MicroEconomics Ch. 7

justin builds fences for a living, justins out-of pocket expenses (wood, paint, etc.) plus the value that he places on his own time amount to his

cost of building fences

producer surplus directly measures

the well being of sellers

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

the willingness to pay

a sellers oppurtunity cost measures the

value of everything she must give up to produce a good

donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is

$150

producer surplus measures

benefits to sellers of participating in a market

a consumers willingness to pay directly measures

how much a buyer values a good

total surplus

is equal to producer surplus plus consumer surplus

which of the ten principals of economics does welfare econmics explain more fully

markets are usually a good way to organize economic activity

market failure is the inability of

some unregulated markets to allocate resources efficiently

consumer surplus is

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

producer surplus is

the amount the seller is paid, minus the cost of production

consumer surplus in a market can be represented by

the area below the demand curve and above the price

suppose raymond and victoria attend a charity benefit and participate in a silent auction. each has in mind a maximum amount that he or shere will bid for an oil painting by a locally famous artist. This maximum is called

willingness to pay

the marginal seller is the seller who

would leave the market first if the price were any lower