considered "missing," since surplus could be gained from it.
D) would increase the wellbeing of those who interacted in it.
Answer: D
59
Answer Key
Testname: UNTITLED90
1) D
2) D
3) A
4) D
5) A
6) B
7) C
8) C
9) D
10) C
11) C
12) A
13) C
14) D
15) C
16) B
17) B
18) B
19) C
20) D
21) D
22) B
23) C
24) C
25) C
26) B
27) B
28) A
29) B
30) B
31) C
32) C
33) B
34) B
35) B
36) A
37) B
38) C
39) B
40) B
41) D
42) B
43) B
44) A
45) A
46) B
47) A
48) C
49) C
50) B
60
Answer Key
51) B
52) B
53) A
54) C
55) C
56) D
57) A
58) D
59) A
60) C
61) A
62) B
63) D
64) D
65) A
66) C
67) C
68) C
69) A
70) A
71) C
72) B
73) D
74) D
75) C
76) D
77) B
78) B
79) A
80) B
81) D
82) C
83) A
84) B
85) B
86) C
87) B
88) B
89) A
90) B
91) C
92) A
93) C
94) A
95) D
96) C
97) C
98) B
99) B
100) C
61
Answer Key
101) C
102) C
103) B
104) B
105) D
106) C
107) C
108) B
109) D
110) B
111) B
112) B
113) C
114) A
115) A
116) C
117) C
118) B
119) A
120) C
121) D
122) B
123) A
124) A
125) A
126) B
127) B
128) B
129) A
130) C
131) D
62

Macroeconomics Canadian 1st Edition Karlan Test Bank 1

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Test Bank for Macroeconomics Canadian 1st Edition

Karlan Morduch Alam Wong 007026094X

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1) In economics, the concept of surplus:

2) The concept of surplus can:

4) A consumer's willingness to pay:

9) A seller's willingness to sell:

10) A buyer always wants to:

11) Willingness to pay represents:

12) The willingness to pay of buyers' in a market:

14) At prices below a consumer's maximum willingness to pay:

17) Surplus is:

18) Each seller's opportunity costs are:

21) Surplus is:

22) Surplus is:

A) $10. B) $9. C) $5. D) $45.

A) Consumer surplus decreases by $9. B) Consumer surplus increases by $5.

A) $120 B) $36. C) $72. D) None of these.

A) $30. B) $20. C) $60. D) $50.

39) According to the graph shown, consumer surplus is:

A) $45. B) $15. C) $30. D) $90.

A) $7.50. B) $15. C) $10. D) $5.

A) Producer surplus decreases by $8.50. B) Producer surplus increases by $7.50.

A) $120. B) $72. C) $36. D) None of these.

A) $50. B) $20. C) $60. D) $30.

A) $20. B) $2. C) $6. D) $10.

65) According to the graph shown, producer surplus is area:

67) According to the graph shown, consumer surplus is area:

A) $50. B) $90. C) $25. D) $130.

A) consumer surplus is greater than producer surplus.

A) consumer surplus would decrease. B) total surplus would increase.

A) producer surplus would increase. B) total surplus would increase.

A) $16. B) $32. C) $4. D) $8.

A) less than consumer surplus. B) $32.

A) $15. B) $12.50. C) $5. D) $60.

A) Consumer surplus decreases, but producer surplus increases.

A) Total surplus increases by $15.50. B) Total surplus decreases by $12.50.

A) Consumer surplus decreases, and total surplus decreases.

A) Producer surplus would increase, and total surplus would decrease.

83) Total surplus:

84) Total surplus:

85) Total surplus:

A) $20. B) $30. C) $50. D) $60.

90) When a market is not in equilibrium:

91) When a market is not in equilibrium:

92) When a market is in equilibrium,

93) When a market is in equilibrium,

94) When a market is efficient,

A) consumer surplus (B + C) will transfer to producers.

A) producer surplus will change from (D + B) to (D + E).

A) Some producers gain surplus, but total surplus falls.

A) Some consumers lose surplus, but total surplus rises.

A) producer surplus rises by area B + C, but falls by area D + E.

A) area (B + C) gets transferred from producer to consumer.

A) all consumer surplus lost is gained by producers.

A) area D is lost surplus due to fewer transactions taking place.

A) $12 of surplus gets transferred from producer to consumers.

A) total surplus will increase. B) deadweight loss will not

A) produce surplus will increase B) deadweight loss will not

A) market transactions will decrease by 7.

116) Deadweight loss:

117) Deadweight loss: