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

Denis buys strawberries, and he would be willing to pay more than he now pays. Suppose that Denis has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Table 7-4 For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Eric, who are the only three buyers of apples. Assume that only three apples can be supplied per day. ​ ​ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Willingness to Pay}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {(Dollars)}$ First Apple Second Apple Third Apple Bob 2.00 1.50 0.75 Sasha 1.50 1.00 0.60 Eric 0.75 0.25 0.00 -Refer to Table 7-4. The market quantity of apples demanded per day is exactly seven if the price of an orange, P, satisfies

Figure 7-9 -Refer to Figure 7-9. At equilibrium, consumer surplus is represented by the area

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then

Figure 7-5 -Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus to existing producers?

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market.

Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay for it.

Scenario 7-1 Suppose market demand is given by the equation $Q ^ { D } = 40 - 2 P$ -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.

An increase in price increases consumer surplus.

Table 7-7 ​ ​ Seller Cost (Dollars) Mike 1,600 Laura 1,300 Alex 1,200 David 900 Codi 700 ​ -Refer to Table 7-7. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is

Table 7-11 ​ ​ Price (Dollars per unit) Quantity Demanded (Units) Quantity Supplied (Units) 12.00 0 36 10.00 3 30 8.00 6 24 6.00 9 18 4.00 12 12 2.00 15 6 0.00 18 0 ​ -Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, consumer surplus will be

Table 7-13 The following table shows the cost of producing a good for the only four producers in a market. Producer Cost W \ 40 X \ 30 Y \ 20 Z \ 10 -Refer to Table 7-13. If the market price is $28, which producers will supply units in the market?

On a graph, the area below a demand curve and above the price measures

Table 7-14 $\begin{array}{l}\begin{array} { | l | l | } \hline \text { Buyer } & \begin{array} { l } \text { Willingness to } \\\text { Pay } ( \$ )\end{array} \\\hline \text { A } & 15 \\\hline B & 30 \\\hline \text { C } & 45 \\\hline \text { D } & 60 \\\hline\end{array}\\\\\begin{array} { | l | l | } \hline \text { Seller } & \text { Cost (\$) } \\\hline W & 10 \\\hline \mathrm { X } & 20 \\\hline \mathrm { Y } & 30 \\\hline \mathrm { Z } & 40 \\\hline\end{array}\end{array}$ -Refer to Table 7-14. How much is total surplus at the equilibrium price in this market?

Figure 7-14 ​ -Refer to Figure 7-14. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total consumer surplus?

Cost is a measure of the

Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market