1. Suppose that Amber's demand for gasoline is given by G = 1000 - 200PG, where G
stands for gallons of gas and PG represents the price of gas.
a. Suppose gas sells for $2 per gallon. What is Amber's consumer surplus? Illustrate your
answer graphically.
b. Suppose the price of gas rises to $3 per gallon. What is the change in Amber's consumer
surplus? Illustrate this change in your graph.
2. Suppose that high-definition television sets (HDTVs) are normal goods. Would the
compensated demand curve for HDTVs be flatter or steeper than the uncompensated demand
curve? Explain your answer using a carefully-labeled graph.
3. Define consumer surplus. Using a graph, explain the change in consumer surplus that
would result from a decrease in the price of a gasoline.
Refer to Figure 6.8.
4 When the price of a good decreases,
A. The good becomes less expensive relative to other goods and the consumer's purchasing
power increases
B. The good becomes less expensive relative to other goods and the consumer's purchasing
power decreases
C. The good becomes more expensive relative to other goods and the consumer's purchasing
power increases
D. The good becomes more expensive relative to other goods and the consumer's purchasing
power decreases
5. Refer to Figure 6.1. Point B represents the
A. Uncompensated effect of an increase in the price of bread
B. Uncompensated effect of a decrease in the price of soup
C. Uncompensated effect of an increase in the price of soup
D. Compensated effect of an increase in the price of soup
6. (p. 2) Refer to Figure 6.1. Point C represents the
A. Uncompensated effect on an increase in the price of soup
B. Compensated effect on a decrease in the price of soup
C. Uncompensated effect on a decrease in the price of soup
D. Compensated effect on an increase in the price of soup
7. (p. 6) According to Figure 6.1,
A. Soup is a normal good
B. Soup is an inferior good
C. Soup is a Giffen good
D. Bread is an inferior good
8. (p. 2) Refer to Figure 6.1. Which change in budget lines represents compensation?
A. L1 to L2
B. L2 to L3
C. L3 to L2
D. L1 to L3
9. (p. 4) Refer to Figure 6.1. The substitution effect is shown by the movement
A. From bundle A to bundle C
B. From bundle A to bundle B
C. From bundle B to bundle C
D. From bundle C to bundle B
10. (p. 4) Refer to Figure 6.1. The income effect is shown by the movement
A. From bundle A to bundle C
B. From bundle A to bundle B
C. From bundle B to bundle C
D. From bundle C to bundle B
11. (p. 12) Refer to Figure 6.4. If the price of computers is $1,000, then consumer surplus is
given by the area represented by
A. c+d
B. b
C. b+c
D. a+b+e
12. (p. 12) Refer to Figure 6.4. If the price of computers is $1,000, then expenditures on
computers is represented by the area
A. c+d
B. c
C. b+c
D. a+b+c
13 (p. 12) Refer to Figure 6.4. If the price of computers is $1,500, then consumer surplus is
equal to
A. $175,000
B. $535,000
C. $1,000
D. $262,500
14. (p. 12) Refer to Figure 6.4. What area represents the change in consumer surplus when the
price of computers increases from $1,000 to $1,500?
A. b
B. b+e
C. b+c
D. a+b
15. (p. 13) Suppose Eddie's demand curve for text messages is T=150-500Pt, where T stands for
the number of text messages and Pt represents the price of text messages. What is Eddie's
consumer surplus if Pt = $.10 per message?
A. $5
B. $10
C. $20
D. $50