Principles of Macroeconomics 8th Edition Mankiw Test Bank

Principles of Macroeconomics 8th
Edition Mankiw Test Bank

Visit to Download in Full: https://testbankdeal.com/download/principles-of-macroecon
omics-8th-edition-mankiw-test-bank/
1. The maximum price that a buyer will pay for a good is called
a. consumer surplus.
b. willingness to pay.
c. equilibrium.
d. efficiency.
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.014 - Assess a market's efficiency.
TOPICS: Consumer theory
KEYWORDS: BLOOM'S: Knowledge
CUSTOM ID: 001.07.1 - MC - MANK08
2. Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie.
Each has in mind a maximum amount that he will bid. This maximum is called
a. a resistance price.
c. consumer surplus.
d. producer surplus.
ANSWER: b
DIFFICULTY: Easy
3. Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a
maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called
a. deadweight loss.
c. consumer surplus.
d. producer surplus.
ANSWER: b
DIFFICULTY: Easy
4. Willingness to pay
a. measures the value that a buyer places on a good.
b. is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept.
c. is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept.
d. is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
ANSWER: a
DIFFICULTY: Moderate
Copyright Cengage Learning. Powered by Cognero. Page 1
5. A consumer's willingness to pay directly measures

a. the extent to which advertising and other external forces have influenced the consumer’s preferences.
b. the cost of a good to the buyer.
c. how much a buyer values a good.
d. consumer surplus.
ANSWER: c
KEYWORDS: BLOOM'S: Comprehension
6. When a buyer’s willingness to pay for a good is equal to the price of the good, the
a. buyer’s consumer surplus for that good is maximized.
b. buyer will buy as much of the good as the buyer’s budget allows.
c. price of the good exceeds the value that the buyer places on the good.
d. buyer is indifferent between buying the good and not buying it.
ANSWER: d
7. In which of the following circumstances would a buyer be indifferent about buying a good?
a. The amount of consumer surplus the buyer would experience as a result of buying the good is zero.
b. The price of the good is equal to the buyer’s willingness to pay for the good.
c. The price of the good is equal to the value the buyer places on the good.
d. All of the above are correct.
ANSWER: d
8. A demand curve reflects each of the following except the

a. willingness to pay of all buyers in the market.
b. value each buyer in the market places on the good.
c. highest price buyers are willing to pay for each quantity.
d. ability of buyers to obtain the quantity they desire.
ANSWER: d
TOPICS: Demand
Supply and demand
9. Consumer surplus
a. is closely related to the supply curve for a product.
b. is represented by a rectangle on a supply-demand graph when the demand curve is a straight, downward-
sloping line.
c. is measured using the demand curve for a product.
d. does not reflect economic well-being in most markets.
ANSWER: c
DIFFICULTY: Easy
TOPICS: Consumer surplus
Welfare economics
10. Consumer surplus is

a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
b. the amount a buyer is willing to pay for a good minus the cost of producing the good.
c. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good.
d. a buyer's willingness to pay for a good plus the price of the good.
ANSWER: a
Welfare economics
11. Consumer surplus

a. is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it.
b. is represented on a supply-demand graph by the area below the price and above the demand curve.
c. measures the benefit sellers receive from participating in a market.
d. measures the benefit buyers receive from participating in a market.
ANSWER: d
DIFFICULTY: Easy
Welfare economics

12. Consumer surplus
a. is the amount of a good that a consumer can buy at a price below equilibrium price.
b. is the amount a consumer is willing to pay minus the amount the consumer actually pays.
c. is the number of consumers who are excluded from a market because of scarcity.
d. measures how much a seller values a good.
ANSWER: b
Welfare economics
13. Consumer surplus is the

a. amount of a good consumers get without paying anything.
b. amount a consumer pays minus the amount the consumer is willing to pay.
c. amount a consumer is willing to pay minus the amount the consumer actually pays.
d. value of a good to a consumer.
ANSWER: c
DIFFICULTY: Easy
Welfare economics
14. Consumer surplus is equal to the

a. Value to buyers - Amount paid by buyers.
b. Amount paid by buyers - Costs of sellers.
c. Value to buyers - Costs of sellers.
d. Value to buyers - Willingness to pay of buyers.
ANSWER: a
Welfare economics
15. 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.
ANSWER: b
DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.236 - Given a supply and demand graph, indicate the area that
represents consumer surplus.
Welfare economics
16. On a graph, consumer surplus is represented by the area

a. between the demand and supply curves.
b. below the demand curve and above price.
c. below the price and above the supply curve.
d. below the demand curve and to the right of equilibrium price.
ANSWER: b
Welfare economics
17. Consumer surplus in a market can be represented by the

a. area below the demand curve and above the price.
b. distance from the demand curve to the horizontal axis.
c. distance from the demand curve to the vertical axis.
d. area below the demand curve and above the horizontal axis.
ANSWER: a
Welfare economics
18. Consumer surplus is

a. a concept that helps us make normative statements about the desirability of market outcomes.
b. represented on a graph by the area below the demand curve and above the price.
c. a good measure of economic welfare if buyers' preferences are the primary concern.
ANSWER: d
Welfare economics
19. In a market, the marginal buyer is the buyer

a. whose willingness to pay is higher than that of all other buyers and potential buyers.
b. whose willingness to pay is lower than that of all other buyers and potential buyers.
c. who is willing to buy exactly one unit of the good.
d. who would be the first to leave the market if the price were any higher.
ANSWER: d
Table 7-1
Buyer Willingness To Pay
Calvin $150.00
Sam $135.00
Andrew $120.00
Lori $100.00
20. Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product?
a. Calvin
b. Calvin and Sam
c. Calvin, Sam, and Andrew
d. Calvin, Sam, Andrew, and Lori
ANSWER: c
KEYWORDS: BLOOM'S: Application
a. Calvin
b. Calvin and Sam
ANSWER: b
a. Calvin
b. Calvin and Sam
ANSWER: d
23. Refer to Table 7-1. If the price of the product is $122, then the total consumer surplus is
a. $28.
b. $41.
c. $43.
d. $405.
ANSWER: b
LEARNING OBJECTIVES: ECON.MANK.193 - Given a scenario describing buyers' willingness to pay,
compute consumer surplus in a market.
Welfare economics
24. Refer to Table 7-1. If price of the product is $135, then the total consumer surplus is
a. $-50.
b. $-35.
c. $15.
d. $150.
ANSWER: c
Welfare economics
25. Refer to Table 7-1. If the market price is $105,

a. Calvin’s consumer surplus is $45 and total consumer surplus is $85.
b. Sam’s consumer surplus is $30 and total consumer surplus is $90.
c. Andrew’s consumer surplus is $15 and total consumer surplus is $67.50.
d. Lori’s consumer surplus is -$2 and total consumer surplus is $100.
ANSWER: b

Welfare economics
Table 7-2
This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke.
Buyer Willingness To Pay
David $8.50
Laura $7.00
Megan $5.50
Mallory $4.00
Audrey $3.50
26. Refer to Table 7-2. If the price of Vanilla Coke is $6.90, who will purchase the good?
a. all five individuals
b. Megan, Mallory and Audrey
c. David, Laura and Megan
d. David and Laura
ANSWER: d
27. Refer to Table 7-2. Which of the following is not true?

a. At a price of $9.00, no buyer is willing to purchase Vanilla Coke.
b. At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one.
c. At a price of $4.00, total consumer surplus in the market will be $9.00.
ANSWER: d
28. Refer to Table 7-2. If the market price is $5.50, the consumer surplus in the market will be
a. $3.00.
b. $4.50.
c. $15.50.
d. $21.00.
ANSWER: b

Welfare economics
29. Refer to Table 7-2. If the market price is $3.80,

a. David’s consumer surplus is $4.70 and total consumer surplus for the five individuals is $9.50.
b. Megan’s consumer surplus is $1.70 and total consumer surplus for the five individuals is $9.80.
c. David, Laura, and Megan will be the only buyers of Vanilla Coke.
d. the demand curve for Vanilla Coke, taking the five individuals into account, is horizontal.
ANSWER: b
Welfare economics
Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
Buyer Willingness to Pay

Carlos $15
Quilana $25
Wilbur $35
Ming-la $45
30. Refer to Table 7-3. If the market price for the good is $20, who will purchase the good?
a. Ming-la only
b. Carlos and Quilana only
c. Quilana and Wilbur only
d. Quilana, Wilbur, and Ming-la only
ANSWER: d
Welfare economics
31. Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to
purchase it, then the good will sell for
a. $15 or slightly less.
b. $25 or slightly more.
c. $35 or slightly more.
d. $45 or slightly less.

ANSWER: c
Welfare economics
32. Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to
purchase it, then the consumer surplus will be
a. $0 or slightly more.
b. $10 or slightly less.
ANSWER: b
DIFFICULTY: Challenging
Welfare economics
33. Refer to Table 7-3. If the price is $20, then consumer surplus in the market is
a. $20, and Wilbur and Ming-la purchase the good.
b. $45, and Carlos and Quilana purchase the good.
c. $45, and Quilana, Wilbur, and Ming-la purchase the good.
d. $55, and Carlos, Wilbur, and Ming-la purchase the good.
ANSWER: c
Welfare economics
34. Refer to Table 7-3. Who experiences the largest loss of consumer surplus when the price of the good increases from
$20 to $22?
a. Quilana
b. Wilbur
c. Ming-la
d. All three buyers experience the same loss of consumer surplus.
ANSWER: d
Welfare economics
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.

Jennifer $10
Bryce $15
Dan $20
David $25
Ken $50
Lisa $60
35. Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, what will be the selling price?
a. slightly more than $20.
b. slightly more than $25.
c. slightly more than $50.
d. slightly more than $60.
ANSWER: c
Welfare economics
KEYWORDS: BLOOM'S: Analysis
36. Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, who will buy the ticket?
a. Dan
b. David
c. Ken
d. Lisa
ANSWER: d
Welfare economics
37. Refer to Table 7-4. If tickets sell for $40 each, then what is the total consumer surplus in the market?
a. $90.
b. $30.
c. $70.
d. $110.

ANSWER: b
Welfare economics
38. 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
ANSWER: c
Welfare economics
39. Refer to Table 7-4. If you have two (essentially) identical tickets that you sell to the group in an auction, what will be
the selling price for each ticket?
a. $21
b. $26
c. $51
d. $61
ANSWER: b
Welfare economics
Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the
day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per
day.
First Orange Second Orange Third Orange

Allison $2.00 $1.50 $0.75
Bob $1.50 $1.00 $0.60
Charisse $0.75 $0.25 $0
40. Refer to Table 7-5. If the market price of an orange is $0.90, then the market quantity of oranges demanded per day is
a. 5.
b. 2.
c. 3.
d. 4.
ANSWER: d
TOPICS: Demand
Supply and demand
41. Refer to Table 7-5. If the market price of an orange is $0.70, then the market quantity of oranges demanded per day is
a. 5.
b. 6.
c. 4.
d. 7.
ANSWER: b
TOPICS: Demand
Supply and demand
42. Refer to Table 7-5. The market quantity of oranges demanded per day is exactly 7 if the price of an orange, P,
satisfies
a. $0.60 < P < $0.75.
b. $0.60 < P < $2.00.
c. $0.25 < P < $0.75.
d. $0.25 < P < $0.60.
ANSWER: d
TOPICS: Demand
Supply and demand
43. Refer to Table 7-5. If the market price of an orange is $0.65, then consumer surplus amounts to
a. $3.90.
b. $6.75.
c. $3.60.
d. $7.50.
ANSWER: c

Welfare economics
44. Refer to Table 7-5. If the market price of an orange is $0.40, then
a. 6 oranges are demanded per day, and consumer surplus amounts to $4.95.
b. 6 oranges are demanded per day, and consumer surplus amounts to $5.10.
c. 7 oranges are demanded per day, and consumer surplus amounts to $5.30.
d. 7 oranges are demanded per day, and consumer surplus amounts to $5.15.
ANSWER: c
Welfare economics
45. Refer to Table 7-5. If the market price of an orange increases from $0.80 to $1.05, then consumer surplus
a. increases by $0.75.
b. decreases by $0.95.
c. decreases by $0.75.
d. decreases by $1.00.
ANSWER: b
Welfare economics
46. Refer to Table 7-5. If the market price of an orange increases from $0.70 to $1.40, then consumer surplus
a. increases by $2.60.
d. decreases by $2.60.
ANSWER: c
Welfare economics
47. Refer to Table 7-5. Who experiences the largest loss of consumer surplus when the price of an orange increases from
$0.70 to $1.40?
a. Allison
b. Bob
c. Charisse
d. All three individuals experience the same loss of consumer surplus.
ANSWER: a
Welfare economics
48. Refer to Table 7-5. Who experiences the largest gain in consumer surplus when the price of an orange decreases from
$1.05 to $0.75?
a. Allison
b. Bob
c. Charisse
d. Allison and Bob experience the same gain in consumer surplus, and Charisse’s gain is zero.
ANSWER: a
Welfare economics
49. Refer to Table 7-5. Which of the following statements is correct?

a. Neither Bob’s consumer surplus nor Charisse’s consumer surplus can exceed Allison’s consumer surplus, for
any price of an orange.
b. All three individuals will buy at least one orange only if the price of an orange is less than $0.25.
c. If the price of an orange is $0.60, then consumer surplus is $4.90.
ANSWER: a
Welfare economics
Table 7-6
For each of three potential buyers of apples, the table displays the willingness to pay for the first three apples of the day.
Assume Xavier, Yadier, and Zavi are the only three buyers of apples, and only three apples can be supplied per day.
First Apple Second Apple Third Apple

Xavier $1.75 $1.55 $1.15
Yadier $1.50 $1.25 $0.75
Zavi $1.30 $1.10 $0.70
50. Refer to Table 7-6. If the market price of an apple is $1.40, then the market quantity of apples demanded per day is
a. 1.
b. 2.
c. 3.
d. 4.
ANSWER: c
TOPICS: Demand
Supply and demand
51. Refer to Table 7-6. If the market price of an apple is $1.40, then consumer surplus amounts to
a. $0.60.
b. $1.20.
c. $1.40.
d. $3.40
ANSWER: a
Welfare economics
52. Refer to Table 7-6. If the market price of an apple increases from $1.40 to $1.60, then consumer surplus
a. decreases by $0.15.
d. increases by $0.15.
ANSWER: c
Welfare economics

Table 7-7
Michael $500
Earvin $400
Larry $350
Charles $300
53. Refer to Table 7-7. You have an extra ticket to the Midwest Regional Sweet 16 game in the men’s NCAA basketball
tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You
hold an auction to sell the ticket. Who makes the winning bid, and what does he offer to pay for the ticket?
a. Michael; $501
b. Michael; more than $400 but less than or equal to $500
c. Earvin; $400
d. Earvin; more than $350 but less than or equal to $400
ANSWER: b
Welfare economics
54. Refer to Table 7-7. You have an extra ticket to the Midwest Regional Sweet 16 game in the men’s NCAA basketball
tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You
hold an auction to sell the ticket. Michael bids $410 for the ticket, and you sell him the ticket. What is his consumer
surplus?
a. $410
b. $90
c. $10
d. $0
ANSWER: b
Welfare economics
55. Refer to Table 7-7. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the
men’s NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for
a ticket to the game. You hold an auction to sell the two tickets. Who makes the winning bids, and what do they offer to
pay for the tickets?
a. Michael and Earvin; more than $350 but less than or equal to $400
b. Michael and Earvin; more than $400 but less than or equal to $500
c. Earvin and Larry; more than $300 but less than or equal to $350
d. Larry and Charles; less than $300
ANSWER: a
Welfare economics
56. Refer to Table 7-7. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the
a ticket to the game. You hold an auction to sell the two tickets. Michael and Earvin each offer to pay $360 for a ticket,
and you sell them the two tickets. What is the total consumer surplus in the market?
a. $720
b. $180
c. $140
d. $40
ANSWER: b
Welfare economics
57. Refer to Table 7-7. You have four essentially identical extra tickets to the Midwest Regional Sweet 16 game in the
a ticket to the game. You offer to sell the tickets for $400. How many tickets do you sell, and what is the total consumer
surplus in the market?
a. one ticket; $100
b. two tickets; $100
c. two tickets; $0
d. three tickets; $0
ANSWER: b
Welfare economics
58. Refer to Table 7-7. You have four essentially identical extra tickets to the Midwest Regional Sweet 16 game in the
a ticket to the game. You offer to sell the tickets for $325. How many tickets do you sell, and what is the total consumer
surplus in the market?
a. one ticket; $175
b. two tickets; $225
c. three tickets; $225
d. three tickets; $275
ANSWER: d
Welfare economics
59. Refer to Table 7-7. You are selling extra tickets to the Midwest Regional Sweet 16 game in the men’s NCAA
basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the
game. Which of the following graphs represents the market demand curve?
a.
b.
c.

d.
ANSWER: a
LEARNING OBJECTIVES: ECON.MANK.047 - Derive the demand curve for a good from a group of buyers'
willingness to pay for that good.
Welfare economics
Table 7-8
During the last two days, Chad purchased a latte from two different stores. The table below shows Chad’s willingness to
pay on each day and his consumer surplus from each purchase.
Chad’s Willingness to Pay Chad’s Consumer Surplus
First Day $5.00 $1.25
Second Day $4.00 $0.75
60. Refer to Table 7-8. The price that Chad paid for a latte on the first day is
a. $3.75.
b. $6.25.
c. $5.00.
d. $5.50.
ANSWER: a
Welfare economics
61. Refer to Table 7-8. The price that Chad paid for a latte on the second day is
a. $0.25 less than the amount he paid on the first day.
b. $1.00 less than the amount he paid on the first day.
c. $1.50 less than the amount he paid on the first day.
d. $0.50 less than the amount he paid on the first day.
ANSWER: d
Welfare economics
Table 7-9
The only four consumers in a market have the following willingness to pay for a good:

Ashleigh $12
Barb $15
Carolyn $19
Danita $27
62. Refer to Table 7-9. If the market price for the good is $20, who will purchase the good?
a. Danita only
b. Carolyn and Danita only
c. Ashleigh, Barb, and Carolyn only
d. All four buyers would purchase the good.
ANSWER: a
Welfare economics
63. Refer to Table 7-9. If there is only one unit of the good available for purchase, and if the buyers bid against each
other for the right to purchase it, then the good will sell for
a. $12 or slightly less
b. $15 or slightly more
c. $19 or slightly more
d. $27 or slightly less
ANSWER: c
Welfare economics
64. Refer to Table 7-9. If there is only one unit of the good available for purchase, and if the buyers bid against each
other for the right to purchase it, then the consumer surplus will be
a. $0 or slightly more.
b. $3 or slightly less.
ANSWER: d
Welfare economics
65. You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket
has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity.
Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie
Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how
much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?
a. $0
b. $10
c. $40
d. $50
ANSWER: b
Welfare economics
66. 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.
ANSWER: d
Welfare economics
67. Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?
a. $6.
b. $2.
c. $8.
d. $4.
ANSWER: c
Welfare economics
68. Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the
book must be
a. $3.
b. $8.
c. $5.
d. $11.
ANSWER: c
Welfare economics
69. Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at
a. $5.
b. $15.
c. $20.
d. $35.
ANSWER: c
Welfare economics
70. If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the
a. consumer has consumer surplus of $2 if he or she buys the good.
b. consumer does not purchase the good.
c. market is not a competitive market.
d. price of the good will fall due to market forces.
ANSWER: b
Welfare economics
71. If a consumer places a value of $20 on a particular good and if the price of the good is $25, then the
a. consumer has consumer surplus of $5 if he buys the good.
b. consumer does not purchase the good.
c. price of the good will rise due to market forces.
d. market is out of equilibrium.
ANSWER: b
Welfare economics
72. If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that
consumer, consumer surplus amounts to
a. $4.
b. $16.
c. $20.
d. $36.
ANSWER: a
Welfare economics
73. Kelly is willing to pay $5.20 for a gallon of gasoline. The price of gasoline at her local gas station is $3.80. If she
purchases ten gallons of gasoline, then Kelly's consumer surplus is
a. $1.40.
b. $14.
c. $3.80.
d. $52.
ANSWER: b
Welfare economics
74. Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is
a. $650.
b. $150.
c. $250.
d. $400.
ANSWER: b
Welfare economics
75. Josh is willing to pay $500 for a set of tire, but he is able to pay $300 at the local tire store. His consumer surplus is
a. $800.
b. $300.
c. $200.
d. $500.
ANSWER: c
Welfare economics
76. Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's willingness to
pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30. Total consumer surplus for
these three would be
a. $15.
b. $30.
c. $45.
d. $90.
ANSWER: c
Welfare economics
77. Suppose Brent, Callie, and Danielle each purchase a particular type of electric pencil sharpener at a price of $20.
Brent’s willingness to pay was $22, Callie’s willingness to pay was $25, and Danielle's willingness to pay was $30.
Which of the following statements is correct?
a. Had the price of the pencil sharpener been $24 rather than $20, only Danielle would have been a buyer.
b. Brent’s consumer surplus is the smallest of the three individual consumer surpluses.
c. For the three individuals together, consumer surplus amounts to $60.
d. The fact that all three individuals paid $20 for the same type of pencil sharpener indicates that each one placed
the same value on that pencil sharpener.
ANSWER: b
Welfare economics
78. Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie’s willingness
to pay was $100, Kendra’s willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following
statements is correct?
a. For the three individuals together, consumer surplus amounts to $35.
b. Having bought the cell phone, Kristen is better off than she would have been had she not bought it.
c. Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have been buyers
and Kristen definitely would not have been a buyer.
d. The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the
same value on that cell phone.
ANSWER: a
Welfare economics
79. Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her purchase if her willingness to
pay is
a. $15.
b. $90.
c. $105.
d. $75.
ANSWER: c
Welfare economics
80. Abraham drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.55 per can.
On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40
for the fourth can. Assume Abraham is rational in deciding how many cans to buy. His consumer surplus is
a. $0.50.
b. $0.60.
c. $0.70.
d. $1.00.
ANSWER: c
Welfare economics
81. Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the
performance at
a. $20.
b. $30.
c. $50.
d. $80.
ANSWER: c
Welfare economics
82. 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.
ANSWER: d
Welfare economics
83. Chad is willing to pay $5.00 to get his first cup of morning latté; he is willing to pay $4.50 for a second cup. He buys
his first cup from a vendor selling latté for $3.75 per cup. He returns to that vendor later in the morning to find that the
vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the following statements is correct?
a. Chad’s willingness to pay for his second cup of latté was smaller than his willingness to pay for his first cup of
latté.
b. Chad’s consumer surplus on his second cup of latté was larger than his consumer surplus on his first cup of
latté.
c. Chad is irrational in that he is willing to pay a different price for his second cup of latté than what he is willing
to pay for his first cup of latté.
d. Chad places a higher value on his second cup of latté than on his first cup of latté.
ANSWER: a
Welfare economics
84. Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of
bananas falls from 50 cents a pound to 40 cents a pound,
a. Henry experiences an increase in consumer surplus, but Janine does not.
b. Janine experiences an increase in consumer surplus, but Henry does not.
c. both Janine and Henry experience an increase in consumer surplus.
d. neither Janine nor Henry experiences an increase in consumer surplus.
ANSWER: c
Welfare economics
85. Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak
increases from $9 to $11,
a. Alex experiences a decrease in consumer surplus, but Bella does not.
b. Bella experiences a decrease in consumer surplus, but Alex does not.
c. both Bella and Alex experience a decrease in consumer surplus.
d. neither Bella nor Alex experiences a decrease in consumer surplus.
ANSWER: a
Welfare economics
86. Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is
a. $8,500.
b. $15,500.
c. $24,000.
d. $39,500.
ANSWER: a
Welfare economics
87. Dawn’s bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit
of the lower prices to
a. only existing customers who now get lower prices on the gowns they were already planning to purchase.
b. only new customers who enter the market because of the lower prices.
c. both existing customers who now get lower prices on the gowns they were already planning to purchase and
new customers who enter the market because of the lower prices.
d. Consumer surplus does not increase; it decreases.
ANSWER: c
Welfare economics
88. Jeff decides that he would pay as much as $2,000 for a new laptop computer. He buys the computer and realizes a
consumer surplus of $300. How much did Jeff pay for his computer?
a. $300.
b. $1,700.
c. $2,000.
d. $2,300.
ANSWER: b
Welfare economics
89. Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie
Jo's willingness to pay for the dishwasher is
a. $150.
b. $425.
c. $500.
d. $850.
ANSWER: c
Welfare economics
90. Denise values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $350.
Denise's consumer surplus is

a. $150.
b. $350.
c. $500.
d. $850.
ANSWER: a
Welfare economics
91. Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000.
Michael's willingness to pay is
a. $500.
b. $3,000.
c. $3,500.
d. $6,500.
ANSWER: c
Welfare economics
92. 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.
ANSWER: a
Welfare economics
93. 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.
ANSWER: d
Welfare economics
94. 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.
ANSWER: d
Welfare economics
95. 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
ANSWER: b
Welfare economics
96. 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.
ANSWER: a
Welfare economics
97. 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.
ANSWER: a
Welfare economics
98. 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.
ANSWER: b
Welfare economics
99. 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.
ANSWER: c
Welfare economics
100. 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.
ANSWER: a
101. 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.
ANSWER: a
Welfare economics
102. All else equal, what happens to consumer surplus if the price of a good increases?
c. Consumer surplus is unchanged.
d. Consumer surplus may increase, decrease, or remain unchanged.
ANSWER: b
Welfare economics
103. All else equal, what happens to consumer surplus if the price of a good decreases?
c. Consumer surplus is unchanged.

ANSWER: a
Welfare economics
104. 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
ANSWER: b
Welfare economics
105. 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
ANSWER: d
Welfare economics
106. When there is a technological advance in the pork 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.
ANSWER: a
Welfare economics

107. If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?
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.
ANSWER: b
Welfare economics
108. 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.
ANSWER: d
Welfare economics
109. 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.
ANSWER: d
Welfare economics
110. 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.
ANSWER: d
Welfare economics
111. 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.
ANSWER: d
Welfare economics
112. 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.
ANSWER: b
Welfare economics
Figure 7-1

113. Refer to Figure 7-1. If the price of the good is $250, then consumer surplus amounts to
a. $50.
b. $100.
c. $150.
d. $200.
ANSWER: a
Welfare economics
a. $150.
b. $200.
c. $250.
d. $300.
ANSWER: c
Welfare economics
a. $400.
b. $500.
c. $600.
d. $750.
ANSWER: c
Welfare economics
116. Refer to Figure 7-1. If the price of the good is $200, then
a. consumer surplus is $150.
b. consumer surplus is $650.
c. producer surplus is $650.
d. producer surplus is $750.
ANSWER: a
Welfare economics
117. Refer to Figure 7-1. The value of the good to consumers minus the cost of the good to consumers amounts to $325
if the price of the good is
a. $200.
b. $150.
c. $125.
d. $100.
ANSWER: c
Welfare economics
Figure 7-2

a. $50.
b. $75.
c. $100.
d. $125.
ANSWER: d
Welfare economics
a. $110.
b. $135.
c. $160.
d. $185.
ANSWER: d
Welfare economics
Figure 7-3

120. Refer to Figure 7-3. When the price is P1, consumer surplus is
a. A.
b. A+B.
c. A+B+C.
d. A+B+D.
ANSWER: c
Welfare economics
121. Refer to Figure 7-3. When the price is P2, consumer surplus is
a. A.
b. B.
c. A+B.
d. A+B+C.
ANSWER: a
Welfare economics
122. Refer to Figure 7-3. 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.
ANSWER: b
Welfare economics
123. Refer to Figure 7-3. 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.
ANSWER: b
Welfare economics
124. Refer to Figure 7-3. 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.
ANSWER: c
Welfare economics
Figure 7-4

125. Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?
a. BDF
b. AFG
c. ABDG
d. ABC
ANSWER: a
Welfare economics
126. Refer to Figure 7-4. Which area represents consumer surplus at a price of P2?
a. BDF
b. AFG
c. ABDG
d. ABC
ANSWER: b
Welfare economics
127. Refer to Figure 7-4. Which area represents the increase in consumer surplus when the price falls from P1 to P2?
a. BDF
b. AFG
c. ABC
d. ABDG
ANSWER: d
Welfare economics
128. Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to
existing buyers?
a. BDF
b. AFG
c. BCGD
d. ABC
ANSWER: c
Welfare economics
129. Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to
new buyers entering the market?
a. BDF
b. AFG
c. BCGD
d. ABC
ANSWER: d
Welfare economics
Figure 7-5

130. Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is
a. $16.
b. $24.
c. $30.
d. $36.
ANSWER: d
Welfare economics
131. Refer to Figure 7-5. If the price of the good is $12, then consumer surplus is
a. $9.
b. $11.
c. $13.
d. $16.
ANSWER: d
Welfare economics
Figure 7-6

132. Refer to Figure 7-6. At the equilibrium price, consumer surplus is
a. $1,600.
b. $800.
c. $1,400.
d. $700.
ANSWER: b
Welfare economics
133. Refer to Figure 7-6. If the government imposes a price floor of $110 in this market, then consumer surplus will
decrease by
a. $200.
b. $400.
c. $600.
d. $800.
ANSWER: c
Welfare economics
Figure 7-7
134. Refer to Figure 7-7. What is the consumer surplus if the price is $100?
a. $2,500
b. $5,000
c. $10,000
d. $20,000
ANSWER: a
Welfare economics
135. Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150?
a. The new consumer surplus is half of the original consumer surplus.
b. The new consumer surplus is 25 percent of the original consumer surplus.
c. The new consumer surplus is double the original consumer surplus.
d. The new consumer surplus is triple the original consumer surplus.
ANSWER: b
Welfare economics
Figure 7-8

136. Refer to Figure 7-8. At the equilibrium price, consumer surplus is
a. $1,050.
b. $1,225.
c. $1,575.
d. $2,450.
ANSWER: b
Welfare economics
137. Refer to Figure 7-8. If the government imposes a price floor of $100 in this market, then consumer surplus will
decrease by
a. $150.
b. $325.
c. $650.
d. $675.
ANSWER: b
DIFFICULTY: Difficult
Welfare economics
138. Refer to Figure 7-8. If the government imposes a price ceiling of $80 in this market, then, assuming those with the
highest willingness to pay purchase the good, consumer surplus will be
a. $900.
b. $1,200.
c. $1,500.
d. $1,600.
ANSWER: c
DIFFICULTY: Difficult
Welfare economics
139. When the supply of a good decreases and the demand for the good remains unchanged, consumer surplus
a. decreases.
b. is unchanged.
c. increases.
ANSWER: a
Welfare economics
140. Which of the following is true when the price of a good or service rises?
a. Buyers who were already buying the good or service are better off.
b. Some buyers exit 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.
ANSWER: b
Welfare economics
141. Oil is used to produce gasoline. If the price of oil increases, consumer surplus in the gasoline market
a. decreases.
b. is unchanged.
c. increases.
ANSWER: a

Welfare economics
142. What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an
increase in income?
a. Consumer surplus decreases.
b. Consumer surplus remains unchanged.
c. Consumer surplus increases.
ANSWER: d
Welfare economics
143. As a result of a decrease in price,

a. new buyers enter the market, increasing consumer surplus.
b. new buyers enter the market, decreasing consumer surplus.
c. existing buyers exit the market, increasing consumer surplus.
d. existing buyers exit the market, decreasing consumer surplus.
ANSWER: a
Welfare economics
144. Economists normally assume people’s preferences should be

a. respected.
b. adjusted.
c. overruled.
d. ignored.
ANSWER: a
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
Welfare economics
145. Consumer surplus is a good measure of economic welfare if policymakers want to

a. maximize total benefit.
b. minimize deadweight loss.
c. respect the preferences of sellers.
d. respect the preferences of buyers.
ANSWER: d
DIFFICULTY: Easy
Welfare economics
146. When policymakers are considering a particular action, they can use consumer surplus as a(n)
a. objective measure of the benefits to buyers as determined by policymakers.
b. measure of the benefits to buyers as the buyers perceive them.
c. potentially flawed measure of the benefits to buyers if the buyers are not rational.
d. Both b) and c) are correct.
ANSWER: d
Welfare economics

Principles of Macroeconomics 8th Edition Mankiw Test Bank

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Principles of Macroeconomics 8th Edition Mankiw Test Bank

Uploaded by

Copyright:

Available Formats

Principles of Macroeconomics 8th

Edition Mankiw Test Bank

5. A consumer's willingness to pay directly measures

8. A demand curve reflects each of the following except the

10. Consumer surplus is

11. Consumer surplus

Copyright Cengage Learning. Powered by Cognero. Page 3

13. Consumer surplus is the

14. Consumer surplus is equal to the

Copyright Cengage Learning. Powered by Cognero. Page 4

16. On a graph, consumer surplus is represented by the area

17. Consumer surplus in a market can be represented by the

18. Consumer surplus is

19. In a market, the marginal buyer is the buyer

25. Refer to Table 7-1. If the market price is $105,

Copyright Cengage Learning. Powered by Cognero. Page 7

27. Refer to Table 7-2. Which of the following is not true?

Copyright Cengage Learning. Powered by Cognero. Page 8

29. Refer to Table 7-2. If the market price is $3.80,

Buyer Willingness to Pay

Copyright Cengage Learning. Powered by Cognero. Page 9

Buyer Willingness to Pay

Copyright Cengage Learning. Powered by Cognero. Page 11

First Orange Second Orange Third Orange

Copyright Cengage Learning. Powered by Cognero. Page 13

49. Refer to Table 7-5. Which of the following statements is correct?

First Apple Second Apple Third Apple

Copyright Cengage Learning. Powered by Cognero. Page 16

Copyright Cengage Learning. Powered by Cognero. Page 19

Buyer Willingness to Pay

Copyright Cengage Learning. Powered by Cognero. Page 29

Copyright Cengage Learning. Powered by Cognero. Page 33

104. Which of the following will cause an increase in consumer surplus?

105. Which of the following will cause a decrease in consumer surplus?

Copyright Cengage Learning. Powered by Cognero. Page 34

Copyright Cengage Learning. Powered by Cognero. Page 36

Copyright Cengage Learning. Powered by Cognero. Page 38

Copyright Cengage Learning. Powered by Cognero. Page 39

123. Refer to Figure 7-3. Area C represents the

Copyright Cengage Learning. Powered by Cognero. Page 41

Copyright Cengage Learning. Powered by Cognero. Page 43

Copyright Cengage Learning. Powered by Cognero. Page 44

Copyright Cengage Learning. Powered by Cognero. Page 46

Copyright Cengage Learning. Powered by Cognero. Page 48

143. As a result of a decrease in price,

144. Economists normally assume people’s preferences should be

145. Consumer surplus is a good measure of economic welfare if policymakers want to

Copyright Cengage Learning. Powered by Cognero. Page 50

You might also like