ECON 101 Chapter Notes - Chapter 4: Economic Surplus, Demand Curve, Opportunity Cost

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8 Aug 2017

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Willingness to pay - max prices consumer would buy a good at. Individual consumer surplus - net gain to an individual buyer from the purchase of a good. Total consumer surplus - sum of individual consumer surpluses of all buyers of good in a market. Area below demand curve and above price (triangle shape) Fall in price increase surplus to original buyers. Cost - lowest price at which potential seller is willing to sell. Individual producer surplus - min price at which producer would have been willing to sell. Area above supply curve and below price. Consumer surplus, producer surplus, and gains from trade. Total surplus = consumer + producer surplus. There are gains from trade - this is why consumers are better off participating in the market. Point of efficiency is: how to achieve goals, not what those goals should be.

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

ECON 101 Chapter Notes - Chapter 4: Economic Surplus, Demand Curve, Opportunity Cost

ECON 101 Full Course Notes

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