Exam 7: Consumers, Producers, and the Efficiency of Markets

Efficiency refers to whether a market outcome is fair, while equality refers to whether the maximum amount of output was produced from a given number of inputs.

Market power and externalities are examples of market failures.

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6,

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3. If the price is $20, then consumer surplus in the market is

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3. Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22?

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

An increase in price increases consumer surplus.

Producer surplus equals

Inefficiency exists in an economy when a good is

Economists typically measure efficiency using

Suppose John's cost for performing some carpentry work is $120. If John is paid $200 for the carpentry work, what is his producer surplus?

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to By how much does total producer surplus increase as a result of this supply shift?

Figure 7-12 -Refer to Figure 7-12. If the equilibrium price is $200, what is the producer surplus?

Producer surplus is the cost of production minus the amount a seller is paid.

Figure 7-1 -Refer to Figure 7-1. The value of the good to consumers minus the cost of the good to consumers amounts to $325 if the price of the good is

Which of the following will cause an increase in producer surplus?

A seller is willing to sell a product only if the seller receives a price that is at least as great as the

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software?

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total producer surplus change, assuming the producers with the lowest cost were the ones supplying the market when the price floor was in place?