Ch 7 Micro

Michael values a stainless steel refrigerator for his new house at $3500, but he succeeds in buying one for $3000. Michael's consumer surplus is

$500

If Gina sells a shirt for $40, and her producer surplus from the sale is $32, her cost must have been

$8

The amount a buyer is willing to pay for a good - the amount the buyer actually pays

consumer surplus

Achieved when the sum of producer surplus and consumer surplus is maximized

efficiency in a market

A consumer's willingness to pay directly measures

how much a buyer values a good

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

it increases

The buyer who would be the first to leave the market if the price were any higher

marginal buyer

A supply curve can be used to measure producer surplus because it reflects

seller's cost

A seller is willing to sell a product only if the seller receives a price that is at least as great as the

seller's cost of production

Producer surplus directly measures

the well-being of sellers

Economist typically measure efficiency using

total surplus

At the equilibrium price of a good, the good will be purchased by those buyers who

value the good more than the price

The value to buyers - the cost to sellers

total surplus

Consumer surplus + producer surplus

total surplus in market

The area between the demand and supply curves up to the point of equilibrium

total surplus on a graph

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

consumer does not purchase the good

On a graph, the area below a demand curve and above the price measures

consumer surplus

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

consumer surplus decreases

Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons?

consumer surplus decreases

Measure of the seller's willingness to sell

cost

If the price a consumer pays for a product is = to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

zero