Principles of Economics Study Set 2

Business

Quiz 7 :
Consumers, Producers and the Efficiency of Markets

Quiz 7 :
Consumers, Producers and the Efficiency of Markets

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Welfare economics is the study of the welfare system.
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True False
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False

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The highest price a buyer is prepared to spend on a good, is that buyer's willingness to pay.
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True False
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True

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The appropriate measure for buyers' valuation of a good is how willing they are to pay.
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True False
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True

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Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.
True False
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When a good is purchased, the difference between what a consumer is willing to pay and what they actually have to pay is consumer surplus.
True False
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For any given quantity, the price on a supply curve represents the marginal buyer's willingness to pay.
True False
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Consumer surplus is closely related to the demand curve for a product.
True False
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To measure the total consumer surplus in a market, the area above the demand curve is added to the area below the price.
True False
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The height of the demand curve measures the value buyers place on the good, as measured by their willingness to pay for it.
True False
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A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay.
True False
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Suppose a market clears and this generates an equilibrium price and quantity. An important outcome of this equilibrium is that it maximises the total benefits to both buyers and sellers.
True False
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When the market price of a good falls, consumer surplus increases because (1) the consumer surplus received by existing buyers becomes larger and (2) more buyers enter the market at the lower price.
True False
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In all markets consumer surplus measures the economic wellbeing in that market.
True False
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Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.
True False
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In a competitive market, sales go to those producers who are willing to supply the product with the best after-sales service.
True False
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The opportunity cost for a seller should only include their cash expenses on inputs.
True False
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A supply curve provides a graphical measure of a producer's true willingness to sell.
True False
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Producer surplus is the amount a seller is paid minus the cost of production.
True False
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Lee can sell coffee at $1 per cup. The market equilibrium price of coffee is $2.50. Suppose Lee sells 200 cups of coffee. The producer surplus captured by Lee is $500.
True False
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Any goods not sold in a vegetable market at the end of the day are producer surplus.
True False
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