Econ Ch 7

George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is

$6.

Willingness to pay

the maximum amount that a buyer will pay for a good

Economists typically measure efficiency using

total surplus

Efficiency

The property of a resource allocation of maximizing the total surplus received by all members of society

Equality

The property of distributing prosperity uniformly among the members of society

Total surplus is

equal to the total value to buyers minus the total cost to sellers.

Figure 7-22 Refer to Figure 7-22. The efficient price is

$70, and the efficient quantity is 100.

At the equilibrium price of a good, the good will be purchased by those buyers who

value the good more than price.

Consumer surplus equals the

value to buyers minus the amount paid by buyers.

The marginal seller is the seller who

would leave the market first if the price were any lower.

Figure 7-24 ​ Refer to Figure 7-24. At equilibrium, total surplus is measured by the area

ABD.

Figure 7-24 ​ Refer to Figure 7-24. At equilibrium, producer surplus is measured by the area

BDF.

Which of the following statements is correct?

Buyers always want to pay less and sellers always want to be paid more.

Which of the following events would increase producer surplus?

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

Producer surplus

The amount a seller is paid for a good minus the seller's cost of providing it

Market failure

The inability of some unregulated markets to allocate resources efficiently

Welfare economics

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

cost

The value of everything a seller must give up to produce a good

Producer surplus equals the

amount received by sellers minus the cost to sellers.

Consumer surplus

measures the benefit buyers receive from participating in a market.

The welfare of sellers is measured by

producer surplus.

Consumer surplus is a good measure of economic welfare if policymakers want to

respect the preferences of buyers.

Producer surplus directly measures

the well-being of sellers.