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

Answer each of the following questions about demand and consumer surplus. a. What is consumer surplus,and how is it measured? b. What is the relationship between the demand curve and the willingness to pay? c. Other things equal,what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve. d. In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve,what else must be considered to determine consumer surplus?

Consumer surplus in a market can be represented by the

Efficiency is attained when

When the demand for a good increases and the supply of the good remains unchanged,consumer surplus

Table 7-5 For each of three potential buyers of oranges,the table displays the willingness to pay for the first three oranges of the day.Assume Alex,Barb,and Carlos are the only three buyers of oranges,and only three oranges can be supplied per day. -Refer to Table 7-5.Who experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75?

Figure 7-10 -Refer to Figure 7-10.At the equilibrium price,producer surplus is

Figure 7-12 -Refer to Figure 7-12.If the government imposes a price floor of $120 in this market,then total surplus will decrease by

Figure 7-14 -Refer to Figure 7-14.When the price is P1,area C represents

Table 7-6 The following table represents the costs of five possible sellers. -Refer to Table 7-6.If the price is $1,000,

In order to conclude that markets are efficient,we assume that they are perfectly competitive.

The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.

Figure 7-10 -Refer to Figure 7-10.If the government imposes a price ceiling of $70 in this market,then producer surplus will decrease by

If Roberta sells a shirt for $30,and her producer surplus from the sale is $23,her cost must have been

Table 7-6 The following table represents the costs of five possible sellers. -Refer to Table 7-6.Suppose each of the five sellers can supply at most one unit of the good.The market quantity supplied is exactly 3 if the price is

Figure 7-2 -Refer to Figure 7-2.When the price falls from P1 to P2,which area represents the increase in consumer surplus to existing buyers?

Table 7-4 The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs.St.Louis Cardinal's baseball game at Wrigley Field. -Refer to Table 7-4.If tickets sell for $25 each,then what is the total consumer surplus in the market?

Figure 7-18 -Refer to Figure 7-18.Sellers whose costs are greater than the equilibrium price are represented by segment

Figure 7-8 -Refer to Figure 7-8.If the demand curve is D and the supply curve shifts from S' to S,what is the change in producer surplus?

Total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve,up to the point of equilibrium.

If a market is allowed to adjust freely to its equilibrium price and quantity,then an increase in demand will