CS/PS Practice Questions 1. Nick can purchase a milkshake for $2. For the first milkshake Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2, and for the fourth milkshake $1. What is the value of Nick’s consumer surplus? A) $3 B) $9 C) $10 D) $2 2. The figure above shows Clara’s demand for CDs. If the market price for a CD is $10, then Clara A) receives a total of $10 of consumer surplus B) receives a total of $80 of consumer surplus C) will buy no CDs D) receives no consumer surplus on the 8th CD she buys 3. In the above figure, if the price is $2, then the total consumer surplus will be A) triangle cef B) trapezoid adec C) triangle abc D) trapezoid bdfc 4. In the above figure, if the market price is $100 per ton, then the firm’s producer surplus on the second ton of wheat is A) $100 B) $50 C) $75 D) $25 5. In the above figure, the producer surplus would be zero if the price per ton of wheat was A) $75 B) $100 C) $50 D) $25 6. When a market is in equilibrium, the total amount of consumer surplus must be ________ the total amount of producer surplus. A) less than B) larger than C) equal to D) None of the above answers are correct. 7. The difference between the maximum price a person is willing to pay for a good and the price actually paid for the good is called A) producer surplus B) the income effect C) consumer surplus D) the substitution effect 8. Cameron goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new one, but he buys one on sale for $125. Cameron’s consumer surplus from the purchase is A) $325 B) $75 C) $125 D) $200 9. A consumer’s willingness to pay for each unit of a product is captured by A) a supply curve B) a demand curve C) the equilibrium price D) none of the above 10. Refer to the figure above. If the market price is $2.50, what is the consumer surplus on the 2nd ice cream cone? A) $1.50 B) $3 C) $10.50 D) $0.50 11. Refer to the figure above. If the market price is $2.50, what is the maximum number of ice cream cones that the consumer will buy? A) 1 B) 2 C) 3 D) 4 12. The difference between the lowest price a firm would have been willing to accept and the price it actually receives from the sale of a product is called A) marginal revenue B) price differential C) profit D) producer surplus 13. Refer to the figure above. What is the area that represents producer surplus at price P2? A) A+B+C B) A+B C) B+D D) A+B+C+D+E 14. Refer to the figure above. What is the area that represents the increase in producer surplus when the market price rises from P1 to P2? A) A+C+E B) B+D C) A+B D) C+E 15. Suppose consumer income increases. If iPods are a normal good, the equilibrium price of an iPod will _________, and producer surplus in the iPod market will __________. A) decrease, increase B) increase, increase C) decrease, decrease D) increase, decrease Answer Key 1. A 9. B 2. D 10. D 3. C 11. C 4. D 12. D 5. C 13. A 6. D 14. C 7. C 15. B 8. B