Microeconomics Market Efficiency

You received $250 for a stationary bike and had a producer surplus of $50. You were willing to accept

$200

______ surplus can be thought of as the wealth that trade creates for consumers in a market

Consumer

______ surplus will always be less with a banding price floor than without

Consumer

______ is a branch of economics that focuses on measuring the well-being of market participants and how changes in the market affect their well-being

Welfare Economics

Graphically, producer surplus is the area ______ the supply curve and ______ the equilibrium price, from zero to the quantity traded

above; below

When there is a binding price ceiling, producer surplus will

always be less, so producers always lose

When calculating producer surplus for the market,

calculate the area above the supply curve and below the equilibrium price, from zero to quantity traded

When calculating consumer surplus for an entire market

calculate the area below the demand curve and above the equilibrium price, from zero to the quantity traded

When calculating tax revenue, calculate the area between the total price paid by ______ and the net price received by ______, from zero to quantity traded

consumers; suppliers

The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the

deadweight loss

Consumer surplus is measured in

dollars

All else equal, when the price decreases, consumer surplus

increases

All else equal, when the price increases, producer surplus

increases

A tax

increases the costs of goods sold and shifts the supply curve up

The difference between the price producers receive for a good or a service and the minimum price they are willing and able to accept is

producer surplus

A tax on suppliers

shifts supply curve up vertically

Economic surplus is also known as

social welfare or total surplus

If low prices are the result of government intervention,

some consumers will be better off because they can buy a good or a service at a lower price, overall consumer surplus can increase or decrease, and some consumers will be worse off because they are unable to get access to goods and services

When calculating producer surplus for an individual firm, ______ the firm's willingness to accept from the market price

subtract

When marginal benefit equals marginal cost, economic ______ is maximized in the market

surplus

Gains from trade in the market are maximized when

the maximum price is such that the quantity demanded equals the quantity supplies

Low prices are good for consumers if

they occur naturally in the market