Exam 7: Consumers, Producers and the Efficiency of Markets

Suppose a market clears and this generates an equilibrium price and quantity. An important outcome of this equilibrium is that it maximises the total benefits to both buyers and sellers.

Producer surplus is the area:

The highest price a buyer is prepared to spend on a good, is that buyer's willingness to pay.

What was the 'invisible hand' doctrine that Adam Smith discussed in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations?

If the cost of producing automobiles increases, consumer surplus will:

A seller would be willing to sell a product ONLY if the price received is:

Consumer surplus is the:

The area below a demand curve and above the price measures:

Graph 7-2 -According to Graph 7-2, area C represents:

Graph 7-3 -According to Graph 7-3, area B represents:

Graph 7-2 -Refer to Graph 7-2. When the price is P₁, consumer surplus is:

Jean wants to sell her camera. Greg offers her $250. Lee offers her $300. Jean decides to sell the camera to Greg because he made the first offer. This is an example of an efficient market transaction.

A consumer's willingness to pay measures:

At all quantity levels the price given by the supply curve shows the cost of the lowest cost seller.

Willingness to pay measures the:

Table 7-2 The costs of five possible sellers -Refer to Table 7-2. If the price is $1000, Landon's producer surplus will be:

Many economists believe that a market in human organs would lead to both an efficient allocation and fair distribution of organs.

In order for market outcomes to maximise the total benefits to buyers and sellers, the markets must be perfectly competitive.

Many countries allow people to visit national parks, lakes or rivers for free. If a good is free in the sense of having zero market price, does this mean that the consumer surplus is also zero?

Nick's willingness to sell his homemade chocolate chip biscuits is $4 per dozen. He sells them and realises a producer surplus of $4 per dozen. Nick sells his biscuits for: