ECON102 Lecture Notes - Lecture 7: Price Floor, Redistribution Of Income And Wealth, Perfect Competition

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sangriamammoth174

8 Dec 2015

School

University of Waterloo

Department

Economics

Course

ECON102

Professor

Ken Jackson

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ECON102 Full Course Notes

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Willingness to pay: the maximum amount that a buyer will pay for a good. *consumer surplus: measures the benefit that buyers receive from participating in a market. *consumer surplus = buyer"s willingness to pay the amount the buyer actually pays = area below the demand curve and above the price. Cost: the value of everything a seller must give up to produce a good. *producer surplus: measures the benefit that sellers receive from participating in a market. *producer surplus = the amount a seller is paid for a good the seller"s cost = area below the price and above the supply. *total surplus= value to buyers cost to sellers. *efficiency: the property of a resource allocation of maximizing the total surplus received by all member of society. Policymakers are often concerned with the efficiency, as well as the equity, of economic outcomes. *: the fairness of the distribution of well-being among the members of society.

Related Questions

The total surplus in a market is equal to

a. amount received by sellers - costs of sellers.

b. willingness to pay - price.

c. consumer surplus + producer surplus.

d. value to buyers - amount paid by buyers.

amethystsnake23

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

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

ECON102 Lecture Notes - Lecture 7: Price Floor, Redistribution Of Income And Wealth, Perfect Competition

ECON102 Full Course Notes

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