Question

(40)Which of the following statements is true? Suppose a government in a city imposes a binding...

(40)Which of the following statements is true?

Suppose a government in a city imposes a binding price ceiling on a market for strawberries, it would be reasonable to expect:

(a)A decrease in consumers’ surplus

(b)An increase in consumer’s surplus

(c)An increase in producers’ surplus

(d)None of the above

(41)Consumers’ surplus is measured by:

(a)The area above the demand curve and below the actual price

(b)The area below the demand curve and above the willingness to pay price

(c)(a) and (b) above

(d)None of the above

                

(42)Which of the following statements is true?

Suppose given ceteris paribus, a government in a county imposes a do nothing price in a market for metro tickets, it would be plausible to expect that:

(a)Consumer surplus would rise

(b)Producer surplus to fall

(c)Consumer surplus to fall

(d)None of the above

(43)Suppose given ceteris paribus the price of i-phones decreases because the supply curve of these phones shifts to the right, which of the following scenarios is likely:

(a)There is an increase in producers’ surplus

(b)There is a decrease in consumer surplus

(c)There is an increase in consumer surplus

(d)None of the above

(44)If Evadney’s willingness to pay price for a romantic novel is $50 but she pays $20 for the book, the difference between the indicated prices represents her:

(a)Producer surplus

(b)Willingness to pay price

(c)Reservation price

(d)None of the above

(45)Suppose Evadney’s reservation price remains unchanged as in Q#44 above but the actual price she pays for the novel is now $65, which of the following statements would be true?

(a)Her consumer surplus expands      

(b)Her welfare declines

(c)Her consumer surplus is zero

(d)Her consumer surplus is unchanged

(46)What would Evadney’s willingness to pay price necessarily have to be in Q#45 above for her consumer surplus to be zero?

(a)$60

(b)$35

(c)$20

(d)None of the above

(47)Which of the following is another name for producers’ surplus in economic theory?

(a)Trade-off

(b)Correlation

(c)Savings

(d)Economic rent

Homework Answers

Answer #1

40. Option b. As binding price ceiling would reduce the price which increase demand and reduces supply and hence creates shortage

41. Option b. Area above equilibrium price and below demand curve

42. Option a

43. Option d. For reduced price, the quantity increases which increases both producer and consumer surplus

44. Option d. It is the difference between highest price and actual price paid

45. Option b. As she has to pay more

46. Option d. price of willingness to pay which is $50

47. Option d. It is amount earned by a resource by virtue of its present use

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