Microeconomics Chapter 7 Review

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling 10 danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for

$3.50 each

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

0

Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell?

50

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

Consumer surplus decreases

What happens to consumer surplus in the cell phone market if cell phones are normal goods and buyers of cell phones experience an increase in income?

Consumer surplus may increase, decrease, or remain unchanged.

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Dallas's consumer surplus would increase.

The distinction between efficiency and equality can be described as follows:

Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society

If the cost of producing sofas decreases causing the price of sofas to decrease, consumer surplus in the sofa market will

Increase

Producer surplus is

The amount a seller is paid minus the cost of production

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then

The marginal buyer's willingness to pay for the 100th unit of the good is $25

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

both Janine and Henry experience an increase in consumer surplus.

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

cost of building fences

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

decreases, and producer surplus decreases

When the demand for a good increases and the supply of the good remains unchanged, consumer surplus

may increase, decrease, or remain unchanged.

Moving production from a high-cost producer to a low-cost producer will

raise total surplus

A supply curve can be used to measure producer surplus because it reflects

sellers' costs

A simultaneous increase in both the demand for tablets and the supply of tablets would imply that

the value of tablets to consumers has increased, and the cost of producing tablets has decreased

Producer surplus directly measures

the well-being of sellers

We can say that the allocation of resources is efficient if

total surplus is maximized