Problem Set 2

If the government places a per unit tax on the sale of a good, the price that the buyer plays will ____, and the price that the seller receives will _____

increase, decrease

Suppose the demand for french bread rises. This will ____ producers surprise in the market for french bread, and ____ producer surplus in the market for flour

increase, increase

The deadweight/welfare loss from a tax is represented by

lost consumer and producer surplus

An efficient allocation of resources maximizes

consumer plus plus producer surplus

An early freeze in California sours/damages the lemon crop. This will ______ consumer surplus in the market for lemons, and _______ consumer surplus in the market for lemonade.

decrease, decrease

If the government places a per unit tax on the sale of a good, consumer surplus _____ and producer surplus _____.

decreases, decreases

When a market is in equilibrium, the buyers are those with the ____ willingness to pay and the sellers are those with the ___ cost

highest, lowers

Producing less that the output that would exist at the equilibrium of supply and demand is inefficient because the value to the buyer, given the buyer's price at that output, is

positive, but greater than the value of the sellers price at that output