chap 3

Consumer surplus equals the

• value to buyers minus the cost to sellers.

• amount received by sellers minus the cost to sellers.

• amount received by sellers minus the amount paid by buyers.

• value to buyers minus the amount paid by buyers.

On a graph the area below a demand curve and above the price measures

• producer surplus.

• total surplus

• willingness to pay.

• consumer surplus.

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

• negative, and the consumer would not purchase the product.

• zero.

• positive, and the consumer would purchase the product.

• There is not enough information given to answer this question.

Ray buys a new tractor for $118,000. He receives a consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

• $13,000

• $131,000

• $105,000

• $118,000

Jeff decides that he would pay as much as $2,000 for a new laptop computer. He buys the computer and realizes a consumer surplus of $300. How much did Jeff pay for his computer?

• $300

• $1,700

• $2,000

• $2,300

Consumer surplus

• is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it.

• measures the benefit buyers receive from participating in a market.

• is represented on a supply-demand graph by the area below the price and above the demand curves

• measures the benefit sellers receive from participating in a market.

Trump would be willing to pay $500 to attend a Formula 1 race, but he buys a ticket for $300. Trump values the Formula 1 race at

• $50

• $200

• $150

• $350

Suppose there is an early freeze that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons?

• Consumer surplus increases.

• Consumer surplus decreases.

• Consumer surplus is not affected by this change in market forces.

• We would have to know whether the demand for lemons is elastic or inelastic to make this determination.

All else equal, what happens to consumer surplus if the price of a good decreases?

• Consumer surplus decreases.

• Consumer surplus increases.

• Consumer surplus is unchanged.

• Consumer surplus may increase, decrease, or remain unchanged.

All else equal, what happens to consumer surplus if the price of a good increases?

• Consumer surplus increases.

• Consumer surplus decreases.

• Consumer surplus is unchanged.

• Consumer surplus may increase, decrease, or remain unchanged.