AP_Krugman_Textbook

494 section 9 Behind the Demand Curve: Consumer Choice

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

Tackle the Test: Free-Response Questions

1. Refer to the graph provided.

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.

Price

200 Quantity

40

$80

10

0

D

S

Answer (6 points)

1 point:$4,000

1 point:$3,000

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.

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
   equilibrium. On your graph, clearly indicate and label the area
   of consumer surplus and the area of producer surplus.