ECON 202 EXAM 2 REVIEW

Suppose there are four firms that are each willing to sell one unit of a good. Each firm has a different minimum price that they are willing to sell for: Firm A $6, Firm B $7, Firm C $10, and Firm D $12. If the market price is $11, then the total producer surplus is

$10

Arnold's marginal benefit from consuming the second burrito is

$2

Suppose that the price of a coffee mug is $2. Lee's marginal cost of producing coffee mugs $0.50 for the first mug, Tammy's marginal cost of producing coffee mugs is $1 for the second mug, Stan's marginal cost of producing coffee mugs is $1.50 for the third mug, Joy's marginal cost of producing coffee mugs is $2 for the fourth mug, and Jody's marginal cost of producing coffee mugs is $3 for the fifth mug. In equilibrium, what is the producer surplus from producing coffee mugs?

$3

Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is

$75

What area represents producer surplus at a price of P2?

A+B+C

Suppose that the price of a bottle of soda is $2. Vonda's marginal cost of production is $1.25 for the first bottle, Galiela's marginal cost of production is $1.50 for the second bottle, Gretchen's marginal cost of production is $1.75 for the third bottle, and Matt's marginal cost of production is $2 for the fourth bottle. Which producer gets no producer surplus?

Matt

A demand curve shows

The willingness of consumers to buy a product at different prices

Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.

True

________ is maximized in a competitive market when marginal benefit equals marginal cost.

economic surplus

In a competitive market for a private good with no price or quantity regulations, no external cost nor external benefit, low transactions costs, and no taxes or subsidies,

efficiency can be attained in the market with no government intervention.

If marginal benefit is greater than marginal cost, output is inefficiently high

false

The difference between the ________ and the ________ from the sale of a product is called producer surplus.

lowest price a firm would have been willing to accept; price it actually receives

In a competitive market the demand curve shows the ________ received by consumers and the supply curve shows the ________.

marginal benefit; marginal cost

A supply curve shows quantities supplied at various prices. It also shows the

marginal cost of production

When efficiency is attained, the sum of the total amount of consumer surplus and producer surplus is

maximized

The supply curve shows the

minimum price that firms must receive to supply a certain quantity of a good.

The producer surplus is found by subtracting the ________ and then adding the difference for all units sold.

price from marginal cost

social value

private value + external benefit

Producer surplus is equal to

the area above the supply curve below the good's price.

In a competitive market equilibrium

the marginal benefit equals the marginal cost of the last unit sold.

Suppliers will be willing to supply a product only if

the price received is at least equal to the additional cost of producing the product.

social cost

the total cost of producing a good or service, including both the private cost and any external cost

Marginal cost is the additional cost to a firm of producing one more unit of a good or service

true