Question

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

D

may increase, decrease, or remain unchanging

Question #14

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for

A

$2.00 each.

B

$0.50 each

C

$3.50 each

D

$5.00 each

Question #15

The lower the price, the lower the producer surplus, all else equal.

A

True

B

False

Question #16

If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase.

A

True

B

False

Answer 1

Ans) the correct option is B) is unchanged

Change of the input prices of a good does not affect the buyer

Ans14) the correct option is C) $3.50 each

Total revenue = 20 + 1.50*10 = 35

Nick must be selling his danishes for = 35/10 = 3.50

Ans15) the correct option is A) True

When the price is lower, producer receive less revenue so producer surplus decreases

Ans 16) the correct option is B) False

Binding price floor is set above the equilibrium price so the area above the price and below the demand decreases meaning consumer surplus decreases