Producer surplus is the sum of the profits earned by all firms in a market. Indicate whether the statement is true or false ANSWER False. This definition ignores fixed costs. Producer surplus minus fixed costs equals profits.
Date: September 9th, 2020
An individual’s ________ surplus is the area ________ the ________ curve and ________ the ________ up to the quantity ________. A) consumer; above; supply; below; market price, produced. B) producer; above; supply; below; market price, produced. C) consumer; below; demand; above; choke price, purchased. D) producer; below; supply; choke price, below; the producer sells. […]
Date: September 9th, 2020
Which of the following expressions can be used to calculate the producer surplus (PS)? A) PS = profit output B) PS = profit + fixed cost C) PS = variable cost – fixed cost D) PS = average cost output ANSWER D
Date: September 9th, 2020
Producer surplus is equal to A) the area under the supply curve. B) the difference between price and average cost for all units sold. C) the difference between price and marginal cost for all units sold. D) the firm’s profit when fixed costs exist. ANSWER C
Date: September 9th, 2020
You enter a store and buy a bottle of soda. Do you usually receive consumer surplus? A) Yes, because you wouldn’t buy the soda if your willingness to pay would be less than the price. B) Yes, because you are thirsty. C) No, because you value other drinks more. D) No, because you have less […]
Date: September 9th, 2020
Joe’s demand for spring water can be represented as p = 10 – Q (where p is measured in $/gallon and Q is measured in gallons). He recently discovered a spring where water can be obtained free of charge. His consumer surplus from this water is A) $0. B) $50. C) $100. D) unknown based […]
Date: September 9th, 2020
Sarah and David both have linear demand curves for lemonade. Sarah’s demand curve for lemonade intersects David’s demand curve at a price of 50 cents per glass. Sarah’s demand curve is more inelastic than David’s. A change in the price of lemonade from 50 cents to 25 cents per glass will A) decrease Sarah’s consumer […]
Date: September 9th, 2020
If entry is limited due to a limited input, firms in that market earn long run economic profit. Indicate whether the statement is true or false ANSWER False. The price of the limited input will be bid up until zero economic profits result in the market that uses the input.
Date: September 9th, 2020
In the long run, firms in a competitive market make zero economic profit. This induces most firms to leave the industry. Indicate whether the statement is true or false ANSWER False. Those firm cannot make themselves better off by moving their resources into another industry because all opportunity cost is covered.
Date: September 9th, 2020
If lower-income households spend a greater share of their income on cigarettes than do higher-income households, then a tax that raises the price of cigarettes will A) cause lower-income households to incur a greater loss of consumer surplus than that incurred by higher-income households. B) cause higher-income households to incur a greater loss of consumer […]
Date: September 9th, 2020
