Economics 1021A/B Lecture Notes - Externality, Deadweight Loss, Robert Nozick

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ECON 1021A/B Full Course Notes

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Resource allocation methods: resources must be allocated by some method, resources can be allocated by, market price, command, majority rule, contest, first-come, first-served, lottery, personal characteristics, force. In each graph, the producer surplus is the blue area: calculate the producer surplus for each graph. In the figure, resources are used efficiently when the sum of consumer surplus and producer surplus is maximized. The sum of consumer surplus and producer surplus is maximized when 10,000 pizzas a day are produced. If production is less than 10,000 pizzas a day, the marginal pizza is valued more highly than its opportunity cost. The sum of the consumer surplus and producer surplus is decreased. This loss is called the deadweight loss: deadweight loss is the decrease in consumer surplus and producer surplus that results from an inefficient level of production. The deadweight loss is shown by the grey triangle. Ideas about fairness can be dived into two groups:

Related Questions

Consider Marginal Cost and Price, and choose the best statement.

a. The price of one more unit of a good or service is its marginal cost.

b. The marginal cost of producing one more unit of a good or service is equal to the marginal benefit.

c. The cost of producing one more unit of a good or service is its marginal cost and we measure the marginal cost as the area above the supply curve and below the market price.

d. The cost of producing one more unit of a good or service is its marginal cost, which is the minimum price that producers must receive to induce them to offer to sell another unit of the good or service.

turquoiseworm20

1. Consumer surplus is not

a. the value of a good minus the price paid for it, summed over the quantity bought.

b. greater on the first unit sold than on the last unit sold.

c. greater on the last unit sold than on the first unit sold.

d. equal to the area below the demand curve and above the market price line.

2. The demand curve for hamburgers is the same as the

a. marginal benefit curve for hamburgers.

b. marginal cost curve of hamburgers.

c. consumer surplus curve of hamburgers.

d. All of the above.

3. A supply curve is

a. the same as a production possibilities frontier.

b. a marginal social benefit curve.

c. a marginal benefit curve.

d. a marginal cost curve.

e. a downward-sloping curve.

4. The opportunity cost of producing one more hot dog is $1.00. The price of a hot dog is $1.50. The producer surplus from selling one more hot dog is

a. $1.00

b. $1.50

c. $0.50

d. zero.

e. $2.50

5. Markets may not achieve an efficient allocation of resources when there are

a. external costs.

b. monopolies.

c. taxes.

d. all of the above.

18) Which of the following is true regarding marginal benefit? I. The marginal benefit curve shows the benefit firms receive by producing another unit of a good. II. Marginal benefit increases as more and more of a good is consumed. III. Marginal benefit is the maximum amount a person is willing to pay to obtain one more unit of a good. A) I and III B) I, II, and III C) I and II D) I only E) III only

Economics 1021A/B Lecture Notes - Externality, Deadweight Loss, Robert Nozick

ECON 1021A/B Full Course Notes

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