Micro Econ Chapter 4.1 - 4.2: Econ. Surplus & Efficiency

Marginal benefit is

the additional benefit from consuming one more unit.

Marginal cost is

the additional cost of producing one more unit.

The Apply the Concept states that the value of the area representing consumer surplus from​ Uber's service was​ $2.88 billion per year for the four cities involved in the study. Use the information from the graph in the Apply the Concept to show how this value was calculated. Consumer surplus is equal to

the area of the blue​ triangle, which is​ one-half times a base of 111 million times a height of​ $51.87.

Consumer surplus is

the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.

Why is the demand curve referred to as a marginal benefit​ curve?

It shows the willingness of consumers to purchase a product at different prices.

Why is the supply curve referred to as a marginal cost​ curve?

It shows the willingness of firms to supply a product at different prices.

Economic efficiency

both a and b.

Economists define economic efficiency in this way

all of the above

_____ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area ____

-Consumer -A

How does consumer surplus change as the equilibrium price of a good rises or​ falls? As the price of a good​ rises, consumer surplus ___ remains unchanged increases decreases ​, and as the price of a good​ falls, consumer surplus ___ decreases remains unchanged increases .

-Decreases -Increases

Using the graph to the​ right, explain why economic surplus would be smaller if Upper Q 1 or Upper Q 3 were the quantity produced than if Upper Q 2 is the quantity produced. Economic surplus at Upper Q 1 would be smaller than at Upper Q 2 because if Upper Q 1 units of output were​ produced, then some units for which marginal benefit is _____ greater than less than equal to marginal cost would ____ not be be produced.

-Greater than -not be

How does producer surplus change as the equilibrium price of a good rises or​ falls? As the price of a good​ rises, producer surplus ___ ​, and as the price of a good​ falls, producer surplus ___

-Increases -Decreases

________ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram by area ____

-Producer -B

Economic surplus at Upper Q 3 would be smaller than at Upper Q 2 because if Upper Q 3 units were​ produced, then some units for which marginal cost is ____marginal benefit would ____ produced.

-greater than -be

Refer to the graph. When​ 15,000 cups of tea are produced and consumed per​ month, which of the following is​ true?

All of the above are true.