SOLVED

4.1  Consumer Surplus and Producer Surplus 1) The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called A) producer surplus. B) the substitution effect. C) the income effect. D) consumer surplus. 2) In New York City, about 1 million apartments are subject to rent control by the local government. Rent control A) puts a legal limit on the rent that landlords can charge for an apartment. B) is a price floor which sets a minimum rent for apartments. C) only applies to those apartments which are owned and rented out by the local government. D) is a government policy which limits apartment rental to those people whose incomes are less than $50,000 per year. 3) In a city with rent-controlled apartments, all of the following are true except A) apartments usually rent for rates lower than the market rate. B) apartments are often in shorter supply than they would be without rent control. C) it usually takes more time to find an apartment than it would without rent control. D) landlords have an incentive to rent more apartments than they would without rent control. 4) Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul’s consumer surplus from the purchase is A) $325 B) $200 C) $125 D) $75 5) Lucinda buys a new GPS system for $250. She receives consumer surplus of $75 from the purchase. How much does Lucinda value her GPS system? A) $75 B) $175 C) $250 D) $325 6) Willingness to pay measures A) the maximum price a buyer is willing to pay for a product minus the amount the buyer actually pays for it. B) the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good. C) the maximum price that a buyer is willing to pay for a good. D) the maximum price a buyer is willing to pay minus the minimum price a seller is willing to accept. 7) Consumers are willing to purchase a product up to the point where A) the marginal benefit of consuming the product is equal to the marginal cost of consuming it. B) the consumer surplus is equal to the producer surplus. C) the marginal benefit of consuming the product equals the area below the supply curve and above the market price. D) the marginal benefit of consuming a product is equal to its price. 8) Marginal benefit is equal to the ________ benefit to a consumer receives from consuming one more unit of a good or service A) total B) unintended C) additional D) surplus 9) Which of the following statements best describes the concept of consumer surplus? A) “Safeway was having a sale on Dreyer’s ice cream so I bought 3 quarts.” B) “I was all ready to pay $300 for a new leather jacket that I had seen in Macy’s but I ended up paying only $180 for the same jacket.” C) “I paid $130 for a printer last week. This week the same store is selling the same printer for $110.” D) “I sold my Blu-ray copy of Ben-Hur for $18 at a garage sale even though I was willing to sell it for $10.” 10) Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices. A) demand B) supply C) production possibilities D) marginal cost    1