ECN 104 Chapter Notes - Chapter 7: Economic Surplus, Baltimore City Fire Department, Demand Curve

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turquoisetrout207

27 Feb 2015

School

Ryerson University

Department

Economics

Course

ECN 104

Professor

Tsogbadral Galaabaatar

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Document Summary

Chapter 7-consumers, producers, and efficiency in the market. Welfare economics-the study of how the allocation of resources affects economic well being. Willingness to pay-the maximum amount that a buyer will pay for a good. Consumer surplus-the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. Using the demand curve to measure consumer surplus. Marginal buyer-the buyer who would leave the market first if the price was higher. The area below the demand curve and above the price measures the consumer surplus in a market. The desirability of market outcomes and whether it is a good measure of economic well-being. Measures the benefit that buyers receive from a good as the buyers themselves perceive it. Cost-the value of everything a seller much give up. Producer surplus-the amount a seller is paid for a good minus the seller"s cost of providing it.

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.

chocolateantelope690

14. Refer to the table below. If the market price is $5.50, the consumer surplus in the market will be a. $15.50. b. $4.50. c. $21.00. d. $3.00. c. None of the above is correct. Five Possible Buyers' Willingness to Pay for Good Z Buyer Willingness to Pay Jane $8.50 James $7.00 Bill $5.50 Jill $4.00 Sarah $3.50

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).

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ECN 104 Chapter Notes - Chapter 7: Economic Surplus, Baltimore City Fire Department, Demand Curve

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