AP MICRO CS & PS

Apples are produced in a perfectly competitive market with no government intervention. Which of the following price changes will cause the total economic surplus to increase for the apple market depicted in the graph provided?

• A decrease in price from $8 to $6

• A decrease in price from $6 to $4

• A decrease in price from $6 to $0

• 
  An increase in price from $6 to $8

• An increase in price from $8 to $12

Consumer surplus could be the shaded area in which of the following situations?

• A price floor set at P1 in the market

• A price floor set at P2 in the market

• A price ceiling set at P1 in the market

• A per-unit subsidy equal to P2−P1 granted to producers

• A per-unit tax equal to P2−P1 imposed on producers

Consumer surplus is defined as

• opportunity cost minus total revenue

• total revenue minus opportunity cost

• the difference between the resource costs and the price that consumers pay

• 
  the difference between the value that consumers place on a good and the price they pay

• the sum of external costs and benefits

The market is currently in equilibrium.

In a competition equilibrium consumer surplus is the area of

• UVZ

• WYZ

• RVUT

• 
  XVZY

• 0YZS

The market is currently in equilibrium.

If a price floor is set at X, the quantity demanded will

• 
  increase from 0R to 0S

• increase from 0R to 0T

• decrease from 0S to 0R

• decrease from 0T to 0R

• 
  not change

Zucchini is produced in a perfectly competitive market with a downward-sloping demand curve and an upward-sloping supply curve. Dawson Farm is a typical perfectly competitive farm that produces and sells zucchini at the equilibrium price of $1.75 per pound. Which of the following is true?

• No buyer in the market is willing to pay more than $1.75 per pound for zucchini.

• No buyer in the market is willing to pay more than $1.75 per pound for zucchini from Dawson Farm.

• 
  Market demand for zucchini will increase if Dawson Farm lowers its price below $1.75 per pound.

• Dawson Farm would lose some but not all of its customers if it increases the price above $1.75 per pound for zucchini.

• Dawson Farm would likely be able to increase the demand for its zucchini by advertising.

The market for Good Z has relatively elastic supply and demand curves. Market efficiency is attained when

• 
  total labor cost is minimized for each firm

• each firm experiences economies of scale

• consumer surplus is greater than producer surplus

• 
  producer surplus is zero

• 
  deadweight loss is zero

Which of the following best illustrates the concept of consumer surplus?

• 
  A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink.

• 
  An individual who is willing to accept a job at $7.50 per hour is offered $7.00 per hour.

• 
  An individual pays the sale price of $15.00 for the same shirt that the individual refused to purchase earlier at $18.00.

• 
  An individual finds that the price of artichokes, a food she dislikes, has been reduced by 50 percent.

• A wood-carver has a marginal cost of $5.00 for a unit of output, but sells that unit at $6.00.

The efficient market outcome shown in the graph provided is

• at price P1, quantity Q1, and total economic surplus is J+K

• at price P2, quantity Q2, and total economic surplus is B+C+D+E+F+G+H+I

• 
  at price P0, quantity Q0, and total economic surplus is B-C-E-F

• 
  at price P0, quantity Q0, and total economic surplus is A-B-C-E-F

• 
  at price P0, quantity Q0, and total economic surplus is A-B-C-E-F-J

The letters on the graph represent enclosed areas.

When the market is in equilibrium, the total economic surplus is equal to area

• f + k

• 
  f + g + i + k

• g + h + i + j

• f + g + h + i + j + k

• f + g + h + i + j + k + l + m