Micro multiple choice
Producer surplus is the area
Above the supply curve and below the price
If a market generates a side affect or externality, then a free market solutions
Are inefficient
Consumer surplus is the area
Below the demand curve and above the price
Medical care clearly and enhances peoples lives. Therefore, we should consume medical care until
Buyers receive no benefit from another unit of medical care
And inferior good is one for which an increase in income causes a
Decrease in demand
An increase in the price of a good along a stationary demand curve
Decreases consumer surplus
The law of demand states that an increase in the price of a good
Decreases the quantity demanded for that good
Adam Smith's invisible hand concept suggest that a competitive market outcome
Maximizes total surplus
If a benevolence social planner chooses to produce more than the equilibrium quantity of a good then
The cost of production on the last unit produced exceeds the value placed on it by buyers
In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should
allow the market to seek equilibrium on its own
If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is
an inferior good
If a producer has market power (can influence the price of the product in the market) then free market solutions
are inefficient
Total surplus is the area
below the demand curve and above the supply curve
Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect
equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
If buyers are rational and there is no market failure,
free market solutions are efficient and free market solutions maximize total surplus
An increase in the price of a good along a stationary supply curve
increases producer surplus
The law of supply states that an increase in the price of a good
increases the quantity supplied of that good
A perfectly competitive market has
many buyers and sellers
Buyers willingness to pay is that buyers
maximum amount they are willing to pay for a good
A monopolistic market has
only one seller
If an increase in the price of blue jeans leads to an increase in demand for tennis shoes, then blue jeans and tennis shoes are
substitutes
If a market is efficient, then
the market allocates output to the buyers who value it the most; market allocates buyers to the sellers who can produce the good at the least cost; the quantity produced in the market maximizes the sum of consumer and producer surplus
The sellers cost of production is
the minimum amount the seller is willing to accept for a good
If the price of a good is equal to the equilibrium price
the quantity demanded is equal to the quantity supplied and the price remains unchanged
If a benevolent social planner chooses to produce less than the equilibrium quantity of a good then
the value placed on the last unit of production by buyers exceeds the cost of production
If a price of a good is below the equilibrium price,
there is a shortage and the price will rise.
If the price of a good is above the equilibrium price,
there is a surplus and the price will fall.
