ECON 2113 -- Ch. 7

At Nick's bakery, the cost to make his homemade chocolate cake is $3 per cake. He sells three and receives a total of $21 worth of producer surplus. Hoe much did Nick sell his cakes for?

$10

Shannon buys a new CD player for her car for $135. She receives consumer surplus of $25 on her purchase. Her willingness to pay is

$160

Belva is willing to pay $65 for a pair of shoes for a formal dance. She finds a pair at her favorite outlet shoes store for $48. Belva's consumer surplus is

$17

Amy buys a new dog for $150. She receives consumer surplus of $100 on her purchase. Her willingness to pay is

$250

Donald produces nails at a cost of $200 per ton. If he sells the nails for $500 per ton, his producer surplus is

$300 per ton

Denea producers cookies. Her production cost is $3 per dozen. She sells the cookies $8 per dozen. Her producer surplus is

$5 per dozen

Janine would be willing to pay $50 to see a show, but buys a ticket for only $30. Janine values the performance at

$50

If a consumer is willing and able to pay $20 for a particular good but only has to pay $14, the consumer surplus is

$6

If Roberta sells a shirt for $30, and her producer surplus from the sale is $21, her cost must have been

$9

A demand curve measures

A buyer's willingness to pay

Producer surplus equals

Amount received by sellers - cost of seller

Suppose there is an early freeze in California that ruins the lemon crop. What happens to consumer surplus in the market for lemons?

It decreases

What happens to consumer surplus if the price of a good increases?

It decreases

Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos?

It increases

Consumer surplus equals the

Value to buyers- Amount paid by buyers.

Consumer Surplus is

a buyer's willingness to pay minus the price

Producer surplus is the

amount a seller is paid less the cost of production

A seller would be willing to sell a product ONLY IF the price received is

at least as great as the cost of production

The area below a demand curve and above the price measures

consumer surplus

if demand decreases, the price of a product, as well as surplus,

decreases

The surgeon general announces that eating chocolate increases tooth decay. As a result, the equilibrium market price of chocolate

decreases, and producer surplus decreases

A consumer's willingness to pay measures

how much a buyer values a good

Welfare economics is the study of

how the allocation of resources affects economic well-being

When technology improves in the ice cream industry, consumer surplus will

increase

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will

increase, and producer surplus in the industry will increase.

With respect to welfare economics, the equilibrium price of a product is considered to be the best price because it

maximizes the total welfare of buyers and sellers

Willingness to pay measures the

maximum amount that a buyer will pay for a good

Cost refers to a seller's

opportunity cost

In most markets, consumer surplus

reflects economic well-being

Cost is a measure of the

seller's willingness to sell

A supply curve can be used to measure producer surplus because it reflects

sellers' costs

Out-of-pocket expenses plus the value of the seller's own resources used in production are considered to be

the cost of production

Producer surplus measures

the well-being of sellers

The marginal seller is the seller who

would leave the market first if the price were any lower

If you pay a price exactly equal to your willingness to pay, then

your consumer surplus is zero

If the price a consumer pays for the product is equal to a consumer's willingness to pay, the the consumer surplus of that purchase would be

zero