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Exam 7: Consumers, Producers, and the Efficiency of Markets

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Question 121

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The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

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Question 122

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Total surplus = Value to buyers - Costs to sellers.

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Figure 7-9 -Refer to Figure 7-9.If the equilibrium price rises from $50 to $200,what is the additional producer surplus to initial producers?

At any quantity,the price given by the supply curve shows the cost of the lowest-cost seller.

Figure 7-6 -Refer to Figure 7-6.If the price of the good is $14,then producer surplus is

Suppose there is an increase in supply that reduces market price.Consumer surplus increases because (1)consumer surplus received by existing buyers increases and (2)new buyers enter the market.

Table 7-8 The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality. -Refer to Table 7-8.You wish to purchase 10 piano lessons for yourself and for your brother,so you take bids from each of the sellers.You will take lessons at the same time,so one teacher cannot provide lessons to both of you.You must pay the same price for both sets of lessons,and you will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons.What bid will you accept?

Suppose Lauren,Leslie and Lydia all purchase bulletin boards for their rooms for $15 each.Lauren's willingness to pay was $35,Leslie's willingness to pay was $25,and Lydia's willingness to pay was $30.Total consumer surplus for these three would be

Figure 7-2 -Refer to Figure 7-2.Which area represents the increase in consumer surplus when the price falls from P1 to P2?

Producer surplus measures the

Figure 7-18 -Refer to Figure 7-18.If the government mandated a price increase from P1 to a higher price,then

The decisions of buyers and sellers that affect people who are not participants in the market create

Figure 7-5 -Refer to Figure 7-5.What happens to the consumer surplus if the price rises from $100 to $150?

If the government allowed a free market for transplant organs such as kidneys to exist,critics argue that such a market would

The maximum price that a buyer will pay for a good is called the

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Brock is willing to pay $400 for a new suit,but he is able to buy the suit for $350.His consumer surplus is

Table 7-7 The only four producers in a market have the following cost: -Refer to Table 7-7.If the sellers bid against each other for the right to sell the good to a consumer,then the good will sell for

Answer each of the following questions about supply and producer surplus. a. What is producer surplus,and how is it measured? b. What is the relationship between the cost to sellers and the supply curve? c. Other things equal,what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

When there is a technological advance in the ice cream industry,consumer surplus in that market will