Econ
Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus in the market?
$60.00
Refer to Table 7-6. If the market price is $1,000, the producer surplus in the market is
$750
Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are
800 and 400
Tariff
A tax on imported goods
Refer to Figure 7-1. When the price is P1, consumer surplus is
A+B+C straight down chart
Costs
Amount that firm pays to buy imputs
ATC
Lies above the other two also u shaped
Relationship between Marginal cost and average total cost
MC<ATC----->ATC rises
Refer to Figure 9-7. The equilibrium price and the equilibrium quantity of cheese in Wales before trade are
P0 and Q0.
Total average Costs
TC/Q or ATF+AVC
Average Fixed costs
TFC/Q
Average variable costs
TVC/Q
They receive lower price
Tarde raises the economic well-being of country as a whole
If country does not have a comparative advantage
Then domestic price will be higher than the worldprice country will be importer of good
AVC and ATC
U shaped reflecting the law of diminshing marginal returns
A demand curve reflects each of the following except the
ability of buyers to obtain the quantity they desire
free trade
affects welfare in an exporting country
MC intersects AVC and ATC
at their minimum points
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the
consumer does not purchase the good.
total surplus equation
consumer surplus + producer surplus
An example of an explicit cost of production would be
lease payments for the land on which a firms factory stands
slope of production function
marginal product of labor
invisible hand
term economists use to describe the self-regulating nature of the marketplace
Imports
the difference between the domestic quantity demanded and the domestic quantity supplied at world price
The domestic price falls to equal the world price
the domestic consumption increases
willingness to pay
the maximum amount that a buyer will pay for a good
welfare economics
the study of how the allocation of resources affects economic well-being
long run
the time period in which all inputs can be varied
market supply
various quantities that suppliers would be willing and able to sell at different prices
Refer to Figure 7-8. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus to existing producers?
$2,500
Refer to Figure 7-4. At the equilibrium price, consumer surplus is
$300
Refer to Figure 9-13. With trade, producer surplus is
$900
Free markets allocate
(1) the supply of goods to the buyers who value them most highly and (2) the demand for goods to the sellers who can produce them at least cost.
Effects of a Quota
1. Increase domestic price of good 2. Increase domestic production of good 3. Decrease consumption of the good 4. Create quota 'rents' which are typically pocketed by foreign firms (but government may also collect it-domestic) 5. Production inefficiency 6. Consumption inefficiency 7. Welfare loss
Effects of a tariff
1. Increase the domestic price of the protected good 2. Increase domestic production of the good 3. Decrease consumption of the good 4. Decrease consumer surplus 5. Increase producer surplus 6. Tariff revenue 7. Production inefficiency 8. Welfare loss
Plant
A physical establishment that performs one or more functions in the production, fabrication, and distribution of goods and services.
expected benefits
what determines how much a buyer would be willing to pay(max price) for a good
Market Efficiency
when a market is capable of producing output high enough to meet consumer demand
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the market for tomatoes. If trade in tomatoes is allowed, the United States
will become an exporter of tomatoes.
Lower marketplace
will increase consumer surplus
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the market for tomatoes. If trade in tomatoes is allowed, the price of tomatoes in the United States
will increase, and this will cause consumer surplus to decrease.
Higher market
will reduce the consumer surplus
producer of steel
will want to sell steel at world price
comparitive advantage
Compares producers of a good according to their oppertunity costs
Price is $260 sonja wtp=$300
Cs= 300-260=$40
They pay lower price
Domestic producers of good are worse off
Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?
For the three individuals together, consumer surplus amounts to $35.
Total Revenue (TR)
Market price x Amount sold=total revenue
consumer surplus
Measure economic welfare from buyer side
producer surplus
Measures economic welfare from the seller side
when domestic prices to equal the world price
Sellers in exporting country are better off Buyers in exporting country are worse off
If world price of steel is lower than the domestic price
The country will be an importer of steel
Turkey is an importer of wheat. The world price of a bushel of wheat is $7. Turkey imposes a $3-per-bushel tariff on wheat. Turkey is a price-taker in the wheat market. As a result of the tariff,
Turkish consumers of wheat become worse off and Turkish producers of wheat become better off.
which of the following expressions is correct
accounting profit=total revenue-explicit costs
Consumer surplus
area below the demand curve and above the market price
world price of steel is higher> domestic price
country will be an exporter of steel trade
A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes
decreases, and the consumer surplus in the market for red wine decreases.
When a country allows trade and becomes an importer of a good,
domestic consumers of the good are better off
A tariff on a product makes
domestic sellers better off and domestic buyers worse off.
Exports
equal the difference between the domestic quantity supplied and the domestic quantiy demanded at the world price
Refer to Figure 9-7. With trade, Wales
exports Q2 - Q1 units of cheese.
industry
group of firms producing the same or similar product
Refer to Figure 9-8. The country for which the figure is drawn
has a comparative disadvantage relative to other countries in the production of cars and it will import cars.
Producer with smaller opportunity costs of producing a good
has comparitive advatage of that good
Economics
include all the opportunity costs when measuring costs (explicit costs)
Refer to Figure 9-8. In the country for which the figure is drawn, total surplus with international trade in cars
is larger than total surplus without international trade in cars.
Equilibrium in a market
maximizes the benefit of buyers and sellers
marginal cost
mc=TC/Q
Accountants
measure the explicit costs but ignore the implicit costs
Producer surplus rises
more than consumer surplus falls
market equilibrium
reflects the way markets allocate scarce resources
Refer to Figure 7-17. If 4 units of the good are produced and sold, then
the allocation of resources is inefficient.
Consumer Surplus (CS)
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
producer surplus
the amount a seller is paid for a good minus the seller's cost of producing it measuring the benefits to sellers
marginal product
the extra output or change in total product caused by the addition of one more unit of variable input
short run
the period of time during which at least one of a firm's inputs is fixed
When the marginal product declines
the production function becomes flatter
Total revenue
the total amount of money a firm receives by selling goods or services
total costs
total fixed costs + total variable costs
