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chapter: 4 >> Consumer and Producer Surplus Krugman/Wells CHECK YOUR UNDERSTANDING ©2009 Worth Publishers Check Your Understanding 4-1 Question 1 Consider the market for cheese-stuffed jalapeno peppers. There are two consumers, Casey and Josie, and their willingness to pay for each pepper is given in the accompanying table. 1a) How many peppers are demanded at a price of $0.10? 1. 2. 3. 4. 0 4 8 10 1b) How many peppers are demanded at a price of $0.70? 1. 2. 3. 4. 3 5 8 10 1c) What is the total consumer surplus at a price of $0.40? 1. 2. 3. 4. $0.60 $0.90 $1.50 $1.65 Check Your Understanding 4-2 Consider the market for cheese-stuffed jalapeno peppers. There are two producers, Cara and Jamie, and their costs of producing each pepper are given in the accompanying table. 1a) How many peppers are supplied at a price of $0.45? 1. 2. 3. 4. 4 5 6 7 1b) How many peppers are supplied at a price of $0.70? 1. 2. 3. 4. 4 5 6 7 1c) What is the total producer surplus when the price is $0.70? 1. 2. 3. 4. $0.60 $1.60 $2.20 $3.10 Check Your Understanding 4-3 Question 1 Check Your Understanding 4-3 Question 1 Using the tables below answer the following questions 1a) What is the equilibrium price in the market for peppers? 1. 2. 3. 4. $0.30 $0.50 $0.60 $0.75 1b) What is the equilibrium quantity in the market for peppers? 1. 2. 3. 4. 5 6 7 8 1c) What is the total consumer surplus at the equilibrium price and quantity? 1. 2. 3. 4. $0.50 $0.60 $0.75 $1.00 1d) What is the total producer surplus at the equilibrium price and quantity? 1. 2. 3. 4. $0.50 $0.60 $1.00 $1.10 Check Your Understanding 4-3 Question 2 2a) If Josie consumes one less pepper, and Casey one more, than in the market equilibrium ( P = $.50 and Q = 5) total surplus will increase. 1. 2. True False 2b) If Cara produces one less pepper, and Jamie one more pepper than in the market equilibrium ( P = $.50 and Q = 5) total surplus will increase. 1. 2. True False 2c) If Josie consumes one less pepper, and Cara produces one less pepper, than in the market equilibrium ( P = $.50 and Q = 5) total surplus will increase. 1. 2. True False Check Your Understanding 4-3 Question 3* Use the diagram showing the demand and supply of lobsters to answer the following questions. NEW CHECK YOUR UNDERSTANDING 3a*) How much is consumer surplus in the lobster market? 1. $18 2. $720,000 3. $1,200,000 4. $1,440,000 NEW CHECK YOUR UNDERSTANDING 3b*) How much is producer surplus in the lobster market? 1. $360,000 2. $720,000 3. $1,200,000 4. $1,440,000 NEW CHECK YOUR UNDERSTANDING 3c*) How much is total surplus in the lobster market? 1. $480,000 2. $720,000 3. $1,080,000 4. $1,440,000 NEW CHECK YOUR UNDERSTANDING Check Your Understanding 4-3 Question 3 3) Suppose UNOS alters its guidelines for the allocation of donated kidneys, no longer relying solely on the concept of “net benefit,” but also giving preference to children with small children. If total surplus is the total life span of kidney recipients, total surplus will increase. 1. 2. True False Check Your Understanding 4-4 Question 1 1) In some states that are rich in natural resources, such as oil, the law separates the right to above-ground use of the land from the right to drill below the ground (mineral rights). If the owner can sell the aboveground rights and the mineral rights separately, efficiency is increased. 1. True 2. False Check Your Understanding 4-4 Question 2 2) Suppose that in the market for used textbooks the equilibrium price is $30, but it is mistakenly announced that the equilibrium price is $300. Efficiency will increase. 1. True 2. False Check Your Understanding 4-4 Question 3 3) Markets are always the best way to organize economic activity. Any policies that interfere with markets reduce society’s welfare. 1. True 2. False