chapter 7 questions and answers
115. On a graph, the area below a demand curve and above the price measures a.Consumer surplus
defintion
121. Moving production from a high-cost producer to a low-cost producer will a. raise total surplus
defintion
123. Which of the following will cause an increase in consumer surplus? a. A technological improvement in the production of the good
This would increase supply which would lower price and increase consumer surplus
103. What happens to consumer surplus in the cell phone market if cell phones are normal goods and income of the cell phone buyers rises? a. Consumer surplus may increase, decrease, or remain unchanged.
basically But for normal good like cell phone, the consumer surplus depends upon the willingness of the buyer. Therefore, the consumer surplus might either increase, decrease or remains unchanged even if the buyers income rises.
102. Producer surplus is a. the amount a seller is paid minus the cost of production.
defintion
113. The maximum price that a buyer will pay for a good is called a. willingness to pay
defintion
106. Which of the following events would increase producer surplus? a. Sellers' costs stay the same and the price of the good increases
defintion a higher price raises producer surplus
104. The distinction between efficiency and equality can be described as follows: a. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.
from chapter like 3
111. As a result of a decrease in price, a. new buyers enter the market, increasing consumer surplus.
new buyers enter the market because they are willing to buy the good for a lower price.
