ECON 200 Lecture Notes - Lecture 4: Economic Surplus, Perfect Competition

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erinmole972

16 Feb 2016

School

University of Maryland

Department

Economics

Course

ECON 200

Professor

Robert Schwab

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Document Summary

Willingness to sell: the minimum price that a seller is willing to accept in exchange for a good or service. Producer surplus: the net beneit that a producer receives from the sale of a good or service. Measured by the diference between willingness to sell and the actual price. Area above the supply curve and below price, between quantity zero and the quantity irms choose to produce. Total surplus: a measure of the combined beneits that everyone receives from participating in an exchange of goods or services. Sum of consumer surplus and producer surplus. Main point: the equilibrium in a perfectly competitive, well-functioning market maximizes total surplus (the market is eicient when it is at equilibrium)

Related Questions

10. Producer surplus is the A) difference between the maximum price consumers are willing to pay and the minimum price producers are willing to accept. B) difference between producers' revenues and opportunity costs of production. C) opportunity cost of production. D) area under the supply curve. E) total amount paid for the good.

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

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.

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ECON 200 Lecture Notes - Lecture 4: Economic Surplus, Perfect Competition

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