Microeconomics Market Efficiency
You received $250 for a stationary bike and had a producer surplus of $50. You were willing to accept
$200
______ surplus can be thought of as the wealth that trade creates for consumers in a market
Consumer
______ surplus will always be less with a banding price floor than without
Consumer
______ is a branch of economics that focuses on measuring the well-being of market participants and how changes in the market affect their well-being
Welfare Economics
Graphically, producer surplus is the area ______ the supply curve and ______ the equilibrium price, from zero to the quantity traded
above; below
When there is a binding price ceiling, producer surplus will
always be less, so producers always lose
When calculating producer surplus for the market,
calculate the area above the supply curve and below the equilibrium price, from zero to quantity traded
When calculating consumer surplus for an entire market
calculate the area below the demand curve and above the equilibrium price, from zero to the quantity traded
When calculating tax revenue, calculate the area between the total price paid by ______ and the net price received by ______, from zero to quantity traded
consumers; suppliers
The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the
deadweight loss
Consumer surplus is measured in
dollars
All else equal, when the price decreases, consumer surplus
increases
All else equal, when the price increases, producer surplus
increases
A tax
increases the costs of goods sold and shifts the supply curve up
The difference between the price producers receive for a good or a service and the minimum price they are willing and able to accept is
producer surplus
A tax on suppliers
shifts supply curve up vertically
Economic surplus is also known as
social welfare or total surplus
If low prices are the result of government intervention,
some consumers will be better off because they can buy a good or a service at a lower price, overall consumer surplus can increase or decrease, and some consumers will be worse off because they are unable to get access to goods and services
When calculating producer surplus for an individual firm, ______ the firm's willingness to accept from the market price
subtract
When marginal benefit equals marginal cost, economic ______ is maximized in the market
surplus
Gains from trade in the market are maximized when
the maximum price is such that the quantity demanded equals the quantity supplies
Low prices are good for consumers if
they occur naturally in the market