1. A consumer’s willingness to pay measures   how much a buyer values a good.
2. A demand curve reflects each of the following EXCEPT the  ability of buyers to obtain the quantity they desire
3. A drought in California destroys many red grapes causing the prices of both red grapes and red wine to rise . As a result, the consumer surplus in the market for red grapes    decreases, and the consumer surplus in the market for red wine decreases.
4. A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes   decreases, and the consumer surplus in the market for red wine decreases.
5. A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called   intermediate goods
6. A tax on an imported good is called a  tariff.
7. According to the table, if the market price is $1,000, the producer surplus in the market would be
   SellerCostDale$1500Jill$1200Denise$1000Catherine$750Jackson$500   $750
8. At the market-clearing equilibrium, total surplus is represented by the area   A + B + C + D + E + F.
9. Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $350. His consumer surplus is  $50.
10. Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at    $20.
11. Consumer surplus is   the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
12. For the purpose of calculating GDP, investment is spending on   capital equipment, inventories, and structures, including household purchases of new housing.
13. GDP is defined as the   value of all final goods and services produced within a country in a given period of time.
14. Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,  both Janine and Henry experience an increase in consumer surplus.
15. If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that consumer, consumer surplus amounts to   $4.
16. If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the   consumer does not purchase the good.
17. If a consumer places a value of $20 on a particular good and if the price of the good is $25, then the   consumer does not purchase the good.
18. If Gina sells a shirt for $40, and her producer surplus from the sale is $32, her cost must have been   $8.
19. If the market price is $5.50, the consumer surplus in the market will be
    Table 4.1.
    BuyerWTPDavid$8.50Laura$7.00Megan$5.50Mallory$4.00Audrey$3.50  $4.50.
20. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus?  $2,500
21. If the United States threatens to impose a tariff on Colombian coffee if Colombia does not remove agricultural subsidies, the United States will be   worse off if Colombia doesn’t remove the subsidies in response to the threat.
22. Import quotas and tariffs produce some common results. Which of the following is not one of those common results?  Equal revenue is always raised for the domestic government.
23. In a pure market economy, the “for whom” or distribution question is largely answered  according to the needs of individuals and groups in society.
24. In a simple circular-flow diagram, total income and total expenditure are  always equal because every transaction has a buyer and a seller.
25. Inefficiency exists in any economy when a good is  not being consumed by buyers who value it most highly.
26. Kelly is willing to pay $68 for a pair of shoes for a wedding. She finds a pair at her favorite outlet shoe store for $58. Kelly’s consumer surplus is  $10.
27. On a graph, consumer surplus is represented by the area   below the demand curve and above price.
28. On a graph, consumer surplus is represented by the area   below the demand curve and above price.
29. Producer surplus is the area  below the price and above the supply curve.
30. Refer to Figure 4.1. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?  BCFD
31. Refer to Figure 4.1. Which area represents consumer surplus at a price of P2?    ACG
32. Refer to Figure 4.2. Which area represents the increase in producer surplus when the price rises from P1 to P2?  AHGB
33. Refer to Figure 4.4. If the supply curve is S and the demand curve shifts from D to D’, what is the change in producer surplus?   Producer surplus increases by $3,125.
34. Refer to Table 4.1. If the market price is $6.90, who will purchase the good?  David and Laura
35. Suppose Chris and Laura attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called   willingness to pay.
36. The equilibrium of supply and demand in a market  maximizes the total benefits received by buyers and sellers.
37. The value of goods added to a firm’s inventory in a certain year is treated as  investment, since GDP aims to measure the value of the economy’s production that year
38. We can say that the allocation of resources is efficient if  total surplus is maximized.
39. What is the fundamental basis for trade among nations?  Comparative advantage
40. When a market is in equilibrium, which of the following would not be correct?  Consumer surplus will be equal to producer surplus.
41. Which area represents consumer surplus at a price of P1?   ABD
42. Which area represents producer surplus when the price is P1?   BCG
43. Which of the following is included in GDP?   Both the market value of rental housing services and the market value of owner-occupied housing services

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