ECN 111 Chapter 7 Practice Problems

Suppose Raymon and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called

willingness to pay

The maximum price that a buyer will pay for a good is called

willingness to pay

Consumer surplus is

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

A consumer's willingness to pay directly measures

how much a buyer values a good

If the price of the product is $135, then the total consumer surplus is

$15

If the price of the product is $122, then the total consumer surplus is

$41 (add Calvin and Sam's consumer surplus)

Consumer surplus is

-a concept that helps us make normative statements about the desirability of market outcomes -represented on a graph by the area below the demand curve and above the price -a good measure of economic welfare if buyers' preferences are the primary concern

In which of the following circumstances would a buyer be indifferent about buying a good?

-the amount of consumer surplus the buyer would experience as a result of buying the good is zero -the price of the good is equal to the buyer's willingness to pay for the good -the price of the good is equal to the value the buyer places on the good

In a market, the marginal buyer is the buyer

-who would be the first to leave the market if the price were any higher

A demand curve reflects the...

-willingness to pay of all buyers in the market -value each buyer in the market places on the good -highest price buyers are willing to pay for each quantity

***21??

>>calculating total consumer surplus jk i got it

If the price of the product is $130, then who would be willing to purchase the product?

Calvin and Sam

If the price of the product is $90, then who would be willing to purchase the product?

Calvin, Sam, Andrew, and Lori

~table~ If the price of the product is $110, then who would be willing to purchase the product?

Calvin, Sam, and Andrew

***If the market price is $105,

Sam's consumer surplus is $30 and total consumer surplus is $90***

On a graph, consumer surplus is represented by the area

below the demand curve and above price

When a buyer's willingness to pay a good is equal to the price of the good, the

buyer is indifferent between buying the good and not buying it

Consumer surplus

measures the benefit buyers receive from participating in a market