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Consumer Surplus and Willingness to Pay quiz #10

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  • Generally, people buy one product or service instead of another because they
    Perceive greater value or utility from it.
  • Satisfying consumer needs is accomplished by what?
    Providing goods and services that deliver value.
  • How does a new good or service create value?
    By satisfying unmet needs or providing greater utility.
  • Regardless of superior quality, consumers will not pay premium prices. True or false?
    False; some consumers are willing to pay more for higher quality.
  • When consumers calculate the value of a product, they do what?
    Compare perceived benefits to the price.
  • To determine the value of a good in the eyes of consumers, a firm can do what?
    Assess willingness to pay and perceived benefits.
  • Consumers calculate the value of a product by:
    Subtracting the price from the perceived benefit.
  • The overall sacrifice a consumer makes to acquire a product or service is known as what?
    Total cost.
  • Bundling of products and services that are consumed in tandem to create value is an example of what?
    Creating consumer surplus through complementary goods.
  • The attractiveness of a product relative to its cost is known as what?
    Value.
  • What percentage of your gross salary does the consumer typically spend on housing?
    About 30% (varies by location and income).
  • If consumers' perceptions of a good improve, what happens?
    Demand increases, potentially raising price and consumer surplus.
  • An example of complementary goods would be what?
    Hot dogs and hot dog buns.
  • The first step in the consumer decision-making process is to do what?
    Recognize a need or want.
  • Mia wants to buy a book. The economic perspective suggests that Mia will buy the book if
    Her willingness to pay is greater than or equal to the price.
  • Refer to figure 7-2. At the equilibrium price, consumer surplus is what?
    The area below the demand curve and above the equilibrium price.
  • Consumer surplus is shown graphically as the area
    Below the demand curve and above the market price.
  • Retailers provide value to product manufacturers by doing what?
    Making products accessible to consumers and increasing sales.
  • At the equilibrium quantity marginal benefit is what?
    Equal to marginal cost.
  • Buyers are powerful when what?
    They have many alternatives and can influence prices.
  • The term used for the relative proportion in which a company's products are sold is blank______.
    Sales mix.
  • Customers are encouraged to buy a larger number of a single product when a firm offers what?
    Bulk discounts or lower unit prices.
  • The expected return of a stock, based on the likelihood of various economic outcomes, equals the:
    Weighted average of possible returns.
  • A decrease in the demand for recreational fishing boats might be caused by an increase in the what?
    Price of complementary goods, such as boat fuel.
  • The income effect is the effect that a change in the:
    Price of a good has on consumer purchasing power.
  • A theme park offers a group rate discount. What is the likely effect?
    Increased consumer surplus for groups.
  • A customer picks a product over a similar product due to the__________blank of the product.
    Perceived value or benefit.
  • An increase in expected future income will have what effect?
    Increase current consumption spending.
  • The difference between the actual demand and the forecast is referred to as what?
    Forecast error.
  • How to calculate consumer surplus from a table?
    Sum the differences between each buyer's willingness to pay and the market price for all buyers who purchase.
  • Surplus can be thought of as the wealth that trade creates for consumers in a market. True or false?
    True.
  • Consumer surplus after the tax is imposed is what?
    The area below the demand curve and above the new, higher price after tax.
  • Sales mix refers to the combination of products sold by a company. True or false?
    True.
  • What is consumer surplus equal to in microeconomics?
    Consumer surplus is equal to the difference between a consumer's maximum willingness to pay for a good and the market price actually paid.
  • How do you find consumer surplus on a demand curve graph?
    Consumer surplus is found as the area below the demand curve and above the market price, typically calculated as the area of a triangle using the formula: 1/2 × base × height, where the base is the quantity and the height is the difference between the highest willingness to pay and the market price.