Economics Quiz

Jen values her time at $60 an hour. She spends 2 hours giving Colleen a massage. Colleen was willing to pay as much as $300 for the massage, but they negotiate a price of $200. In this transaction,

• consumer surplus is $20 larger than producer surplus.

• consumer surplus is $40 larger than producer surplus.

• producer surplus is $20 larger than consumer surplus.

• producer surplus is $40 larger than consumer surplus.

The demand curve for cookies is downward-sloping. When the price of cookies is $2, the quantity demanded is 100. If the price rises to $3, what happens to consumer surplus?

• It falls by less than $100.

• It falls by more than $100.

• It rises by less than $100.

• It rises by more than $100.

John has been working as a tutor for $300 a semester. When the university raises the price it pays tutors to $400, Jasmine enters the market and begins tutoring as well. How much does producer surplus rise as a result of this price increase?

• by less than $100

• between $100 and $200

• between $200 and $300

• by more than $300

An efficient allocation of resources maximizes

• consumer surplus.

• producer surplus.

• consumer surplus plus producer surplus.

• consumer surplus minus producer surplus.

When a market is in equilibrium, the buyers are those with the ________ willingness to pay and the sellers are those with the ________ costs.

• highest, highest

• highest, lowest

• lowest, highest

• lowest, lowest

Producing a quantity larger than the equilibrium of supply and demand is inefficient because the marginal buyer's willingness to pay is

• negative.

• zero.

• positive but less than the marginal seller’s cost.

• positive and greater than the marginal seller’s cost.

Provider A charges $120 per month for unlimited phone calls, while Provider B charges $1 per minute with no fixed fee. What is the cost to your friend of an extra minute on the phone with Provider B?

• $0

• $1

• $120

• $2

• 0 minutes

• 50 minutes

• 100 minutes

• 150 minutes

If your friend chooses Provider A, which charges a flat fee, how would you calculate the consumer surplus using the demand curve?

• By finding the area under the demand curve up to the quantity consumed and subtracting the total cost.

• By multiplying the price per minute by the number of minutes.

• By dividing the total cost by the number of minutes.

• By adding the fixed fee to the total number of minutes.

Suppose your friend wants to maximize consumer surplus. What strategic factor should she consider when choosing between Provider A and Provider B?

• The number of minutes she expects to use each month.

• The color of the provider’s logo.

• The location of the provider’s office.

• The type of phone she owns.