TAMU ECON 202 EXAM 2
combined producer surplus $62 Alice and Amber
Alice, Amber and Andi make and sell pottery. Alice is willing to sell a 5 inch pot for $20, Amber is willing to sell a 5 inch pot for $22 and Andi is willing to sell a 5 inch post for $46 combined producer surplus is if the price of a 5 inch pot $30, which of the ladies will sell their pots
$6 ($10-$4)
Amanda goes to a local cafe and orders a sandwich. her willingness to pay for that sandwich is $10. the price of the sandwich is $4. The cost to the cafe to produce that sandwich is $1. How much economic surplus does Amanda receive when she purchases the sandwich?
the maximum price a buyer is willing to pay and the market price
Consumer surplus is equal to the difference between
under the demand curve and above the market price
Consumer surplus is shown graphically as the area
below; above
Consumer surplus us represented by the area _____________ the demand curve and _______________ the price that the consumer pays.
produces gains from trade for both buyers and sellers
Elijah decides that his family should eat more healthy meals, but they are very pressed for time. He decides to subscribe to a service that sends healthy pre-planned meals to his home three times a week
Will not; only Apple
Juan is willing to pay $600 for a new Ipad. Apple is selling a new ipad for $700 and it costs apple $400 to produce this ipad. A voluntary economic transaction between juan and apple _________ occur because ______________ would be better pff due to the transaction
$4 ($6-$2)
Kevin goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte os $6. the price of the latte is $2. The cost to the coffee shop to produce the latte is $1. how much economic surplus does Kevin gain when he purchases the latte?
the market price will fall
a binding price floor in a market is removed. which of the following is likely to occur as a result
positive
a decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient
inefficient
a market dominated by a few powerful businesses
efficient
a market in which economic surplus is maximized
inefficient
a market in which government regulation creates distortions
inefficient
a market transaction in which buyers or seller behave irrationally
inefficient
a market transaction in which one party has information not available to the other party
a price floor or a price ceiling is an example of
a price control
opportunity cost; specialization
after working your way through college as a CNA, you now have completed your nursing degree and are an RN- you are now a functioning RN at the hospital. Some of the tasks between a CNA and an RN overlap, but you should delegate some tasks to CNAs because they have lower ___________ of completing tasks. Your ___________ allows you to take on more complex nursing tasks
consumer surplus
amount consumers are willing to pay for a good MINUS what they actually pay for it
the high-skilled worker
an employer has work that can be done in the same time by one high-skilled worker paid $50.00 an hour or by eight low-skilled workers paid $5.00 an hour each, and minimum wage is $7.25 an hour. in this scenario who benefits from the minimum wage, the high skilled or low skilled?
positive
as minimum wage increases, the prices of all good and services also tends to increase
Aaron could have a comparative advantage in producing both milk and cheese
assume aaron and Jose each own a small ranch, and each produces milk and cheese. one of them is better than the other at producing both milk and cheese (but we dont know who) what cannot be true regarding absolute or comparative advantage
normative
at 8%, unemployment in the United States is too high
equal to ; less; more
at the equilibrium quantity, marginal benefit is ___________ marginal cost. Consuming ___________ means that some mutually beneficial exchanges do not take place, and producing _______ means that some goods go unsold.
rusia because she has a lower opportunity cost
barlow and rusia own a nail salon. a manicure takes barlow 60 minutes to complete and takes rusia 45 minutes to complete. completing a pedicure takes barlow 45 minutes and takes rusia 30 minutes. who has the comparative advantage in pedicures
fails to produce gains from trade for both buyers and sellers
callie turns down an extra shift at work to take care for household chores
produces gains from trade for both buyers and sellers
charlene's job requires her to work on an oil rig, and she must alternate two weeks on the rig and two weeks off, when she is on the rig, she rents out her apartment through Airbnb
a given level of output is produced at the lowest possible cost
efficient production occurs when
it costs suppliers more to produce the good than its value to buyers
for suppliers to sell more than the equilibrium quantity, it would mean that
bought by the buyers who have the highest willingness to pay
gains from trade will be maximized at the free market equilibrium price and quantity because the supply of goods is
productive efficiency
goods and serviced are produced at their lowest opportunity cost
the sum of the consumer and producer surplus to increase
harrison is willing to buy the last ticket to the Billy play for $15 while Stefania is willing to pay $25. Harrison is first in line and buys a ticket for $15. he then resells his ticket to Stefania for $20. By reselling the ticket instead of going to the play himself, harrison cause
positive
higher tariffs on imported automobiles would decrease the demand for foreign made cars
lost gains from trade
if an american teenager will work for $5 an hour and an employers is willing to pay that wage, but the minimum wage is $7.25 an hour and the employer is not willing to pay that much, the teenager goes unemployed and the market experiences
do for herself the things for which she has low opportunity cost and trade with others for things she had high opportunity cost
if ilona wants to live her life based on comparative advantage, then she should
mary has a comparative advantage in baking cakes
if mary can bake a cake at a lower opportunity cost than sarah can, then
a surplus of sugar will occur, increasing efficiency
if the government guarentees sugar farmers a price of $1 when the market equilibrium price is actually $.50 per pound, what will happen
the sum of consumer surplus and producer surplus is maximized resources are being used efficiently the marginal benefit is equal to the marginal cost
if the market for alpine skis is in competitive equilibrium, and there are no external costs or government interventions, then :
economic surplus is not maximized
if the market output is not efficient, what must be true
those who want to work will outnumber the jobs available
if the minimum wage is a binding price floor
inputs, like workers and raw materials, will not go to the companies that can use them to produce the most value consumers will not receive the amount of any given product that they want consumers will not receive the products they want, and new products are unlikely to appear
in a market without prices, where goods are allocated by a central planner which is likely to happen
both the buyer and the seller
in a voluntary economic transaction between a buyer and a seller, ________ can earn economic surplus from the transaction
positive
international trade makes some people better off and some people worse off
nomative
international trade should be limited because it can cause some workers to lose their jobs
Consumer surplus
is the gains from trade on the part of the consumer that result from the market transaction
of a potential lack of incentives amount citizens who are asked to provide the central planner with accurate information
it is difficult for a central planner to determine optimal allocations of resources because
an inefficient outcome
market failure occurs when market forces lead to
market fails to meet efficient outcome
market failure refers to
minimizes
markets describes production across companies in a way that
produces gains from trade for both buyers and sellers
neighbors jordan and chelsea are both working parents. they can hire a single babysitter to care for both of their toddlers for 75% of what they would collectively have to pay two separate babysitters
left of the quantity and between and supply curves
one a market graph, economic surplus can be identified as the area that is the...
small higher; lower
one question that economics students often ask is, "in a market with a lot of buyers and sellers, who sets the price of the good?". everyone sets the price because everyone has _________ influence in the market no one sets the price because all suppliers want a _________ price and all consumers want a ______ price
are least bad at doing, relative to other tasks
people are capable of completing many different tasks, each persons comparative advantages is in the particular tasks that they ...
higher quality
price floors make it illegal to compete for more customers by lowering prices, so firms compete by offering customers
above the supply curve and below the market price
producer surplus is shown graphically as the area
The market price and the minimum price a seller is willing to accept
producer surplus is the difference between
allocative efficiency
production represents consumer preferences
create higher unemployment
raising the minimum wage is not an effective way to eliminate poverty because increases in minimum wage
normative
social welfare spending in sweden occupies too large a portion of the national budget
market power externalities irrationality
sources of market failure
positive
statements say something that described how the world currently is
normative
statements that say something about how the world ought to be
in order to continue producing their product, sellers may overstate the importance of that product
suppose resources are directed by means of a central planner who receives information on all the different uses of these resources. Why might sellers have an incentive to not provide truthful information to the central planner?
michelle's consumer surplus: $3.50 Pauls cafe and bakery producer surplus: $3.50
suppose that michelle buys a cappuccino from pauls cafe and bakery for $4.25. Michelle was willing to pay up to $7.75 for the drink, and pauls cafe and bakery was willing to accept $0.75 for the cappuccino. what is michells CS and the cafe PS
increase the price received by farmers
suppose that the government wants to support local organic farms with a price support system. if so, we would expect the market price support policy that establishes a binding price floor to
result in gasoline shortages, even in oil-rich country
suppose the government of oil-ricj country Saudi Arabia sets price at 0.25 a gallon when the market price is $1.50. this action will
that macadamia nuts are in plentiful supply, so consumers should buy more that the price change will be understood in every language and helps coordinate the macadamia market that demand for macadamia nuts is low, so producers should produce less
that price of macadamia nuts fall, this conveys the following signals
competitive markets send resources to their highest valued uses
the "invisible hand" refers to the notion that
normative
the US should impose import quotas in the market for consumer electronics to help domestic workers
is far below the equilibrium level and rental units are not being maintained
the city of mumbai in india imposed rent controls on apartments in 1947. despite inflation and changes in land value, allowable rents have hardly increases since that time. use what you know about rent controls to speculate about the quality of rent-controlled buildings in Mumbia
labor-saving devices and management prices are slowly adopted
the long run effect of laws that raise the minimum wage is that
consumers will pay for the good only if its value of use is greater than the price
the market solves the incentive problem when allocating resources because the
productive efficiency
the maximum output is obtained with given resources
a price floor
the minimum price that seller can charge in a market
true
the minimum wage causes unemployment mainly among poor, unskilled workers
price floor
the minimum wage is an example of
allocative efficiency
the price consumers pay is equal to the marginal cost of producing the good
it is a signal that celery is more valuable to consumers than it was before
the price of celery rises, but nothing has changed on the supply side of the market- what does this mean to celery farms?
normative
the richest 1% of Americans should pay more taxes than the rest of the 99%
positive
the richest 1% of the population earn 24% of the total income
normative
the richest 1% should be paying more in taxes
positive
the sugar quota in the US costs consumers $6.08 billion a year
normative
the sugar quota in the US is a good public policy and should be made stronger
positive
the unemployment rate is 8.2%
marginal benefits exceed marginal costs
to maximize economic surplus. keep increasing output as long as
marginal benefit minus marginal cost; consumer surplus plus producer surplus
two ways to calculate economic surplus are _____________ and ______________
self- interest motivates people prices are flexible the invisible hand guides decision making
typical of market economics
the planners interests dominate prices are fixed the value system of the decision makers is imposed on society
typical of nonmarket economics
allocative efficiency is achieved goods are produced by the firms that can do so at the lowest marginal cost goods go to the consumers who will gain the highest marginal benefit from the good
what are results of an efficient market
side effects of externalities government regulations that impede market forces irrational decisions
what are sources of market failure
firms having the capacity to raise the market price transactions that have side effects on the welfare of others lack of information about the quality of a second-hand car
what are the factors that are possible reasons for market failure
prices create incentives prices are signals prices aggregate information
what are the three key roles that prices play in markets
Actions intended or make economic outcomes fairer cause efficiency to decrease
what described the fairness-efficiency trade off
excessive information
what is not a reason for market failure
economic surplus is minimized to reduce waste
what is not a result of an efficient market
lack of market power
what is not a source of market failure
government failure occurs
when government policies lead to outcomes that are worse than those that would occur in unregulated markets
acting in self-interest; at the lowest possible marginal cost
when market forces lead to efficient production, each producer is _________, and the product is produced ___________.
resources are wasted because goods are produced at a higher cost than consumers are willing to pay
when producers produce more than the equilibrium quantity
deadweight loss
when the economic surplus in a market is less than it would be if the market were efficient, the market is experiencing
economic surplus
1. consumer surplus plus producer surplus 2. the area between the the supply curve and the demand curve to the left of the quantity sold 3. equals the marginal benefit minus marginal cost
