1) Refer to Figure 9.1. If the market is in equilibrium, the consumer surplus ea
ID: 1195257 • Letter: 1
Question
1) Refer to Figure 9.1. If the market is in equilibrium, the consumer surplus earned by the buyer of the 1st unit is ________.
A) $5.00
B) $15.00
C) $22.50
D) $40.00
Answer: D
2) Refer to Figure 9.1. If the market is in equilibrium, the producer surplus earned by the seller of the 1st unit is ________.
A) $5.00
B) $10.00
C) $15.00
D) $20.00
E) $40.00
Answer: D
3) Refer to Figure 9.1. Suppose the market is currently in equilibrium. If the government establishes a price ceiling of $20, consumer surplus will
A) fall by $200.
B) fall by $300.
C) remain the same.
D) rise by $200.
E) rise by $300.
Answer: C
4) Refer to Figure 9.1. Suppose the market is currently in equilibrium. If the government establishes a price ceiling of $20, producer surplus will
A) fall by $200.
B) fall by $300.
C) remain the same.
D) rise by $200.
E) rise by $300.
Answer: B
5) Refer to Figure 9.1. If the government establishes a price ceiling of $20, the resulting deadweight loss will be
A) $0.
B) $20.
C) $30.
D) $300.
E) $600.
Answer: D
Explanation / Answer
1. D) $40.00 ( it is evidend from the figure that the equilibrium price is $30 per unit and consumer is ready to pay $70 for 1st unit. so the consumer surplus = 70 - 30 = 40)
2. D) $20.00 ( it is evidend from the figure that the equilibrium price is $30 per unit and producer is ready to sell at $10 for 1st unit. so the producer surplus = 30 - 10 = 20)
3. C) remain the same. ( since market is in equilibrium any goverment action will not change consumer surplus)
4. B) fall by $300.( before govt. establises price celling , the total producer surplus was (40 x20)/2 = $400. when govt. establises price celling at $20, the current total producer surplus = 10x10= $100 (means the area above the supply curve and below price level $20). so, there is a fall in producer surplus = 400 -100 = $300)
5. D) $300. ( dead weight loss means the loss in surplus which neither the consumer not the producers get. in this case it is equal to the loss in producer surplus of $300
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