ECON-E-201 (Chapter 4 Questions)

At the market-clearing equilibrium, total surplus is represented by the area

A + B + C + D + E + F.

According to the graph, when the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

BCFD

When a market is in equilibrium, which of the following would not be correct?

Consumer surplus will be equal to producer surplus.

Buyer WTP David $8.50 Laura $7.00 Megan $5.50 Mallory $4.00 Audrey $3.50 Refer to Table 4.1. If the market price is $6.90, who will purchase the good?

David and Laura

Refer to Figure 4.4. If the supply curve is S and the demand curve shifts from D to D', what is the change in producer surplus?

Producer surplus increases by $3,125.

On a graph, consumer surplus is represented by the area

below the demand curve and above price.

A consumer's willingness to pay measures

how much a buyer values a good.

The equilibrium of supply and demand in a market

maximizes the total benefits received by buyers and sellers.

Inefficiency exists in any economy when a good is

not being consumed by buyers who value it most highly.

Consumer surplus is

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

If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus?

$2,500

Producer surplus is the area

below the price and above the supply curve.

The "invisible hand" refers to

the marketplace guiding the self-interests of market participants into promoting general economic well-being.

Suppose Chris and Laura 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.

Buyer WTP David $8.50 Laura $7.00 Megan $5.50 Mallory $4.00 Audrey $3.50 If the market price is $5.50, the consumer surplus in the market will be

$4.50

According to the table, if the market price is $1,000, the producer surplus in the market would be Seller Cost Dale $1500 Jill $1200 Denise $1000 Catherine $750 Jackson $500

$750

According to the graph, which area represents consumer surplus at a price of P1?

ABD

According to the graph, which area represents consumer surplus at a price of P2?

ACG

Refer to Figure 4.2. Which area represents the increase in producer surplus when the price rises from P1 to P2?

AHGB

Which area represents producer surplus when the price is P1?

BCG

A demand curve reflects each of the following EXCEPT the

ability of buyers to obtain the quantity they desire.

In a pure market economy, the "for whom" or distribution question is largely answered

according to the needs of individuals and groups in society.