Q: Which formula correctly represents producer surplus for a single unit?

$$\text{Producer Surplus} = \text{Price} - \text{Marginal Cost}$$

Question 1

Which of the following best describes economic surplus?

Accepted Answer

The total benefits minus the total costs flowing from a decision.

Question 2

Suppose the marginal benefit of a good is $$70 and the price is 50. $$What is the consumer surplus for this unit?

Accepted Answer

$20

Question 3

Which formula correctly represents producer surplus for a single unit?

Accepted Answer

$$	ext{Producer Surplus} = 	ext{Price} - 	ext{Marginal Cost}$$

Question 4

If the market price of a jersey is $$55, and Anne is willing to pay 80$$, Bruce $$70, and Carlos 60$$, what is the total consumer surplus for these three buyers?

Accepted Answer

$$25 + 15 + 5 = 45$$

Question 5

Which of the following statements about economic efficiency is correct?

Accepted Answer

An efficient outcome yields the largest possible economic surplus.

Question 6

A market is considered efficient if:

Accepted Answer

All trades where marginal benefit exceeds marginal cost take place, and no other trades occur.

Question 7

What does the area below the demand curve and above the market price represent?

Accepted Answer

Consumer surplus

Question 8

If the marginal cost of producing a jersey is $$40 and the market price is 50$$, what is the producer surplus for this jersey?

Accepted Answer

$10

Question 9

Which of the following best defines deadweight loss?

Accepted Answer

The reduction in economic surplus resulting from a market not being in competitive equilibrium.

Question 10

Suppose the supply curve for a good represents the marginal cost of production, and the demand curve represents the marginal benefit to consumers. At the competitive equilibrium, which of the following is true?

Accepted Answer

Marginal benefit equals marginal cost.

Question 11

If a market is not in equilibrium and the price is set below the equilibrium price, what is likely to occur?

Accepted Answer

Deadweight loss will arise due to underproduction.

Question 12

Which of the following is NOT a correct statement about consumer surplus?

Accepted Answer

It is the area above the demand curve and below the price.

Question 13

A government sets a price ceiling below the equilibrium price in the market for rental apartments. Which of the following is a likely consequence?

Accepted Answer

Deadweight loss will occur due to fewer apartments being rented than at equilibrium.

Question 14

If the total benefit to consumers from buying a good is $$500 and the total amount they pay is 350$$, what is the consumer surplus?

Accepted Answer

$$500 - 350$$ = $$150$$

Question 15

Which of the following best describes the relationship between efficiency and equity?

Accepted Answer

Efficiency is concerned with maximizing economic surplus, while equity is concerned with the fairness of the distribution of benefits.

Question 16

Suppose a market for a good is in competitive equilibrium. If the government imposes a tax on the good, what is the most likely effect?

Accepted Answer

Deadweight loss will be created, reducing total economic surplus.

Question 17

If the marginal benefit of the last unit consumed is less than the marginal cost of producing it, what does this imply about the market?

Accepted Answer

Too much of the good is being produced, resulting in inefficiency.

Question 18

Which of the following is true at the competitive equilibrium in a market?

Accepted Answer

Total economic surplus (consumer surplus plus producer surplus) is maximized.

Question 19

A firm is willing to sell a product for $$30 (its marginal cost), but the market price is 45. $$What is the producer surplus for this unit?

Accepted Answer

$$45 - 30$$ = $$15$$

Question 20

Which of the following scenarios would result in a deadweight loss?

Accepted Answer

A government sets a minimum price above equilibrium, causing fewer trades to occur.

Surplus and Efficiency in Competitive Markets

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