Q: Which formula correctly calculates consumer surplus in a market?

$$\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Price Paid}$$

Question 1

Suppose a country can produce either 100 units of wheat or 200 units of corn using all its resources. What is the opportunity cost of producing 1 unit of wheat in terms of corn?

Accepted Answer

$$2$$

Question 2

If a nation moves from a point inside its production possibilities curve (PPC) to a point on the curve, what does this represent?

Accepted Answer

An increase in resource utilization or efficiency

Question 3

Which of the following would cause the production possibilities curve (PPC) to shift outward?

Accepted Answer

An increase in the labor force

Question 4

If the opportunity cost of producing an additional unit of good X increases as more of X is produced, the PPC is:

Accepted Answer

Bowed outward

Question 5

Country A can produce 10 cars or 20 computers in a day. Country B can produce 8 cars or 16 computers in a day. Which country has a comparative advantage in producing cars?

Accepted Answer

Country A, because its opportunity cost of cars is lower

Question 6

If the price of a substitute good increases, what is likely to happen to the demand for the original good?

Accepted Answer

Demand will increase

Question 7

Suppose the demand for normal goods increases when consumer incomes rise. Which of the following is an example of an inferior good?

Accepted Answer

Public transportation for a consumer who buys a car when income rises

Question 8

If both the demand and supply of a good increase simultaneously, what will happen to the equilibrium quantity?

Accepted Answer

It will increase

Question 9

A price ceiling set below the equilibrium price will result in:

Accepted Answer

A shortage

Question 10

If a $10 per unit tax is imposed on sellers, and the demand curve is perfectly inelastic, who bears the entire burden of the tax?

Accepted Answer

Buyers

Question 11

Which formula correctly calculates consumer surplus in a market?

Accepted Answer

$$	ext{Consumer Surplus} = 	ext{Willingness to Pay} - 	ext{Price Paid}$$

Question 12

A negative externality in production leads to which of the following outcomes in a competitive market?

Accepted Answer

The market equilibrium quantity is greater than the socially optimal quantity

Question 13

The Coase Theorem suggests that private parties can solve the problem of externalities if:

Accepted Answer

Property rights are well-defined and transaction costs are low

Question 14

If the government wants to eliminate the deadweight loss from a negative externality, it should set a tax equal to:

Accepted Answer

The marginal external cost at the socially optimal quantity

Question 15

Suppose a market for gasoline has a negative externality of $$\2$ per gallon. If the government imposes a $$\$$2$$ per gallon tax, what will happen to the equilibrium quantity?

Accepted Answer

It will decrease to the socially optimal level

Question 16

Which of the following best describes deadweight loss?

Accepted Answer

The reduction in total surplus that results from a market distortion, such as a tax

Question 17

If a market is efficient and there are no externalities, which of the following is true?

Accepted Answer

Total surplus is maximized

Question 18

A government sets a price floor above the equilibrium price in the wheat market. What is the likely result?

Accepted Answer

A surplus of wheat

Question 19

If the demand for a product is perfectly elastic, who bears the burden of a tax imposed on the product?

Accepted Answer

Sellers

Question 20

Suppose the government imposes a $$\5$ per unit tax on a good. If the price paid by buyers increases by $$\$$3$$, what is the incidence of the tax on buyers?

Accepted Answer

$$\frac{3}{5} of $$the tax

Key Microeconomics Concepts: Production, Supply & Demand, and Market Efficiency

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