Problem Set 6

Consumer surplus is ___

the value or total benefits one receives from a good in excess of the price paid for it

A deadweight loss is the ___ in social surplus that results from a market ___

-decrease -distortion

Suppose there is a product that is being sold in a perfectly competitive market. If the demand for the product ___, producer surplus will increase since this change results in a ___ price, which means there is ___ area between the supply curve and the market price for a good

-increase -higher -more

Which of the following statements regarding producer surplus are not true?

-it is the difference between total cost and total revenue -it is not possible to calculate the total producer surplus in the market -it is the area below the marginal cost curve

Producer surplus is the difference between the ___ and the ___

-price consumers pay -supply curve

All else being equal, the flatter the demand curve, the ___ the total surplus in a market. All else being equal, the steeper the supply curve, the ___ the total surplus in a market

-smaller -larger

Social surplus is maximized when the ___

All of the above -buyers and sellers as distinct groups are doing as well as they possibly can -perfectly competitive market is in equilibrium -highest-value buyers are making a purchase and the lowest-cost sellers are selling

Consider a good that you do not like at all, perhaps turnips. Given the market price for turnips, what would be your consumer surplus?

Both A and B are possible

Do all consumers in a competitive market enjoy the same amount of consumer surplus?

No, since considerable variation exists among consumers in terms of tastes and incomes

The market for economics textbooks is in equilibrium. The government decides to relax export restriction on paper, leading to an increase in the demand for domestically produced paper. How does total, consumer surplus, and producer surplus in the market for textbooks change?

The total surplus decreases, producer surplus may increase or decrease, and consumer surplus may decrease

All of the following could cause an increase in producer surplus except

an upward shift in the marginal cost curve