ch 4 macroeconomics
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.
Economic surplus
is equal to the sum of consumer surplus and producer surplus.
Economic efficiency in a competitive market is achieved when
the marginal benefit equals the marginal cost from the last unit sold.
In a competitive market equilibrium
the marginal benefit equals the marginal cost of the last unit sold.
If the market price is $1.00, what is the consumer surplus on the third burrito?
$0.50
Arnold's marginal benefit from consuming the third burrito is
$1.50
For each unit sold, the price sellers receive after the tax (net of tax) is
$20
The price buyers pay after the tax is
$27
If the market price is $1.00, what is Arnold's consumer surplus?
$3.00
How much of the tax is paid by sellers?
2
How much of the tax is paid by buyers?
5
If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor demanded?
570,000
If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor supplied?
610,000
What area represents consumer surplus after the imposition of the price floor?
A
what are represents consumer surplus at p2
A
What is the area that represents consumer surplus after the imposition of the ceiling?
A + B + D
What is the area that represents producer surplus after the imposition of the price floor?
B + E
what area represents producer surplus at p2
B+D
What area represents the deadweight loss after the imposition of the price floor?
C + D
What area represents the deadweight loss after the imposition of the ceiling?
C + E
What area represents the deadweight loss at P2?
C + E
The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $3, what changes in the market would result in an economically efficient output?
The price would increase, the quantity demanded would decrease, and the quantity supplied would increase.
What area represents the deadweight loss at the equilibrium price of P1?
There is no deadweight loss at the price of P1.
What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?
W* = $10.50; Q* = 590,000
Economists refer a to a market where buying and selling take place at prices that violate government price regulations as
a black market
Which term refers to a legally established minimum price that firms may charge?
a price floor
The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.
above;below
The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called
consumer surplus
________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.
deadweight loss
What is the area that represents the producer surplus after the imposition of the ceiling?
f
In a competitive market, the demand curve shows the ________ received by consumers and the supply curve shows the ________.
marginal benefit; marginal cost
The additional cost to a firm of producing one more unit of a good or service is the
marginal cost
To affect the market outcome, a price floor
must be set above the equilibrium price
To affect the market outcome, a price ceiling
must be set below the equilibrium price
Rent control is an example of
price ceiling
The minimum wage is an example of
price floor
If a minimum wage of $11.50 is mandated, there will be a
surplus of 40,000 units of labor.
marginal cost
the additional cost to a firm of producing one more unit of a good or service
The sum of consumer surplus and producer surplus is equal to
the economic surplus.
If equilibrium is achieved in a competitive market, then
there is no deadweight loss
