chapter 7 questions and answers

115. On a graph, the area below a demand curve and above the price measures a.Consumer surplus

defintion

121. Moving production from a high-cost producer to a low-cost producer will a. raise total surplus

defintion

123. Which of the following will cause an increase in consumer surplus? a. A technological improvement in the production of the good

This would increase supply which would lower price and increase consumer surplus

103. What happens to consumer surplus in the cell phone market if cell phones are normal goods and income of the cell phone buyers rises? a. Consumer surplus may increase, decrease, or remain unchanged.

basically But for normal good like cell phone, the consumer surplus depends upon the willingness of the buyer. Therefore, the consumer surplus might either increase, decrease or remains unchanged even if the buyers income rises.

102. Producer surplus is a. the amount a seller is paid minus the cost of production.

defintion

113. The maximum price that a buyer will pay for a good is called a. willingness to pay

defintion

106. Which of the following events would increase producer surplus? a. Sellers' costs stay the same and the price of the good increases

defintion a higher price raises producer surplus

104. The distinction between efficiency and equality can be described as follows: a. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.

from chapter like 3

111. As a result of a decrease in price, a. new buyers enter the market, increasing consumer surplus.

new buyers enter the market because they are willing to buy the good for a lower price.