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ECON 1000 Chapter Notes - Chapter 5.2-3: Economic Surplus, Demand Curve, Marginal Utility

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York University
Department
Economics
Course
ECON 1000
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All

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ECON 1000 Full Course Notes
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Document Summary

Value of one more unit of a good/service is its marginal benefit. Measure marginal benefit by maximum price that is willingly paid for another unit of good: but willingness to pay determines demand, demand curve is marginal benefit curve. Figure 5. 1 (a) (b: individual demand and market demand. Individual demand = relationship between price and quantity demanded by one person. Market demand = relationship between price and quantity demanded by all buyers. Horizontal sum of the individual demand curve. Figure 5. 1 (c : consumer surplus. Consumer surplus = excess of benefit received from a good over the amount paid for it. Area of the triangle is her consumer surplus. The rectangle under the triangle shows how much she actually pays: supply and marginal cost. Markets must sell their outputs for a price that exceeds their production cost: supply, cost, and minimum supply-price. Cost = what firms give up to produce g/s. Price = firm receives when it sells g/s cost.

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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.

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).

B) difference between the market price and the maximum amount each individual is willing to pay for a good. C) sum of the prices that each individual is willing to pay for each quantity demanded. D) difference between the maximum amount each individual is willing to pay for a good and the market price. E) sum of the quantity demanded by each individual at each price. 1............... . 5) Market demand is the A) sum of the consumer surplus of each individual.