ECNS 105 Assessment Quiz 4 Consumer Surplus, Producer Surplus, Economic Efficiency Due 9/30

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Instructions: For each of the multiple choice questions below, circle the correct answer and use the space below each question to briefly and clearly explain why the answer you chose is correct and why the answers you did not choose are incorrect. Your circled answers will not count unless they are accompanied by an explanation. 1. Joanne buys a new pair of skis at Northern Lights for $200 that she was willing to buy for $225. The minimum Northern Lights is willing to accept for the skis is $130. Joannes consumer surplus is ___ , Northern Lights producer surplus is ___ , and the total economic surplus is ___. a. There is not enough information to answer this question. b. $200, $225, $425 c. $25 , $70, $95 d. $25, there is no producer surplus because the skis were on sale, $26 Explanation:

2. Orangeland exports oranges and orange juice. Which of the following scenarios would make it difficult to find oranges in Orangeland stores? a. The government sets a price ceiling above the equilibrium price b. The government sets a price ceiling below the equilibrium price c. The government sets a price floor below the equilibrium price d. The government sets a price floor above the equilibrium price Explanation:

3. According to economic theory, a quota will cause a market shortage and deadweight loss when a. this question is nonsense because a quota never causes a shortage b. this question cannot be answered because a quota can only cause a market surplus, just like an effective price floor c. the quota is set at a quantity greater than the equilibrium quantity d. the quota is set at the equilibrium quantity e. the quota is set at a quantity less than the equilibrium quantity Explanation:

4. You love cinnamon flavored gummy bears. You are willing to pay $2.00 per package, but the equilibrium price is $2.25 per package so you do not buy any additional gummy bears. Which of the following could change the equilibrium price so that you would buy cinnamon flavored gummy bears? a. A decrease in the cost of labor at the gummy bear factory b. An increase in the cost of gelatin, an input in gummy bear production c. A price ceiling above equilibrium d. An increase in market demand for gummy bears Explanation:

5. This graph shows the market for dog treats. The market is in equilibrium at price P* and quantity Q*. Ceteris paribus, which of the following statements about this Price market is true? a. The producer surplus in this market is A represented by areas A, B, and E Supply b. There is no consumer surplus in this market B E c. There is no deadweight loss in this market P* because it is in equilibrium F C d. The total surplus in this market is represented D by areas A, B, C, and D Demand e. None of the above statements are true Explanation:
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