tbch09 - Chapter 9 Applying the Competitive Model MULTIPLE...

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Chapter 9 Applying the Competitive Model MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question. 1) Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is A) $5,000. B) $15,000. C) $20,000. D) not able to be calculated from the information given. Answer: D Diff: 1 Topic: Consumer Welfare 2) Mary purchased a stuffed animal toy for $5. After a few weeks, someone offered her $100 for the toy. Mary refused. One can conclude that Mary's consumer surplus from the toy is A) less than $5. B) at least $95. C) at least $100. D) $105. Answer: B Diff: 1 Topic: Consumer Welfare 3) Joe's demand for spring water can be represented as p = 10 - Q (where p is measured in $/gallon and Q is measured in gallons). He recently discovered a spring where water can be obtained free of charge. His consumer surplus from this water is A) $0. B) $50. C) $100. D) unknown based upon the information provided. Answer: B Diff: 1 Topic: Consumer Welfare Figure 9.1 4) Figure 9.1 shows the market demand curve for telecommunication while driving one's car (time spent on the car phone). The current price is $0.35 per minute. If the price were to increase by ten cents per minute, consumer surplus will A) fall to $820. B) fall by $84. C) fall by $58. D) fall to $369. 1
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Chapter 9/Applying the Competitive Model Answer: B Diff: 1 Topic: Consumer Welfare 5) Figure 9.1 shows the market demand curve for telecommunication while driving one's car (time spent on the car phone). At the current price of $0.35 per minute, consumer surplus equals A) $301.00. B) $924.50. C) $1,225.50. D) $1,250.00. Answer: B Diff: 1 Topic: Consumer Welfare 6) As the price of a good increases, the loss in consumer surplus is larger, A) the more elastic demand is. B) the more money previously spent on the good. C) the less money previously spent on the good. D) the smaller the price increase. Answer: B Diff: 1 Topic: Consumer Welfare 7) If lower-income households spend a greater share of their income on cigarettes than do higher-income households, then a tax that raises the price of cigarettes will A) cause lower-income households to incur a greater loss of consumer surplus than that incurred by higher-income households. B) cause higher- income households to incur a greater loss of consumer surplus than that incurred by lower-income households. C) raise consumer surplus among higher-income households. D) cause consumer surplus to decline among smokers, but the relative impact cannot be determined from the given information. Answer: D
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tbch09 - Chapter 9 Applying the Competitive Model MULTIPLE...

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