Week 6 Quiz

In the course's illustrative used-bicycle market, five buyers would pay at most 100, 80, 70, 50, and 30 dollars for one bicycle, and five sellers would accept no less than 20, 30, 50, 70, and 90 dollars. Bicycles sell for 60 dollars. What is the consumer surplus?

Select one.

• 80 dollars
• 70 dollars
• 150 dollars
• 250 dollars

In the course's illustrative used-bicycle market, five buyers would pay at most 100, 80, 70, 50, and 30 dollars for one bicycle, and five sellers would accept no less than 20, 30, 50, 70, and 90 dollars. Bicycles sell for 60 dollars. What is the producer surplus?

Select one.

• 70 dollars
• 100 dollars
• 80 dollars
• 150 dollars

In the course's illustrative used-bicycle market, five buyers would pay at most 100, 80, 70, 50, and 30 dollars for one bicycle, and five sellers would accept no less than 20, 30, 50, 70, and 90 dollars. Pairing the highest value with the lowest cost, then the next pair, how many trades make total surplus as large as possible?

Select one.

• Three trades, because the fourth pair's gain is negative
• Five trades, because more trades always add gains
• Four trades, because the fourth buyer still values a bicycle
• Two trades, because only the first two gains are large

In the course's illustrative market, demand read as prices is P = 9 − Q ⁄ 10 and supply read as prices is P = 3 + Q ⁄ 10, with P in dollars and Q in units per day; the two lines cross at 6 dollars and 30 units a day. What is the consumer surplus at this equilibrium?

Select one.

• 90 dollars per day
• 135 dollars per day
• 270 dollars per day
• 45 dollars per day

In the course's illustrative market, demand read as prices is P = 9 − Q ⁄ 10 and supply read as prices is P = 3 + Q ⁄ 10, with P in dollars and Q in units per day; the two lines cross at 6 dollars and 30 units a day. Picture the diagram with price on the vertical axis. Which area is producer surplus?

Select one.

• The area below the demand curve and above the 6-dollar price line
• The area above the supply curve and below the 6-dollar price line
• The area between the two curves to the right of 30 units
• The whole area below the supply curve out to 30 units

In the course's illustrative market, demand read as prices is P = 9 − Q ⁄ 10 and supply read as prices is P = 3 + Q ⁄ 10, with P in dollars and Q in units per day; the two lines cross at 6 dollars and 30 units a day. Reading the demand curve, what is the 20th unit worth to the buyer who buys it?

Select one.

• 7 dollars
• 5 dollars
• 2 dollars
• 11 dollars

In the course's illustrative market, demand read as prices is P = 9 − Q ⁄ 10 and supply read as prices is P = 3 + Q ⁄ 10, with P in dollars and Q in units per day; the two lines cross at 6 dollars and 30 units a day. Why does trading a 40th unit lower total surplus?

Select one.

• It is worth 7 dollars to a buyer and costs a seller 5 dollars
• It raises the price above 6 dollars and hurts buyers
• It is worth 5 dollars to a buyer but costs a seller 7 dollars
• It creates a surplus of unsold units at the equilibrium price

True or false: when economists say the competitive equilibrium is efficient, they also mean that its split of the gains between buyers and sellers is fair.

True or false.

• True
• False

In the course's illustrative used-bicycle market, five buyers would pay at most 100, 80, 70, 50, and 30 dollars for one bicycle, and five sellers would accept no less than 20, 30, 50, 70, and 90 dollars. Bicycles sell for 60 dollars. Which of these claims about the market are positive statements? Select all that apply.

Select every option that applies.

• Total surplus from the trades at 60 dollars is 150 dollars
• Raising the price to 75 dollars would change how many bicycles sell
• The buyer who values a bicycle at 50 dollars deserves one too
• Sellers ought to receive a smaller share of the gains

True or false: in the course's illustrative market with demand Qd = 90 − 10P and supply Qs = 10P − 30, the 30th unit is worth 6 dollars to its buyer and costs its seller 6 dollars, so the equilibrium quantity is where the value of the last unit traded equals its cost.

True or false.

• True
• False