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ECON 101 Lecture Notes - Lecture 4: Price Ceiling, Economic Surplus, Marginal Cost

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School
UBC Okanagan, UBC OK
Department
Economics
Course
ECON 101
Professor
Noriko Ozawa

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Document Summary

Lecture 4: economic efficiency, government price setting and taxes. Consumer surplus - the difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays. Marginal cost - additional cost of producing that unit in regards to the increase/ decrease in slope. Consumer surplus (cs) = highest price willing to pay - cost of item = pro t (bene t) = total bene t received by consumers - total amount they pay. Producer surplus (ps) = price seller actually receives - the marginal cost. Pro t (bene t) = total amount received (rx) - cost of production (cx) Economic surplus = how well the market is surviving. Economic (market) ef ciency - resources are used to generate the largest possible surplus to consumers and producers. Ef ciency - 1. goods are being consumed by the buyers who value them the most.

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Related Questions

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.

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).

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.