ECO100Y1 Chapter Notes - Chapter 4: Economic Surplus, Demand Curve, Efficient-Market Hypothesis

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14 Jan 2019

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Consumer surplus and the demand curve: an individual consumer"s willingness to pay for a good is the maximum price at which he or she would buy the good. Individual consumer surplus is the net gain to an individual buyer from the purchase of a good. Cost and producer surplus: an individual seller"s cost is the lowest price at which he or she is willing to sell a good. Individual producer surplus is the net gain to an individual seller from selling a good. Consumer surplus, producer surplus and the gains from trade. The gains from trade: the total surplus generated in a market is the total net gain to consumers and producers from trading in the market. It is the sum of the producer and the consumer surpluses. Once the market is in equilibrium, there is no way to increase the gains from trade, any other outcome reduces total surplus.

Related Questions

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

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

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.

bronzeoyster264

ECO100Y1 Chapter Notes - Chapter 4: Economic Surplus, Demand Curve, Efficient-Market Hypothesis

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