Page 536 - Krugmans Economics for AP Text Book_Neat

4. Consumer surplus is found as the area 5. Allocating kidneys to those with the highest net benefit (where
a. above the supply curve and below the price. net benefit is measured as the expected increase in lifespan
b. below the demand curve and above the price. from a transplant) is an attempt to maximize
c. above the demand curve and below the price. a. consumer surplus.
d. below the supply curve and above the price. b. producer surplus.
e. below the supply curve and above the demand curve. c. profit.
d. equity.
e. respect for elders.

Tackle the Test: Free-Response Questions

1. Refer to the graph provided.
Answer (6 points)
Price
1 point: $4,000
$80 1 point: $3,000

S 1 point: Consumer surplus will increase.
1 point: An increase in supply lowers the equilibrium price, which causes
consumer surplus to increase.
1 point: Producer surplus will decrease.
40
1 point: A decrease in demand decreases the equilibrium price, which causes
producer surplus to decrease.

2. Draw a correctly labeled graph showing a competitive market in
10 equilibrium. On your graph, clearly indicate and label the area
D
of consumer surplus and the area of producer surplus.
0 200 Quantity
a. Calculate consumer surplus.
b. Calculate producer surplus.
c. If supply increases, what will happen to consumer surplus?
Explain.
d. If demand decreases, what will happen to producer surplus?
Explain.

494 section 9 Behind the Demand Curve: Consumer Choice