Chapter 7: Micro Study Guide
I have a buyers willingness to pay for a new Honda is $30,000 she is able to actually buy it for $28,000 her consumer surplus is
$2,000
Producer surplus is the area
Above the supply curve into below the price
If a market is efficient, then
All of the above are true
In general, if a benevolent social planner wanted to maximize the total benefits received by buyers or sellers in a market, the planner should
Allow the market to seek equilibrium on its own
If a market generates a side effect or X ternal holiday, then free market solutions
Are inefficient
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
An increase in the price of a good along a stationary supply curve
Increases producer surplus
Adam Smith's "invisible hand" concept suggest that a competitive market outcome
Maximizes total surplus
Suppose there are three identical VS is available to be purchased. Buyer one is willing to pay $30 for one tire to is willing to pay $25 for one and a buyer three is willing to pay $20 for one. If the price is $25 how many bases will be sold and what is the value of consumer surplus in this market?
To vases will be sold in consumer surplus is $5
An increase in the price of a good along a stationary demand curve
decreases consumer surplus
If buyers are rational there is no market failure
A and C are correct
The sellers cost of production is
The minimum amount the seller is willing to except for a good
Suppose that the price of a new bicycle is $300. So you values a new bicycle at $400. It costs $20 for the seller to produce the new bicycle. What is the value of total surplus if Sue buys a new bike?
$200
Joe has 10 baseball gloves, and Sue has not. A baseball glove cost $50 to produce. If Joe values and additional baseball glove at $100 and Sue values a baseball glove at $40 then to maximize
Efficiency, Joe should receive the glove
Medical care clearly enhances peoples lives. Therefore, we should consume medical care until
The benefit Buyers place on medical care is equal to the cost of producing it
If a benevolent 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
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
