ECON 103 Chapter Notes - Chapter 7: Economic Surplus, Demand Curve, Opportunity Cost

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goldshark321

20 Jan 2017

School

University of Illinois

Department

Economics

Course

ECON 103

Professor

Mc Dermott Eric

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Document Summary

Econ 103 :sections 7-1, 7-2, 7-3 : consumers, producers and the efficiency of. Welfare economics: the study of how the allocations of resources affects economic well being. In any market, the equilibrium of supply and demand maximizes the total benefits received by all buyers and sellers combined: equilibrium price maximized total welfare (surplus) Willingness to pay = maximum amount that the buyer will pay for a good. Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. 7-1b using the demand curve to measure consumer surplus. Marginal buyer: the buyer who would leave the market first if the price were any higher. The area below the demand curve and above the price measures the consumer surplus in a market. Consumer surplus measures the benefit that buyers receive from a good as the buyers themselves perceive it.

Related Questions

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

7) Indicate whether each of the following statements is true or false, and explain why.

A. Producer surplus tends to fall as the supply curve becomes more elastic.

B. Consumer surplus tends to rise as demand becomes more elastic.

C. The market demand curve indicates the minimum price buyers are willing to pay at each level of production.

D. The market supply curve indicates the minimum price required by sellers as a group to bring forth production.

E. Consumer surplus is the amount that consumers are willing to pay for a given good or service above and beyond the amount actually paid.

bronzeoyster264

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

ECON 103 Chapter Notes - Chapter 7: Economic Surplus, Demand Curve, Opportunity Cost

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