Question 1

Welfare economics is the study of
the well-being of less fortunate people.

Accepted Answer

False

Question 2

With respect to welfare economics,
the equilibrium price of a product is
considered to be the best price because it
maximizes total revenue to firms and total
utility to buyers.

Accepted Answer

False

Question 3

Willingness to pay measures the
amount a buyer is willing to pay for a good
minus the amount the buyer actually pays
for it.

Accepted Answer

False

Question 4

Consumer surplus is a buyer’s
willingness to pay minus the price.

Accepted Answer

True

Question 5

A consumer’s willingness to pay
measures the cost of a good to the buyer

Accepted Answer

False

Question 6

. If a consumer is willing and able to
pay $20.00 for a particular good but only
has to pay $14.00, the consumer surplus
is $6.00.

Accepted Answer

True

Question 7

. Belva is willing to pay $65.00 for a
pair of shoes for a formal dance. She finds
a pair at her favorite outlet shoe store for
$48.00. Belva’s consumer surplus is $17.

Accepted Answer

True

Question 8

Shannon buys a new CD player for
her car for $135. She receives consumer
surplus of $25 on her purchase. Her
willingness to pay is $25.

Accepted Answer

False

Question 9

Janine would be willing to pay $50
to see Les Misérables, but buys a ticket
for only $30. Janine values the
performance at $20.

Accepted Answer

False

Question 10

Amy buys a new dog for $150. She
receives consumer surplus of $100 on her
purchase. Her willingness to pay is $50.

Accepted Answer

False

Question 11

If the price a consumer pays for a
product is equal to a consumer’s
willingness to pay, then the consumer
surplus of that purchase would be zero.

Accepted Answer

True

Question 12

Suppose there is an early freeze in
California that ruins the lemon crop.
Consumer surplus in the market for
lemons decreases

Accepted Answer

True

Question 13

If you pay a price exactly equal to
your willingness to pay, then your
consumer surplus is negative.

Accepted Answer

False

Question 14

A demand curve measures a
buyer’s willingness to pay.

Accepted Answer

True

Question 15

Consumer surplus equals the Value
to buyers – Amount paid by buyers.

Accepted Answer

True

Question 16

The area below a demand curve
and above the price measures producer
surplus.

Accepted Answer

False

Question 17

If the price of a good increases,
consumer surplus decreases.

Accepted Answer

True

Question 18

When technology improves in the
ice cream industry, consumer surplus will
increase.

Accepted Answer

True

Question 19

In most markets, consumer surplus
reflects economic well-being.

Accepted Answer

True

Question 20

Out-of-pocket expenses plus the
value of the seller’s own resources used in
production are considered to be the
seller’s total revenue.

Accepted Answer

False

Question 21

Cost is a measure of the seller’s
willingness to sell.

Accepted Answer

True

Question 22

Cost refers to a seller’s producer
surplus.

Accepted Answer

False

Question 23

A supply curve can be used to
measure producer surplus because it
reflects the actions of sellers.

Accepted Answer

False

Question 24

. A seller would be willing to sell a
product ONLY IF the price received is less
than the cost of production.

Accepted Answer

False

Question 25

Suppose the demand for nachos
increases. Producer surplus in the market
for nachos will increase.

Accepted Answer

True

Question 26

If demand decreases, the price of a
product, as well as producer surplus,
increases.

Accepted Answer

False

Question 27

The Surgeon General announces
that eating chocolate increases tooth
decay. As a result, the equilibrium market
price of chocolate increases, and producer
surplus increases.

Accepted Answer

False

Question 28

Suppose consumer income
increases. If grass seed is a normal good,
the equilibrium price of grass seed will
decrease, and producer surplus in the
industry will decrease.

Accepted Answer

False

Question 29

Producer surplus equals Value to
buyers – Amount paid by buyers.

Accepted Answer

False

Question 30

Producer surplus is the area under
the supply curve to the left of the amount
sold.

Accepted Answer

False

Question 31

The marginal seller is the seller
who cannot compete with the other sellers
in the market.

Accepted Answer

False

Question 32

Producer surplus measures the
well-being of sellers.

Accepted Answer

True

Question 33

Denea produces cookies. Her
production cost is $3 per dozen. She sells
the cookies for $8 per dozen. Her
producer surplus is $3 per dozen.

Accepted Answer

False

Question 34

Donald produces nails at a cost of
$200 per ton. If he sells the nails for $500
per ton, his producer surplus is $200 per
ton.

Accepted Answer

False

Question 35

If Roberta sells a shirt for $30, and
her producer surplus from the sale is $21,
her cost must have been $51.

Accepted Answer

False

Question 36

. At Nick’s Bakery, the cost to make
his homemade chocolate cake is $3 per
cake. He sells three and receives a total of
$21 worth of producer surplus. Nick must
be selling his cakes for $2 each.

Accepted Answer

False

Question 37

We can say that the allocation of
resources is efficient if producer surplus is
maximized.

Accepted Answer

False

Question 38

total surplus = value to sellers –
costs of sellers is NOT correct.

Accepted Answer

True

Question 39

Total surplus in a market is the total
costs to sellers of providing the goods less
the total value to buyers of the goods.

Accepted Answer

False

Question 40

In a market, total surplus is equal to
producer surplus plus consumer surplus.

Accepted Answer

True

Question 41

Total surplus in a market is
represented by the total area under the
demand curve and above the price.

Accepted Answer

False

Question 42

At the equilibrium price, the good
will be purchased by those buyers who
value the good more than price.

Accepted Answer

True

Question 43

Total surplus in a market equals
Value to buyers – Amount paid by buyers.

Accepted Answer

False

Question 44

Total surplus in a market equals
Consumer surplus + Producer surplus.

Accepted Answer

True

Question 45

. An allocation of resources is said to
be inefficient if a good is not being
produced by the sellers with the lowest
cost.

Accepted Answer

True

Question 46

When economists say that markets
are efficient, they are assuming that
markets are perfectly competitive.

Accepted Answer

True

Question 47

Efficiency occurs when total surplus
is maximized.

Accepted Answer

True

Question 48

Inefficiency exists in any economy
when a good is not being consumed by
buyers who value it most highly

Accepted Answer

True

Question 49

The “invisible hand” refers to the
marketplace guiding the self-interests of
market participants into promoting general
economic well-being.

Accepted Answer

True

Question 50

Externalities are side effects
passed on to a party other than the buyers
and sellers in the market.

Accepted Answer

True

Question 51

When markets fail, public policy can
do nothing to improve the situation.

Accepted Answer

False

Question 52

If a market is allowed to move
freely to its equilibrium price and quantity,
then an increase in supply will increase
consumer surplus.

Accepted Answer

True

Question 53

To analyze economic well­being in an
economy it is necessary to use demand
and supply

Accepted Answer

False

Question 54

When a tax is levied on a good only
the quantity of the good sold will change.

Accepted Answer

False

Question 55

A tax on a good raises the price
buyers pay and lowers the price sellers
receive.

Accepted Answer

True

Question 56

When a good is taxed both buyers
and sellers are worse off.

Accepted Answer

True

Question 57

A tax placed on a product causes the
price the buyer pays and the price the
seller receives to be higher.

Accepted Answer

False

Question 58

Economic analysis uses consumer
and producer surplus to judge the effect of
taxes on economic welfare

Accepted Answer

True

Question 59

A tax levied on the supplier of a
product shifts the supply curve upward
(or to the left).

Accepted Answer

True

Question 60

A tax levied on the buyers of a
product shifts the  supply curve upward
(or to the left).

Accepted Answer

False

Question 61

If a tax is imposed on a market with
elastic demand and inelastic supply,
buyers will bear most of the burden of the
tax.

Accepted Answer

False

Question 62

Suppose a tax is imposed on the
buyers of a product. The burden of the tax
will fall entirely on the buyers.

Accepted Answer

False

Question 63

A tax imposed on a market with an
inelastic demand and an elastic supply
will cause sellers to pay the majority of the
tax.

Accepted Answer

False

Question 64

When a tax is placed on the buyers of
orange juice, the size of the orange juice
market is reduced.

Accepted Answer

True

Question	Answer
Welfare economics is the study of the well-being of less fortunate people.	False
With respect to welfare economics, the equilibrium price of a product is considered to be the best price because it maximizes total revenue to firms and total utility to buyers.	False
Willingness to pay measures the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.	False
Consumer surplus is a buyer’s willingness to pay minus the price.	True
A consumer’s willingness to pay measures the cost of a good to the buyer	False
. If a consumer is willing and able to pay $20.00 for a particular good but only has to pay $14.00, the consumer surplus is $6.00.	True
. Belva is willing to pay $65.00 for a pair of shoes for a formal dance. She finds a pair at her favorite outlet shoe store for $48.00. Belva’s consumer surplus is $17.	True
Shannon buys a new CD player for her car for $135. She receives consumer surplus of $25 on her purchase. Her willingness to pay is $25.	False
Janine would be willing to pay $50 to see Les Misérables, but buys a ticket for only $30. Janine values the performance at $20.	False
Amy buys a new dog for $150. She receives consumer surplus of $100 on her purchase. Her willingness to pay is $50.	False
If the price a consumer pays for a product is equal to a consumer’s willingness to pay, then the consumer surplus of that purchase would be zero.	True
Suppose there is an early freeze in California that ruins the lemon crop. Consumer surplus in the market for lemons decreases	True
If you pay a price exactly equal to your willingness to pay, then your consumer surplus is negative.	False
A demand curve measures a buyer’s willingness to pay.	True
Consumer surplus equals the Value to buyers – Amount paid by buyers.	True
The area below a demand curve and above the price measures producer surplus.	False
If the price of a good increases, consumer surplus decreases.	True
When technology improves in the ice cream industry, consumer surplus will increase.	True
In most markets, consumer surplus reflects economic well-being.	True
Out-of-pocket expenses plus the value of the seller’s own resources used in production are considered to be the seller’s total revenue.	False
Cost is a measure of the seller’s willingness to sell.	True
Cost refers to a seller’s producer surplus.	False
A supply curve can be used to measure producer surplus because it reflects the actions of sellers.	False
. A seller would be willing to sell a product ONLY IF the price received is less than the cost of production.	False
Suppose the demand for nachos increases. Producer surplus in the market for nachos will increase.	True
If demand decreases, the price of a product, as well as producer surplus, increases.	False
The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium market price of chocolate increases, and producer surplus increases.	False
Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will decrease, and producer surplus in the industry will decrease.	False
Producer surplus equals Value to buyers – Amount paid by buyers.	False
Producer surplus is the area under the supply curve to the left of the amount sold.	False
The marginal seller is the seller who cannot compete with the other sellers in the market.	False
Producer surplus measures the well-being of sellers.	True
Denea produces cookies. Her production cost is $3 per dozen. She sells the cookies for $8 per dozen. Her producer surplus is $3 per dozen.	False
Donald produces nails at a cost of $200 per ton. If he sells the nails for $500 per ton, his producer surplus is $200 per ton.	False
If Roberta sells a shirt for $30, and her producer surplus from the sale is $21, her cost must have been $51.	False
. At Nick’s Bakery, the cost to make his homemade chocolate cake is $3 per cake. He sells three and receives a total of $21 worth of producer surplus. Nick must be selling his cakes for $2 each.	False
We can say that the allocation of resources is efficient if producer surplus is maximized.	False
total surplus = value to sellers – costs of sellers is NOT correct.	True
Total surplus in a market is the total costs to sellers of providing the goods less the total value to buyers of the goods.	False
In a market, total surplus is equal to producer surplus plus consumer surplus.	True
Total surplus in a market is represented by the total area under the demand curve and above the price.	False
At the equilibrium price, the good will be purchased by those buyers who value the good more than price.	True
Total surplus in a market equals Value to buyers – Amount paid by buyers.	False
Total surplus in a market equals Consumer surplus + Producer surplus.	True
. An allocation of resources is said to be inefficient if a good is not being produced by the sellers with the lowest cost.	True
When economists say that markets are efficient, they are assuming that markets are perfectly competitive.	True
Efficiency occurs when total surplus is maximized.	True
Inefficiency exists in any economy when a good is not being consumed by buyers who value it most highly	True
The “invisible hand” refers to the marketplace guiding the self-interests of market participants into promoting general economic well-being.	True
Externalities are side effects passed on to a party other than the buyers and sellers in the market.	True
When markets fail, public policy can do nothing to improve the situation.	False
If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will increase consumer surplus.	True
To analyze economic wellbeing in an economy it is necessary to use demand and supply	False
When a tax is levied on a good only the quantity of the good sold will change.	False
A tax on a good raises the price buyers pay and lowers the price sellers receive.	True
When a good is taxed both buyers and sellers are worse off.	True
A tax placed on a product causes the price the buyer pays and the price the seller receives to be higher.	False
Economic analysis uses consumer and producer surplus to judge the effect of taxes on economic welfare	True
A tax levied on the supplier of a product shifts the supply curve upward (or to the left).	True
A tax levied on the buyers of a product shifts the supply curve upward (or to the left).	False
If a tax is imposed on a market with elastic demand and inelastic supply, buyers will bear most of the burden of the tax.	False
Suppose a tax is imposed on the buyers of a product. The burden of the tax will fall entirely on the buyers.	False
A tax imposed on a market with an inelastic demand and an elastic supply will cause sellers to pay the majority of the tax.	False
When a tax is placed on the buyers of orange juice, the size of the orange juice market is reduced.	True
A tax imposed on gasoline, will have buyers and sellers sharing the burden of the tax.	True
The benefit received by buyers in the market is measured by the demand curve.	False
The benefit received by the government from a tax is measured by deadweight loss.	False
Total tax revenue received by government can be expressed as T/Q.	False
The benefit received by sellers in a market is measured by the supply curve.	False
The benefit from a tax is measured by the benefit received by those people who gain from government’s expenditure of the tax revenue.	True
Deadweight loss measures the loss in a market to buyers and sellers that is not offset by an increase in government revenue.	True
The loss in total surplus resulting from a tax is called a deficit.	False
Deadweight loss is the reduction in total surplus that results from a tax.	True
A tax has a deadweight loss because it induces the government to spend more.	False
Total surplus with a tax is equal to consumer surplus and producer surplus.	False
Assume that the supply of gasoline is relatively inelastic and the supply of wheat is relatively elastic. A tax levied on wheat will cause the loss of producer surplus to be relatively large.	True
As the size of a tax increases the deadweight loss from the tax declines	False
If the size of a tax increases, tax revenue will increase.	False
The Laffer curve relates income tax rates to total income taxes collected.	False
As the tax rate rises, tax revenue rises for a while, but eventually begins to fall; deadweight loss continually rises, this is true for most markets	True
For the most part, all governments, federal, state, and local, rely on taxes to raise revenue for public purposes.	True
The term tax incidence refers to the Boston Tea Party	False
The initial effect of a tax on the buyers of a good is on the supply of that good.	False
If buyers are required to pay a $0.10 tax per bag on Hershey’s kisses, the demand for kisses will shift up by $0.10 per bag	False
A tax on the buyers of popcorn increases the size of the popcorn market.	False
For the most part, buyers and sellers share the burden of the tax.	True
When a tax is placed on the buyers of milk, the size of the milk market is reduced.	True
If a tax is levied on the seller of a product the demand curve will not change.	True
A tax placed on the seller of a product will raise equilibrium price and lower equilibrium quantity.	True
A tax placed on the seller of a good raises the price buyers pay and lowers the price sellers receive.	True
When a tax is placed on the sellers of a product the size of the market is reduced	True
A tax on the sellers of cell phones will reduce the size of the cell phone market.	True
A tax placed on the sellers of blueberries increases costs, lowers profit and shifts supply to the left (upward).	True
In the end, tax incidence depends on the legislated burden.	False
If a tax is imposed on a market with inelastic demand and elastic supply, buyers will bear most of the burden of the tax.	True
Buyers of a product will pay the majority of a tax placed on a product when supply is more elastic than demand.	True
If a tax is imposed on a market with elastic demand and inelastic supply, buyers will bear most of the burden of the tax.	False
For the most part, a tax burden falls most heavily on the side of the market that is more inelastic.	True
The burden of a tax placed on a product depends on the supply and demand of that product.	True
Suppose that a tax is placed on DVDs. If the seller ends up paying the majority of the tax we know that the demand curve is more inelastic than the supply curve	False
Suppose that a tax is placed on books. If the buyer pays the majority of the tax we know that the supply curve is more inelastic than the demand curve	False
When analyzing the economic effects of government policies, supply and demand are useful tools of analysis.	True

"Know" box contains:
Time elapsed:
Retries:

Question

Question

Question

Econ