Chapter 7/Consumers, Producers, and the Efficiency of Markets ? 501
61. Refer to Figure 7-11. When the price rises from P1 to P2, which area represents the increase in producer
surplus to existing producers? a. A b. A+B c. A+B+C d. G
ANS: A
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
62. Refer to Figure 7-11. When the price rises from P1 to P2, which area represents the increase in producer
surplus due to new producers entering the market? a. A b. B c. A+B d. G
ANS: B
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
63. Refer to Figure 7-11. Area A represents
a. producer surplus to new producers entering the market as the result of an increase in price from P1
to P2.
b. the increase in consumer surplus that results from an upward-sloping supply curve.
c. the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. d. the increase in producer surplus to those producers already in the market when the price increases
from P1 to P2.
ANS: D
NAT: Analytic MSC: Applicative
DIF: 3 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
64. Refer to Figure 7-11. Area B represents
a. the combined profits of all producers when the price is P2.
b. the increase in producer surplus to all producers as the result of an increase in the price from P1 to
P2.
c. producer surplus to new producers entering the market as the result of an increase in the price from
P1 to P2.
d. that portion of the increase in producer surplus that is offset by a loss in consumer surplus when the
price increases from P1 to P2.
ANS: C
NAT: Analytic MSC: Applicative
DIF: 3 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
65. Refer to Figure 7-6. When the price falls from P2 to P1, which of the following would not be true?
a. The sellers who still sell the good are worse off because they now receive less.
b. Some sellers leave the market because they are not willing to sell the good at the lower price.
c. The total cost of what is now sold by sellers is actually higher than it was before the decrease in the
price.
d. Producer surplus would fall by area A + B.
ANS: C
NAT: Analytic MSC: Applicative
DIF: 2 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
502 ? Chapter 7/Consumers, Producers, and the Efficiency of Markets
66. Producer surplus equals
a. Value to buyers - Amount paid by buyers. b. Amount received by sellers - Costs of sellers. c. Value to buyers - Costs of sellers.
d. Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers.
ANS: B
NAT: Analytic MSC: Definitional
DIF: 2 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
67. Producer surplus is the
a. area under the supply curve to the left of the amount sold. b. amount a seller is paid minus the cost of production.
c. area between the supply and demand curves, above the equilibrium price. d. cost to sellers of participating in a market.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
68. Producer surplus is the area
a. under the supply curve.
b. between the supply and demand curves. c. below the price and above the supply curve. d. under the demand curve and above the price.
ANS: C
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
69. Producer surplus is
a. represented on a graph by the area below the demand curve and above the supply curve. b. the amount a seller is paid minus the cost of production. c. also referred to as excess supply. d. All of the above are correct.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
70. Producer surplus directly measures
a. the well-being of society as a whole. b. the well-being of buyers and sellers. c. the well-being of sellers. d. sellers’ willingness to sell.
ANS: C
NAT: Analytic MSC: Interpretive
DIF: 1 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus
71. Producer surplus directly measures
a. the well-being of sellers. b. production costs. c. excess demand. d. unsold inventories.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 1 REF: 7-2 LOC: Supply and demand
TOP: Producer surplus