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ECON101 Chapter Notes - Chapter 5: Demand Curve, Marginal Utility, Marginal Cost

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School
University of Waterloo
Department
Economics
Course
ECON101
Professor
Corey Van De Waal

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ECON101 Full Course Notes
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Document Summary

Resources are allocated efficiently and in the social interest when they are used in the ways that people value most highly. The value of one more unit of a good/service is its marginal benefit. A demand curve is a marginal benefit curve. The relationship between the price of a good and the quantity demanded by one person: individual demand. The relationship between the price of a good and the quantity demanded by all buyers: market demand. The market demand curve is the horizontal sum of the individual demand curves and is formed by adding the quantities demanded by all the individuals at each price. Marginal benefit to the entire society marginal social benefit. So the market demand curve is also the marginal social benefit (msb) curve. When people buy something for less than it is work to them, they receive a consumer surplus. Consumer surplus: the excess of the benefit received from a good over the amount paid for it.

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Related Questions

1. Consumer surplus is not

a. the value of a good minus the price paid for it, summed over the quantity bought.

b. greater on the first unit sold than on the last unit sold.

c. greater on the last unit sold than on the first unit sold.

d. equal to the area below the demand curve and above the market price line.

2. The demand curve for hamburgers is the same as the

a. marginal benefit curve for hamburgers.

b. marginal cost curve of hamburgers.

c. consumer surplus curve of hamburgers.

d. All of the above.

3. A supply curve is

a. the same as a production possibilities frontier.

b. a marginal social benefit curve.

c. a marginal benefit curve.

d. a marginal cost curve.

e. a downward-sloping curve.

4. The opportunity cost of producing one more hot dog is $1.00. The price of a hot dog is $1.50. The producer surplus from selling one more hot dog is

a. $1.00

b. $1.50

c. $0.50

d. zero.

e. $2.50

5. Markets may not achieve an efficient allocation of resources when there are

a. external costs.

b. monopolies.

c. taxes.

d. all of the above.

13) When the efficient quantity is produced A) the sum of consumer surplus and producer surplus is maximized. B) the quantity demanded equals the quantity supplied. c) marginal social benefit equals marginal social cost. D) resources are used in the activities in which they are most highly valued. E) all of the above.

24) When the efficient quantity is produced A) the sum of consumer surplus and producer surplus lo maximized. B) the quantity demanded equals the quantity supplied. c) resources are used in the activities in which they are most highly valued. D) marginal social benefit equals marginal social coot. E) all of the above.