NAME SECTIONS PRINT LAST NAME, FIRST NAME CONSUMER AND PRODUCER SURPLUS 1. Consumer surplus is: the difference between product price and marginal cost. b. the difference between marginal benefit and product price. impossible to measure. P equal to the maximum amount the consumer is willing to pay for a product. 2. Assuming that supply is upward-sloping. producer surplus a. increases as price falls. increases as price rises, Arg decreases as price rises. ING Round SP M does not depend on price. 3. A supply curve can be interpreted as a: marginal benefit curve. marginal cost curve. horizontal line corresponding to market quantity. vertical line corresponding to market price. 4. If Betty is willing to pay $45 for a new purse but only has to pay $30 for the purse, Betty: will enjoy consumer surplus if she purchases the purse. will experience a decline in total utility if she purchases the purse. cannot afford to purchase the purse. must have a demand curve that is horizontal at a price of $45. 5. Which of the following statements best illustrates the concept of producer surplus? Rose's Flower Shop is forced to sell surplus tulips at a price that is below cost because inventories are too high. Alice's Cleaning Service agrees to add a new client for $50 a week, although they would be willing to accept $25 to perform these services. Steve found a scalper willing to sell him concert tickets for less than their original price, d. Maria refuses to work overtime despite being offered twice her regular wage rate because she cannot make arrangements for child care. 6. When exchange in a market occurs such that the marginal benefit of the last unit bought and sold is just equal to the marginal cost of the last unit bought and sold: consumer surplus is zero. producer surplus is zero. total consumer and producer surplus is maximized. d. total consumer and producer surplus is minimized. 45 Chapter 6 Assignments