MicroEconomics Ch. 7
justin builds fences for a living, justins out-of pocket expenses (wood, paint, etc.) plus the value that he places on his own time amount to his
cost of building fences
producer surplus directly measures
the well being of sellers
the maximum price that a buyer will pay for a good is called
the willingness to pay
a sellers oppurtunity cost measures the
value of everything she must give up to produce a good
donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is
$150
producer surplus measures
benefits to sellers of participating in a market
a consumers willingness to pay directly measures
how much a buyer values a good
total surplus
is equal to producer surplus plus consumer surplus
which of the ten principals of economics does welfare econmics explain more fully
markets are usually a good way to organize economic activity
market failure is the inability of
some unregulated markets to allocate resources efficiently
consumer surplus is
the amount a buyer is willing to pay for a good, minus the amount the buyer actually pays for it
producer surplus is
the amount the seller is paid, minus the cost of production
consumer surplus in a market can be represented by
the area below the demand curve and above the price
suppose raymond and victoria attend a charity benefit and participate in a silent auction. each has in mind a maximum amount that he or shere will bid for an oil painting by a locally famous artist. This maximum is called
willingness to pay
the marginal seller is the seller who
would leave the market first if the price were any lower