EC chap 7
c.if policymakers want to respect the preferences of buyers.
Consumer surplus is a good measure of economic welfare a.because it accounts for the effects of price changes on buyers and sellers. b.for those who only enter the market when the price of a substitute increases. c.if policymakers want to respect the preferences of buyers. d.if policymakers are concerned about equity, but not efficiency.
b.UVW When the price falls from P1 to P2, quantity demanded increases from Q1 to Q2 indicating the new buyers entering the market. Consumer surplus from those buyers is the area below the demand curve and above the price from Q1 to Q2, shown as area UVW.
Refer to the Figure. When the price falls from P1 to P2, which area represents the increase in consumer surplus to new buyers entering the market? a.WYZ b.UVW c.UXZ d.VXYW
a.WYZ
Refer to the Figure. Which area represents consumer surplus at a price of P1? a.WYZ b.UXZ c.UVW d.WVXY
b.UXZ Feedback: Correct. The area below the demand curve and above the price is the consumer surplus.
Refer to the Figure. Which area represents consumer surplus at a price of P2? a.WYZ b.UXZ c.UVW d.WVXY
c.UXYW
Refer to the Figure. Which area represents the increase in consumer surplus when the price falls from P1 to P2? a.UXZ b.UVW c.UXYW d.VXYW
d.$48 or slightly more. The buyers will bid up to their willingness to pay amount. Padraig is only willing to bid $48, while Marisol is willing to pay more. When Padraig stops bidding, Marisol will not have to bid higher to win the right to purchase the good, so the good will sell for $48 or slightly more.
Refer to the Table. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for a.$32 or slightly less. b.$40 or slightly more. c.$56 or slightly less. d.$48 or slightly more.
d.Sellers expect the price of the good to be higher next month.
Which of the following will cause a decrease in consumer surplus? a.An improvement in production technology for the good b.A decrease in the price of one of the inputs for the good c.The imposition of a binding price ceiling in the market d.Sellers expect the price of the good to be higher next month.