ECON 1116 Chapter Notes - Chapter 7: Economic Surplus, Demand Curve

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lilacmule890

14 Mar 2016

School

Northeastern University

Department

Economics

Course

ECON 1116

Professor

Pritchard Robert

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Document Summary

Welfare economics the study of how the allocation of resources affects economic well-being (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) Using the demand curve to measure consumer surplus. Consumer surplus is closely related to the demand curve for a product. The area below the demand curve and above the price measures the consumer surplus in a market. When price is lowered consumer surpluses rises: because the initial consumer surplus is greater and there are now more people in the market. Consumer surplus is a good measure of economic well-being in respect to the preferences of buyers. Cost and willingness to sell: producer surplus is the amount a seller is paid minus the cost of production. Producer surplus measures the benefit sellers receive from participating in a market. Using the supply curve to measure producer surplus. Marginal seller the seller who would leave the market first if the price were lower.

Related Questions

7) Indicate whether each of the following statements is true or false, and explain why.

A. Producer surplus tends to fall as the supply curve becomes more elastic.

B. Consumer surplus tends to rise as demand becomes more elastic.

C. The market demand curve indicates the minimum price buyers are willing to pay at each level of production.

D. The market supply curve indicates the minimum price required by sellers as a group to bring forth production.

E. Consumer surplus is the amount that consumers are willing to pay for a given good or service above and beyond the amount actually paid.

bronzeoyster264

True or False:

1. Consumer surplus is the buyer's willingness-to-pay minus the seller's opportunity cost of production.

2. If your willingness-to-pay for a hamburger is $3 and you paid $2, then your consumer surplus is $5.00

3. The opportunity cost of production for a seller includes the implicit cost of the seller's time.

4. The height of the supply curve at a selected quantity is the seller's opportunity cost of producing that marginal unit.

5. Total surplus (total well-being) is the seller's cost of production minus the buyer's willingness-to-pay.

6. The competitive market equilibrium outcome is efficient because it allocates the produced output to the buyers who place the highest value on the good

7. Producer surplus is the area above the supply curve and below the price.

8. The competitive market equilibrium outcome maximizes total surplus (total well-being)

9. Producing and consuming more of a good will always increase the total surplus(total well-being).

redelephant805

Efficiency in a market is achieved when

a. social planner intervenes and sets the quantity of output after evaluating buyers willingness to pay and sellers' costs

b. the sum of producer surplus and consumer surplus is maximized

c. all firms are producing the good at the same low cost per unit.

d. no buyer is willing to pay more than the equilibrium price for any unit of the good.

chocolateantelope690

ECON 1116 Chapter Notes - Chapter 7: Economic Surplus, Demand Curve

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