Microeconomics Chapters 7-11 (Midterm #2)

All else equal, what happens to consumer surplus if the price of a good increases?

Consumer surplus decreases.

Producer surplus is the area

below the price and above the supply curve.

On a graph, the area below a demand curve and above the price measures

consumer surplus

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

decreases, and producer surplus decreases.

Total surplus is maximized at

equilibrium

When there is a technological advance in the pork industry, consumer surplus in that market will

increase

The deadweight loss from a tax of $8 per unit will be smallest in a market with

inelastic demand and inelastic supply

Willingness to pay

measures the value that a buyer places on a good

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

supply of the product is more elastic than the demand for the product.

If a country allows trade and the domestic price of a good is lower than the world price,

the country will become an exporter of the good.

If a country allows trade and the domestic price of a good is higher than the world price,

the country will become an importer of the good.