Micro Quiz 7

Suppose you having an argument with your roommate about whether the federal government should subsidize the production of food. Your roommate argues that because food is something that is unambiguously good (unlike liquor, guns, and drugs, which may be considered inherently evil by some members of society), we simply cannot have too much of it. That is, because food is clearly good, having more of it must always improve our economic well-being.

You can have too much of a good thing. Yes, any good with a positive cost and a declining willingness to pay from the consumer can be overproduced. This is because at some point of production, the cost per unit will exceed the value to the buyer and there will be a loss to total surplus associated with additional production.

Refer to Table 7-10. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 4 if the price is

$1,400.

Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Jeff pay for his computer?

$2,300

This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Refer to Table 7-2. If the market price is $5.50, the consumer surplus in the market will be

$4.50

Refer to Figure 7-24. If 10 units of the good are produced and sold, then

the marginal cost to sellers exceeds the marginal value to buyers.

Refer to Figure 7-24. If 6 units of the good are produced and sold, then

the sum of consumer surplus and producer surplus is maximized.