Ch 7 Micro
Michael values a stainless steel refrigerator for his new house at $3500, but he succeeds in buying one for $3000. Michael's consumer surplus is
$500
If Gina sells a shirt for $40, and her producer surplus from the sale is $32, her cost must have been
$8
The amount a buyer is willing to pay for a good - the amount the buyer actually pays
consumer surplus
Achieved when the sum of producer surplus and consumer surplus is maximized
efficiency in a market
A consumer's willingness to pay directly measures
how much a buyer values a good
Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?
it increases
The buyer who would be the first to leave the market if the price were any higher
marginal buyer
A supply curve can be used to measure producer surplus because it reflects
seller's cost
A seller is willing to sell a product only if the seller receives a price that is at least as great as the
seller's cost of production
Producer surplus directly measures
the well-being of sellers
Economist typically measure efficiency using
total surplus
At the equilibrium price of a good, the good will be purchased by those buyers who
value the good more than the price
The value to buyers - the cost to sellers
total surplus
Consumer surplus + producer surplus
total surplus in market
The area between the demand and supply curves up to the point of equilibrium
total surplus on a graph
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the
consumer does not purchase the good
On a graph, the area below a demand curve and above the price measures
consumer surplus
All else equal, what happens to consumer surplus if the price of a good increases?
consumer surplus decreases
Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons?
consumer surplus decreases
Measure of the seller's willingness to sell
cost
If the price a consumer pays for a product is = to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is
zero
