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When a buyer's willingness to pay for a good is equal to the price of the good, the
A. buyer's consumer surplus for that good is maximized.
B. buyer will buy as much of the good as the buyer's budget allows.
C. price of the good exceeds the value that the buyer places on the good.
D. buyer is indifferent between buying the good and not buying it.

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Mahe Alam
Mahe AlamLv10
28 Sep 2020

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Related questions

Willingness to pay:

  is the lowest price that a buyer is willing and able to pay for a unit of a good.
  is the highest price that a buyer is willing and able to pay for a unit of a good.
  is equal to the price of the highest-priced goods in a consumption bundle.
  is equal to the price of the lowest-priced goods in a consumption bundle.

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.

A buyer hires a manufacturer to build a specialized machine for delivery on a certain date. The value of the machine to the buyer is $2,000, and the price, payable on delivery, is $1,500. Suppose that after the machine is completed but before delivery, a second buyer arrives and offers the manufacturer $2,500 for it.

(a) From a social perspective, who should get the machine?

(b) Calculate the value of expectation damages for the first buyer and show that it gives the seller the correct incentives regarding breach of the original contract.

(c) Suppose the first buyer sought and obtained a specific performance remedy. How will this affect the ultimate ownership of the machine compared to expectation damages? (Assume that the first buyer is aware of the second buyer's offer and that the two buyers can bargain.)

(d) The arrival of the second buyer created a "surplus" of $500 (the excess of his offer over the valuation of the first buyer). Describe how this surplus is divided between the seller and first buyer under the two breach remedies.

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