Homework7

Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11,

Alex experiences a decrease in consumer surplus, but Bella does not.

Inefficiency can be caused in a market by the presence of

a. market power. b. externalities. c. imperfectly competitive markets.

17. A seller's willingness to sell is

a. measured by the seller's cost of production. b. related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. c. less than the price received if producer surplus is a positive number.

3. A demand curve reflects each of the following except the

ability of buyers to obtain the quantity they desire.

A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes

decreases, and the consumer surplus in the market for red wine decreases.

If the cost of producing sofas decreases, then consumer surplus in the sofa market will

increase

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

increase

Consumer surplus

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

consumer surplus

measures the benefit buyers receive from participating in a market.

16. Cost is a measure of the

seller's willingness to sell

Total surplus is

the total value of the good to buyers minus the cost to sellers of providing the good

Producer surplus directly measures

the well-being of sellers.

The study of how the allocation of resources affects economic well-being is called

welfare economics

We can say that the allocation of resources is efficient if

total surplus is maximized

In a market, the marginal buyer is the buyer

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

Suppose the demand for peaches decreases. What will happen to producer surplus in the market for peaches

It decreases

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

Zero

Consumer surplus is

a. a concept that helps us make normative statements about the desirability of market outcomes. b. represented on a graph by the area below the demand curve and above the price. c.a good measure of economic welfare if buyers' preferences are the primary concern

The marginal seller is the seller

who would leave the market first if the price were any lower, and the marginal buyer is the buyer who would leave the market first if the price were any higher.

The maximum price that a buyer will pay for a good is called

willingness to pay