Quiz 5
What is consumer surplus
Consumer surplus is defined as the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e. the market price).
If the market is in equilibrium, producer surplus equals (remember that the area of a triangle equals one-half base times height)
Selected Answer: Correct $1250 (producer surplus: the bottom left triangle, could have four sides)
Amy buys a new laptop for $1250 and receives $250 of consumer surplus from the purchase. Amy's willingness to pay for the computer (i.e. marginal dollar value) is
Selected Answer: Correct $1500.
Refer to Figure 1 above. If the market is in equilibrium, the total cost of producing all 50 units of equilibrium quantity equals
Selected Answer: Correct $2250
A competitive market equilibrium is the quantity traded at which (NOT TOTALLY UNDERSTAND)
Selected Answer: Correct All of the above are correct. Answers: the surplus maximising quantity of the good or service is traded. those with the highest dollar values consume the goods and services traded. those with the lowest opportunity costs supply the goods and services traded.
Suppose hail damage reduces the number of grapes that can be used for wine production in Central Otago. What happens in the market for that vintage of Central Otago wine?
Selected Answer: Correct Supply decreases, price increases and consumer surplus decreases.
Refer to Figure 1 above. A price ceiling would bind if it was set at
Selected Answer: Incorrect any price above $70. Answers: a price of $70. a price of $90. any price above $70. Correct any price below $70.
When a binding price floor is imposed in a market
Selected Answer: Incorrect buyers and sellers benefit equally. Answers: Correct some producers are better off while other producers are worse off and all consumers are worse off. the market will be cleared of any shortages or surpluses that existed previously. buyers and sellers benefit equally. the government is attempting to improve market efficiency.
