1.2.8 Consumer and Producer surplus

What area represents producer surplus in the graph shown here if this market is in equilibrium?

• P₂MP₀

• P₄MP₂

• LMN

• P₄P_LN

• P₀MP₄

Consumer surplus is the area

• below the demand curve and above the price.

• above the supply curve and below the price.

• above the demand curve and below the price.

• above the demand curve and below the price.

You are the manager of Fun World, a small amusement park that charges per ride. The diagram shows the demand curve for a typical customer. At $5 per ride, what is the total consumer surplus?

• $5

• $15

• $25

• $50

Producer Surplus is the area

• Below the price and above the supply curve

• Under the supply curve

• Between the supply and demand curves

• Under the demand curve, and above the price

Other things being equal, if the price of a good falls, the consumer surplus

• May increase, decrease, or remain unchanged

• Increases

• Is unchanged

• Decreases

If a buyer's willingness to pay for a new Honda Civic is £35,500 and she is able to actually buy it for £32,000, her consumer surplus is

• £7,500

• £2,500

• £3,500

• £67,500

Which of these statements about consumer surplus is correct?

• Consumer surplus is shown by the area above the demand curve but below the prevailing price in the market.

• Consumer surplus is calculated as the sum of the price consumers are willing to pay for a good, and the price they actually pay

• Consumer surplus is the benefit the consumers receive when they pay a price below what they are willing to p

• Consumer surplus shows the benefit that consumers receive when factors of production are allocated efficien

2 This diagram shows a market for short weekend breaks in a hotel, which is in equilibrium at P1Q1.

Which ONE of the following statements can be inferred from the information provided

• Price elasticity of supply is constant along the supply curve

• Demand is price inelastic

• Price and quantity supplied have an inverse relationship

• Consumer surplus is greater than producer surplus

When there is an increase in demand, ceteris paribus, and the market supply curve is upward sloping, then

• consumer surplus will increase and producer surplus will increase

• consumer surplus will increase and producer surplus will fall

• consumer surplus will fall and producer surplus will increase

• consumer surplus will fall and producer surplus will fall

The diagram shows the market for books.

A decrease in demand from D1 to D2 will cause a fall in

• Producer Surplus to P2JY

• Producer surplus to P2YK

• Consumer surplus to P2YQ2

• Consumer surplus to LXP1