Micro Econ Chapter 4.1 - 4.2: Econ. Surplus & Efficiency
Marginal benefit is
the additional benefit from consuming one more unit.
Marginal cost is
the additional cost of producing one more unit.
The Apply the Concept states that the value of the area representing consumer surplus from Uber's service was $2.88 billion per year for the four cities involved in the study. Use the information from the graph in the Apply the Concept to show how this value was calculated. Consumer surplus is equal to
the area of the blue triangle, which is one-half times a base of 111 million times a height of $51.87.
Consumer surplus is
the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
Why is the demand curve referred to as a marginal benefit curve?
It shows the willingness of consumers to purchase a product at different prices.
Why is the supply curve referred to as a marginal cost curve?
It shows the willingness of firms to supply a product at different prices.
Economic efficiency
both a and b.
Economists define economic efficiency in this way
all of the above
_____ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area ____
-Consumer -A
How does consumer surplus change as the equilibrium price of a good rises or falls? As the price of a good rises, consumer surplus ___ remains unchanged increases decreases , and as the price of a good falls, consumer surplus ___ decreases remains unchanged increases .
-Decreases -Increases
Using the graph to the right, explain why economic surplus would be smaller if Upper Q 1 or Upper Q 3 were the quantity produced than if Upper Q 2 is the quantity produced. Economic surplus at Upper Q 1 would be smaller than at Upper Q 2 because if Upper Q 1 units of output were produced, then some units for which marginal benefit is _____ greater than less than equal to marginal cost would ____ not be be produced.
-Greater than -not be
How does producer surplus change as the equilibrium price of a good rises or falls? As the price of a good rises, producer surplus ___ , and as the price of a good falls, producer surplus ___
-Increases -Decreases
________ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram by area ____
-Producer -B
Economic surplus at Upper Q 3 would be smaller than at Upper Q 2 because if Upper Q 3 units were produced, then some units for which marginal cost is ____marginal benefit would ____ produced.
-greater than -be
Refer to the graph. When 15,000 cups of tea are produced and consumed per month, which of the following is true?
All of the above are true.