ECON 1113 LS 5 HW 5A and HW 5B

When a perfectly competitive, well functioning market maximizes total surplus, the market is said to be ____.

efficient

Dead-weight loss is a loss of total surplus that occurs because the quantity traded is different from the market ____ quantity.

equilibrium

Measuring producer surplus tells us

how much better or worse off sellers are when the price changes.

A line showing the maximum willingness to pay for all buyers is the ____ curve.

demand

Total surplus

1) Is the sum of consumer and producer surplus. 2) Exists as a result of participation in market exchanges.

Markets can be missing for a variety of reasons:

1) Lack of technology that would make the exchanges possible. 2) Public policy prevents the market from existing. 3) Lack of accurate information or communication between potential buyers and sellers.

When the price is artificially high and some transactions no longer take place,

1) Part of the consumer and producer surplus is lost to both consumers and producers. 2) Part of the consumer surplus is transferred to producers.

When the price is artificially low and some transactions no longer take place,

1) Producer surplus falls 2) Consumer surplus may rise or fall.

Economists use the word surplus to describe which concepts?

1) Selling something for more than the minimum you would have accepted. 2) Buying something for less than you would have been willing to pay.

We can calculate dead-weight loss by

1) The area of the dead-weight loss triangle on a graph. 2) Surplus market equilibrium before intervention minus surplus market equilibrium after intervention.

Suppose a demand curve has a vertical intercept of (0,80). Suppose a supply curve has a vertical intercept of (0,0). The equilibrium price is $30 and the equilibrium quantity is 40. The total surplus is ____ dollars.

1600

Suppose a supply curve has a vertical intercept of (0,0); the equilibrium price is $40 and the equilibrium quantity is 100. The producer surplus is ____ dollars.

2000

Suppose a supply curve has a vertical intercept of (0,0); the equilibrium price is $30 and the equilibrium quantity is 40. The producer surplus, therefore, is ____ dollars.

600

In a market with voluntary transactions, the results are like those in a zero-sum game.

False

We can ____ up each seller's producer surplus to describe the overall benefits that sellers received in a market.

add

Surplus is a way of measuring who ____ from transactions, and by how much.

benefits

To describe the overall benefits that buyers received in a market, we can add up each individual's ____ surplus.

consumer

Total ____ surplus is represented graphically by the area underneath the demand curve and above the equilibrium price.

consumer

Consumer surplus is the net benefit that a

consumer receives from purchasing a good or service.

Willingness to sell is the ____ price that a seller is willing to accept in exchange for a good or service.

minimum

In a(n) ____ market in which quantity is at or close to zero, total surplus is lower than it could be if a well-functioning market existed.

missing

When there are people who would like to make exchanges but cannot, for one reason or another, we say that a market is ____.

missing

The difference between the producer's willingness to sell and the actual price is the

net benefit that a producer receives from the sale of a good or service.

In a zero-sum game, the

net value of a transaction is zero.

Seller's willingness to sell is determined by the ____ cost of the sale.

opportunity

Willingness to pay is the point at which the benefit that a person will get from the camera is equal to the ____ cost.

opportunity

The reservation price represents the buyer's maximum ____ to pay.

price

Measuring ____ surplus tells us how much better or worse off sellers are when the price changes.

producer

The relationship showing producers' willingness to sell is the ____ curve.

supply

Calculations of ____ can clearly show who benefits and who loses from policies such as taxes and minimum wages.

surplus

Using the concept of ____ is the best way to look at the benefits people receive from successful transactions.

surplus

In market equilibrium,

total surplus is maximized.

Graphically, assuming an upward sloping supply curve, economic surplus is represented as the

triangular area between a supply or demand curve and the market price.

The supply curve is upward-sloping because producers are ____ to sell more at higher prices.

willing