Quiz - Chapter 7 - Welfare Economics

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

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

Consumer surplus

Which of the following events would increase producer surplus?

Sellers' costs stay the same and the price of the good increases.

If a consumer places a value of $14 on a particular good and if the price of the good is $12, then the

consumer enjoys consumer surplus if he or she buys the good

If the cost of producing tables increases causing the price of tables to increase, consumer surplus in the table market will

decrease

Welfare economics implies that the equilibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers.

Cost is a measure of the

seller's willingness to sell

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

sellers' costs

Producer surplus is

the amount a seller is paid minus the cost of production