AP_Krugman_Textbook

module 49 Consumer and Producer Surplus 493

Section 9 Behind the Demand Curve: Consumer Choice

Module 49 AP Review

Check Your Understanding

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

Solutions appear at the back of the book.

Tackle the Test: Multiple-Choice Questions

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

a. $400

b. $800

c. $4,000

d. $8,000

e. $16,000

0 200

Price

Quantity

D

40

$80

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

a. $100

b. $150

c. $1,000

d. $1,500

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.

Price

Quantity

$60

20

0 50

S