Page 535 - Krugmans Economics for AP Text Book_Neat

Module 49 AP Review

Solutions appear at the back of the book.
Check Your Understanding

1. Consider the market for cheese-stuffed jalapeno peppers. There 2. Again consider the market for cheese-stuffed jalapeno
are two consumers, Casey and Josey, and their willingness to pay peppers. There are two producers, Cara and Jamie, and
for each pepper is given in the accompanying table. (Neither is their costs of producing each pepper are given in the
willing to consume more than 4 peppers at any price.) Use the accompanying table. (Neither is willing to produce more
table (i) to construct the demand schedule for peppers for than 4 peppers at any price.) Use the table (i) to construct the Section 9 Behind the Demand Curve: Consumer Choice
prices of $0.00, $0.10, and so on, up to $0.90, and (ii) to supply schedule for peppers for prices of $0.00, $0.10, and
calculate the total consumer surplus when the price of a pepper so on, up to $0.90, and (ii) to calculate the total producer
is $0.40. surplus when the price of a pepper is $0.70.
Quantity Casey’s Josey’s Quantity Cara’s Jamie’s
of peppers willingness to pay willingness to pay of peppers cost cost
1st pepper $0.90 $0.80 1st pepper $0.10 $0.30
2nd pepper 0.70 0.60 2nd pepper 0.10 0.50
3rd pepper 0.50 0.40 3rd pepper 0.40 0.70
4th pepper 0.30 0.30 4th pepper 0.60 0.90

Tackle the Test: Multiple-Choice Questions

1. Refer to the graph below. What is the value of consumer surplus 2. Refer to the graph below. What is the value of producer surplus
when the market price is $40? when the market price is $60?

Price Price
S
$80

$60

40
20
D
0 200 Quantity 0 50 Quantity
a. $400 a. $100
b. $800 b. $150
c. $4,000 c. $1,000
d. $8,000 d. $1,500
e. $16,000 e. $3,000
3. Other things equal, a rise in price will result in which of the
following?
a. Producer surplus will rise; consumer surplus will rise.
b. Producer surplus will fall; consumer surplus will fall.
c. Producer surplus will rise; consumer surplus will fall.
d. Producer surplus will fall; consumer surplus will rise.
e. Producer surplus will not change; consumer surplus
will rise.

module 49 Consumer and Producer Surplus 493