
AP Micro Consumer and Producer Surplus Practice
Authored by Dena Goldberg
Social Studies
11th - 12th Grade
Used 35+ times

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9 questions
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1.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
The difference between the price a consumer would be willing to pay for a cone of ice cream and the actual market price that she pays gives a measure of her
consumer surplus
producer surplus
marginal utility
marginal cost
ability to pay
2.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
UVZ
WYZ
RVUT
XVZY
0YZS
3.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
The graph above shows the market demand for good X. A movement from point A to point B would most likely be caused by
an increase in the price of good Z, a substitute
an increase in consumers' income
a decrease in consumers' income
a decrease in production costs for good X
a decrease in the supply of good X
4.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
Which of the following is most likely to occur when a competitive market adjusts from one equilibrium to another?
A decrease in demand will cause the equilibrium price, equilibrium quantity, and total surplus to increase.
An increase in demand will cause the equilibrium price, equilibrium quantity, and producer surplus to increase.
A decrease in supply will cause the equilibrium price to decrease, the equilibrium quantity to increase, and consumer surplus to decrease.
An increase in supply will cause the equilibrium price to increase, the equilibrium quantity to decrease, and consumer surplus to increase.
A decrease in supply and increase in demand will cause the equilibrium quantity to decrease but the equilibrium price to be indeterminate.
Answer explanation
An increase in demand shifts the demand curve to the right. A rightward shift in the demand curve results in an increase in the equilibrium price and the equilibrium quantity, which causes producer surplus (the triangle below the equilibrium price and above the supply curve) to increase.
5.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
Assume that the market demand for a good is perfectly inelastic, the market supply for the good is perfectly elastic, and the market is in equilibrium. If there is a decrease in the price of a key input used in the production of the good, which of the following will occur?
There will be a decrease in the equilibrium quantity.
There will be no change in the producer surplus.
There will be a decrease in the producer surplus.
There will be a decrease in the consumer surplus.
There will be an increase in the equilibrium price.
Answer explanation
With a perfectly elastic (horizontal) supply curve, there is no producer surplus.
6.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
Based on the graph, the consumer surplus at the market equilibrium price and quantity is shown by which area?
GMK
GMN
ZMN
MNK
GZN
Answer explanation
Consumer surplus is the difference between the maximum price consumers are willing to pay for a unit of a product (as depicted by the demand curve) and the actual price they do pay. At equilibrium, the consumer surplus is measured by the area of the triangle under the demand curve but above the equilibrium price for the quantities between zero and equilibrium quantity, Q
R
QR. It is represented by the area ZMN
ZMN.
7.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
In the absence of market failures, a perfectly competitive market equilibrium is efficient for which of the following reasons?
Consumer surplus is maximized and consumers are better off relative to producers.
Producer surplus is maximized and producers are better off relative to consumers.
Total economic surplus is maximized and all mutually beneficial transactions are exhausted.
Total economic surplus is distributed equally between producers and consumers.
The quantity of output is produced at a constant cost so that every consumer pays the same price.
Answer explanation
The competitive market in equilibrium is efficient because it maximizes the sum of consumer surplus and producer surplus. Perfectly competitive markets in equilibrium ensure that all mutually beneficial transactions are exhausted; that is, all opportunities to make some people better off without making other people worse off have been satisfied.
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