Microeconomics Lecture #4

The table contains the willingness to pay for five students in the market for a new tablet. The accompanying graph visualizes this information. Identify which portion of the demand curve represents Anthony. A B C D E

A

For each scenario, decide whether it creates a producer or a consumer surplus. Then, calculate the ensuing surplus. Jeff finds some steaks for $16 for which he would have been willing to pay $20. The butcher notices the meat is near the expiration date and gives him an extra 75% off. Jeff experiences a A. Consumer Surplus B. Producer Surplus

A. Consumer Surplus

Consumer surplus is shown graphically as the area A. Under the demand curve and above the market price B. Under the demand curve and below the market price C. Above the supply curve and above the market price D. Above the supply curve and below the market price

A. Under the demand curve and above the market price

The accompanying table contains the willingness to pay for 5 students in the market for a new tablet. Identify which portion of the demand curve below represents each individual. Amanda is A B C D E

Amanda's Willingness to Pay = $400 B

The accompanying table contains the willingness to pay for 5 students in the market for a new tablet. Identify which portion of the demand curve below represents each individual. Anthony is A B C D E

Anthony's Willingness to Pay: $500 A

Producer surplus is shown graphically as the area A. Under the demand curve and below the market price B. Above the supply curve and below the market price C. Above the supply curve and above the market price D. Under the demand curve and above the market price

B. Above the supply curve and below the market price

For each scenario, decide whether it creates a producer or a consumer surplus. Then, calculate the ensuing surplus. Alice is willing to spend $30 on a pair of jeans, and has a coupon for $10 off which she found online. She selects and purchases a pair of jeans which cost $35 pre-discount. Alice experiences a A. Producer Surplus B. Consumer Surplus

B. Consumer Surplus

The table contains the willingness to pay for five students in the market for a new tablet. Which students will purchase a tablet if the price of a tablet is $550? A. Anthony B. No one C. Lily, Amanda, and Anthony D. Everyone

B. No one

Producer surplus is the difference between A. The maximum price a buyer is willing to pay and the market price B. The market price and the minimum price a seller is willing to accept. C. The market price and the minimum price a buyer is willing to pay. D. The maximum price a seller is willing to accept and the market price.

B. The market price and the minimum price a seller is willing to accept.

The accompanying table contains the willingness to pay for 5 students in the market for a new tablet. Identify which portion of the demand curve below represents each individual. Which students will purchase a tablet if the price of a tablet is $350? A. Everyone B. No one C. Amanda and Anthony D. Lily and Francisco

C. Amanda and Anthony

Assume Fiona is willing to pay $8 for a pizza cutter. Tim also wants one, but is only willing to pay $6 for one. At a pizza baker's convention, Fiona buys the last pizza cutter at the market price just before Tim can buy it. Tim contacts the convention organizers and complains about missing out on the last pizza cutter. The organizers refund Fiona for the pizza cutter and allow Tim to buy it at the market price. What happens as a result of the organizers refunding Fiona, taking the pizza cutter from her, and letting Tim buy it at the market price? A. Consumer surplus increases B. Producer surplus increases C. Consumer surplus decreases D. Producer surplus decreases

C. Consumer surplus decreases

Move the point, E, in the accompanying graph to reflect equilibrium in the competitive market for corn.

Competitive market equilibrium occurs where the supply and demand curves intersect. Equilibrium Price: $4

Consider the accompanying supply and demand graph. What is the value of consumer surplus?

Consumer Surplus = (5 x $4.5) / 2 = $11.25

Answer the question according to the information in the graph. Calculate consumer surplus (CS).

Consumer Surplus = (5,000 x $5) / 2 = $12,500

Amazon has a "Lightning Deal" where it slashes the price of one item. At 3:15 PM today, they announced that the item was a new tablet with a sales price of $150, which is less than half the original price. The table below contains the maximum willingness to pay for five college students wanting to buy a tablet on Amazon. If the price increases from $150 to $350, what is the change in total consumer surplus?

Consumer Surplus = Willingness to Pay - Price Anthony's Willingness to Pay = $500 $500 - $350 = $150 Amanda's Willingness to Pay = $400 $400 - $350 = $50 Total Consumer Surplus = $150 + $50 = $200 Change in Consumer Surplus = $200 - $800 = -$600

Suppose that Michelle buys a cappuccino from Paul's Cafe and Bakery for $5.25. Michelle was willing to pay up to $7.25 for the cappuccino and Paul's Cafe and Bakery was willing to accept $3.75 for the cappuccino. Michelle's consumer surplus:

Consumer Surplus = Willingness to Pay - Price $7.25 - $5.25 = $2

Amazon has a "Lightning Deal" where it slashes the price of one item. At 3:15 PM today, they announced that the item was a new tablet with a sales price of $150, which is less than half the original price. The table below contains the maximum willingness to pay for five college students wanting to buy a tablet on Amazon. What is total consumer surplus for the five students?

Consumer Surplus = Willingness to Pay - Price Anthony's Willingness to Pay = $500 $500 - $150 = $350 Amanda's Willingness to Pay = $400 $400 - $150 = $250 Lily's Willingness to Pay = $300 $300 - $150 = $150 Francisco's Willingness to Pay = $200 $200 - $150 = $50 Total Consumer Surplus = $350 + $250 + $150 + $50 = $800

The accompanying table shows the supply and demand schedules for used copies of the fourth edition of this textbook. The supply schedule is derived from offers at Amazon.com. The demand schedule is hypothetical. Calculate consumer surplus at the equilibrium in this market.

Consumer Surplus: $105 - $85 = $20(2 Buyers) = $40 $100 - $85 = $15(2 Buyers) = $30 $95 - $85 = $10(2 Buyers) = $20 $90 - $85 = $5(2 Buyers) = $10 Total Consumer Surplus = $40 + $30 + $20 + $10 = $100

For each scenario, decide whether it creates a producer or a consumer surplus. Then, calculate the ensuing surplus. Jeff finds some steaks for $16 for which he would have been willing to pay $20. The butcher notices the meat is near the expiration date and gives him an extra 75% off. Jeff's surplus:

Consumer Surplus: $20 - ($16 - $12) = $16

For each scenario, decide whether it creates a producer or a consumer surplus. Then, calculate the ensuing surplus. Alice is willing to spend $30 on a pair of jeans, and has a coupon for $10 off which she found online. She selects and purchases a pair of jeans which cost $35 pre-discount. Alice's surplus:

Consumer Surplus: Willingness to Pay - Price $30 - ($35 - $10) = $30 - $25 = $5

Consumer surplus is equal to the difference between A. The minimum price a buyer is willing to pay and the market price B. The maximum price a seller is willing to accept and the market price C. The minimum price a seller is willing to accept and the market price D. The maximum price a buyer is willing to pay and the market price

D. The maximum price a buyer is willing to pay and the market price

The Generator is a popular youth hostel in London located near Kings Cross. The hostel provides a bed, showers, and breakfast in their nightly fee. Suppose the quantity demanded is 0 when the price is $90 per night and 90 when the price is $10 per night. Quantity supplied is 0 when the price is $10 and 100 when the price is $80. In equilibrium, how many beds are rented?

Equilibrium Price: $45 At $45, 50 beds are rented

The accompanying table contains the willingness to pay for 5 students in the market for a new tablet. Identify which portion of the demand curve below represents each individual. Francisco is A B C D E

Francisco's Willingness to Pay = $200 D

The accompanying table contains the willingness to pay for 5 students in the market for a new tablet. Identify which portion of the demand curve below represents each individual. Julio is A B C D E

Julio's Willingness to Pay = $100 E

The accompanying table contains the willingness to pay for 5 students in the market for a new tablet. Identify which portion of the demand curve below represents each individual. Lily is A B C D E

Lily's Willingness to Pay = $300 C

Determine the amount of producer surplus generated in each of the following situations. So-Hee advertises her car for sale in the used-car section of the student newspaper for $2,000, but she is willing to sell the car for any price higher than $1,500. The best offer she gets is $1,200, which she declines.

No trade takes place. No producer surplus is created. Producer surplus = 0

For each scenario, decide whether it creates a producer or a consumer surplus. Then, calculate the ensuing surplus. Nicole has a hockey puck from the 2018 Winter Olympic Games and puts it up for sale on eBay. She will only sell the puck if the winning bid is greater than or equal to $500. After bidding closes, the last bid stands at $501. Nicole experiences a A. Producer Surplus B. Consumer Surplus

Producer Surplus

Consider the accompanying supply and demand graph. What is the value of producer surplus?

Producer Surplus = (5 x $3.5) / 2 = $8.75

Determine the amount of producer surplus generated in each of the following situations. Sanjay likes his job so much that he would be willing to do it for free. However, his annual salary is $80,000.

Producer Surplus = Price - Willingness to Accept $80,000 - 0 = $80,000

Suppose that Michelle buys a cappuccino from Paul's Cafe and Bakery for $5.25. Michelle was willing to pay up to $7.25 for the cappuccino and Paul's Cafe and Bakery was willing to accept $3.75 for the cappuccino. Paul's Cafe and Bakery's producer surplus:

Producer Surplus = Price - Willingness to Accept $5.25 - $3.75 = $1.50

Determine the amount of producer surplus generated in each of the following situations. Gordon lists his old Lionel electric trains on eBay. He sets a minimum acceptable price, known as his reserve price, of $75. After five days of bidding, the final high bid is exactly $75. He accepts the bid.

Producer Surplus = Price - Willingness to Accept $75 - $75 = 0

The accompanying table shows the supply and demand schedules for used copies of the fourth edition of this textbook. The supply schedule is derived from offers at Amazon.com. The demand schedule is hypothetical. Calculate producer surplus at the equilibrium in this market.

Producer Surplus: $85 - $60 = $25(1 Seller) = $25 $85 - $65 = $20(2 Sellers) = $40 $85 - $75 = $10(3 Sellers) = $30 $85 - $80 = $5(3 Sellers) = $15 Total Producer Surplus = $25 + $40 + $30 + $15 = $110

For each scenario, decide whether it creates a producer or a consumer surplus. Then, calculate the ensuing surplus. Nicole has a hockey puck from the 2018 Winter Olympic Games and puts it up for sale on eBay. She will only sell the puck if the winning bid is greater than or equal to $500. After bidding closes, the last bid stands at $501. Nicole's surplus:

Producer Surplus: Price - Willingness to Accept $500 - $501 = $1

Answer the question according to the information in the graph. Calculate producer surplus (PS).

Producer surplus = (5,000 x $3) / 2 = $7,500

Assuming $5 to be the equilibrium price for this market, please shade in consumer surplus (CS), producer surplus (PS), and total surplus (TS).

The area above the equilibrium price bound by the demand curve represents the consumer surplus. The area below the equilibrium price bound by the supply curve represents the producer surplus. Total (or social) surplus is the sum of the two areas.

Below is the market for toy spaceships. Shade total consumer surplus (CS) on the graph by correctly placing the CS shaded area.

The market price is the equilibrium point. The demand curve denotes the willingness to pay for all the individual consumers. The total consumer surplus is the area below the demand curve down to the market price.

Below is the market for hair conditioner. Draw the total producer surplus (PS) on the graph using the shaded area labelled PS.

The market price is the equilibrium point. The supply curve denotes the costs to all the individual firms. The total producer surplus is the area above the supply curve up to the market price.

Consider the accompanying supply and demand graph. What is the value of total (also called social or economic) surplus?

Total Surplus = Consumer Surplus + Producer Surplus Total Surplus = $11.25 + $8.75 = $20

The Generator is a popular youth hostel in London located near Kings Cross. The hostel provides a bed, showers, and breakfast in their nightly fee. Suppose the quantity demanded is 0 when the price is $90 per night and 90 when the price is $10 per night. Quantity supplied is 0 when the price is $10 and 100 when the price is $80. What is the total surplus?

Total surplus = Consumer surplus + Producer surplus Consumer surplus and Producer surplus can be calculated by the area of a triangle. Area of a triangle = (Base x Height) / 2 Consumer surplus = ($50 x $45) / 2 = $2250 / 2 = $1125 Producer surplus = ($50 x $35) / 2 = $1750 / 2 = $875 Total surplus = $1125 + $875 = $2000