MacroEcon Ch.7

All else equal, what happens to consumer surplus if the price of a good decreases?

Consumer surplus increases

Externalities are

side effects passed on to a party other than the buyers and sellers in the market

An example of normative analysis is studying

whether equilibrium outcomes are socially desirable

Welfare economics is the study of how

the allocation of resources affects economic well-being

Producer surplus is

the amount a seller is paid minus the cost of production

Market power and externalities are examples of

market failure

A consumer's willingness to pay directly measures

how much a buyer values a good

When there is a technological advance in the pork industry, consumer surplus in that market will

increase

Which of the Ten Principles of Economics does welfare economics explain more fully?

Markets are usually a good way to organize economic activity.

Consumer surplus is the amount..

a consumer is willing to pay minus the amount the consumer actually pays

Consumer surplus in a market can be represented by the

area below the demand curve and above the price

Inefficiency can be caused in a market by the presence of

market power, externalities, and imperfectly competitive markets.

When markets fail, public policy can

potentially remedy the problem and increase economic efficiency

The consumption of water by local residents that may include pesticide runoff from local farmers' fields is an example of

externalities