Q: Which of the following best defines Consumer Surplus (CS)?

$$\text{CS} = \text{Willingness to Pay (WTP)} - \text{Actual Price Paid (P)}$$

Q: Producer Surplus (PS) is defined as:

$$\text{PS} = \text{Price Received (P)} - \text{Cost of Production (Cost)}$$

Q: How do you calculate total economic surplus in a market?

$$\text{Total Surplus} = \text{Consumer Surplus} + \text{Producer Surplus}$$

Q: What is the formula for the area of consumer surplus under a linear demand curve with a maximum price $$P_{max}$$, market price $$P^*$$, and equilibrium quantity $$Q^*$$?

$$\text{CS} = \frac{1}{2} \times Q^* \times (P_{max} - P^*)$$

Question 1

Which of the following best defines Consumer Surplus (CS)?

Accepted Answer

$$	ext{CS} = 	ext{Willingness to Pay (WTP)} - 	ext{Actual Price Paid (P)}$$

Question 2

Suppose the market price for a concert ticket is 2,500,000 VND. An is willing to pay 4,000,000 VND, Binh is willing to pay 3,000,000 VND, and Chi is willing to pay 2,000,000 VND. What is the total consumer surplus in this market?

Accepted Answer

$$2,000,000 \ 	ext{VND}$$

Question 3

Which area on a demand and supply graph represents total consumer surplus in a continuous market?

Accepted Answer

The area below the demand curve and above the market price, from quantity 0 to Q

Question 4

If the price of a good falls from $$P_1 to$$ $$P_2$$, which of the following best describes the change in consumer surplus?

Accepted Answer

Consumer surplus increases due to both existing buyers paying less and new buyers entering the market

Question 5

Producer Surplus (PS) is defined as:

Accepted Answer

$$	ext{PS} = 	ext{Price Received (P)} - 	ext{Cost of Production (Cost)}$$

Question 6

A tutor named Linh is willing to work for 150,000 VND per session. If the market price is 200,000 VND per session, what is Linh's producer surplus?

Accepted Answer

$$50,000 \ 	ext{VND}$$

Question 7

Given the supply function $$P = 200 + 2Q$$ and the demand function $$P = 1,000 - 2Q$$, what is the equilibrium price ($$P^*) $$and quantity ($$Q^*$$)?

Accepted Answer

$$P^* = 600, \ Q^* = 200$$

Question 8

How do you calculate total economic surplus in a market?

Accepted Answer

$$	ext{Total Surplus} = 	ext{Consumer Surplus} + 	ext{Producer Surplus}$$

Question 9

Which of the following is NOT a condition for market efficiency at equilibrium?

Accepted Answer

Goods are allocated to buyers with the lowest willingness to pay

Question 10

If a market is producing less than the equilibrium quantity ($$Q \u003c Q^*$$), what is the result?

Accepted Answer

There are unrealized gains from trade, and total surplus can be increased by producing more

Question 11

Which of the following best describes the effect of a price ceiling set at zero in the market for human kidneys?

Accepted Answer

It creates a massive chronic shortage, as quantity demanded far exceeds quantity supplied

Question 12

Which of the following is a source of market failure?

Accepted Answer

Externalities, such as pollution affecting third parties

Question 13

What is the formula for the area of consumer surplus under a linear demand curve with a maximum price $$P_{max}$$, market price $$P^*$$, and equilibrium quantity $$Q^*$$?

Accepted Answer

$$	ext{CS} = \frac{1}{2} 	imes Q^* 	imes (P_{max} - P^*)$$

Question 14

If a tax is imposed on a market, what is the likely effect on total surplus?

Accepted Answer

Total surplus decreases by more than the tax revenue collected, creating deadweight loss

Question 15

Which of the following statements about equity and efficiency is correct?

Accepted Answer

Markets can be efficient but still result in unequal outcomes, raising concerns about equity

Question 16

In the context of welfare economics, what does the 'invisible hand' refer to?

Accepted Answer

The self-interested actions of buyers and sellers that lead to market efficiency without central direction

Question 17

If the cost to sellers of producing an additional unit exceeds the value to buyers, what should happen to maximize total surplus?

Accepted Answer

Production should decrease to avoid destroying social wealth

Question 18

Which of the following is NOT a requirement for a benevolent social planner to maximize social welfare?

Accepted Answer

Allowing market prices to adjust freely

Question 19

What is the main insight from the proof that $$Q \u003e Q^* ($$overproduction) destroys wealth?

Accepted Answer

The cost to sellers exceeds the value to buyers for the extra units, resulting in negative social surplus

Consumers, Producers, and the Efficiency of Markets: Welfare Economics in Microeconomics

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