EC120 Chapter Notes - Chapter 7: Demand Curve, Opportunity Cost, Economic Surplus

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12 Mar 2016

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Chapter 7- consumers, producers, and the eiciency of markets. Consumer surplus- a buyer"s willingness to pay minus the amount the buyer actually pays. The area below the demand curve and above the price is the consumer surplus. Marginal buyer- the buyer who is willing to pay the least amount. Producer surplus- the amount a seller is paid for a good minus the seller"s cost. The area above the supply curve and below the price is the producer surplus. Marginal seller- the seller who has the highest cost in the market. Total surplus= value to buyers cost to sellers. If an allocaion of resources maximizes total surplus exhibits eiciency.

Related Questions

1. Consumer surplus is equal to the difference between

a. the maximum price a buyer is willing to pay and the market price.

b. the minimum price a buyer is willing to pay and the market price.

c. the maximum price a setter is willing to accept and the market price.

d. the minimum price a seller is willing to accept and the market price.

2. Consumer surplus is shown graphically as the area

a. under the demand curve and above market price.

b. above the supply curve and above the market price.

c. above the supply curve and below the market price.

d. under the demand curve and below the market price.

brownantelope470

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

10. Producer surplus is the A) difference between the maximum price consumers are willing to pay and the minimum price producers are willing to accept. B) difference between producers' revenues and opportunity costs of production. C) opportunity cost of production. D) area under the supply curve. E) total amount paid for the good.

EC120 Chapter Notes - Chapter 7: Demand Curve, Opportunity Cost, Economic Surplus

EC120 Full Course Notes

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