Chapter 7 quiz Qs
Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?
It increases
Producer surplus is the area
below the price and above the supply curve
If the demand for leather decreases, producer surplus in the leather market
decreases
When the supply of a good increases and the demand for the good remains unchanged, consumer surplus
increases
If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that consumer, consumer surplus amounts to
$4
On a graph, the area below a demand curve and above the price measures
Consumer surplus
If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?
Consumer surplus decreases
What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?
Consumer surplus may increase, decrease, or remain unchanged
Total surplus is represented by the area
between the demand and supply curves up to the point of equilibrium
Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to
both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the
consumer does not buy the good
If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will
increase producer surplus
When markets fail, public policy can
potentially remedy the problem and increase economic efficiency
Moving production from a high-cost producer to a low-cost producer will
raise total surplus
Consumer surplus is a good measure of economic welfare if policymakers want to
respect the preferences of buyers
A supply curve can be used to measure producer surplus because it reflects
sellers' costs
Market failure is the inability of
some unregulated markets to allocate resources efficiently
Welfare economics is the study of how
the allocation of resources affects economic well-being
Economists typically measure efficiency using
total surplus
Efficiency is attained when
total surplus is maximized
Consumer Surplus is measured
using the demand curve for a product
A seller's opportunity cost measures the
value of everything she must give up to produce a good
At the equilibrium price of a good, the good will be purchased by those buyers who
value the good more than price
The maximum price that a buyer will pay for a good is called the
willingness to pay
Another way to think of the marginal seller is the seller who
would leave the market first if the price were any lower