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

Figure 7-15 -Refer to Figure 7-15. When the price falls from P2 to P1, which of the following would not be true?

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 consumer surplus increase for those consumers who enter the market after the price floor is removed?

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm A produces a monitor that Cassie buys but David does not, then the market outcome illustrates which of the following principles? (i)Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay. (ii)Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

Figure 7-23 -Refer to Figure 7-23. At equilibrium, producer surplus is represented by the area

Table 7-12 The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality. Seller Cost Marcia $200 Jan $250 Cindy $350 Greg $400 Peter $700 Bobby $800 -Refer to Table 7-12. You wish to purchase 10 piano lessons for yourself and for your brother, so you take bids from each of the sellers. You will take lessons at the same time, so one teacher cannot provide lessons to both of you. You must pay the same price for both sets of lessons, and you will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. What bid will you accept?

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

Efficiency is attained when

Table 7-10 The following table represents the costs of five possible sellers. Seller Cost Abby $1,600 Bobby $1,300 Dianne $1,100 Evaline $900 Carlos $800 -Refer to Table 7-10. If the price is $1,000,

If the government imposes a binding price ceiling in a market, then the producer surplus in that market will increase.

Consumer surplus

Figure 7-33 -Refer to Figure 7-33. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total surplus in this market at the new equilibrium price?

Abraham drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.55 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Abraham is rational in deciding how many cans to buy. His consumer surplus is

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

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

Consumer surplus measures the benefit to buyers of participating in a market.

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.

Figure 7-18 -Refer to Figure 7-18. Suppose the willingness to pay of the marginal buyer of the 3^rd unit is $125. Then total surplus is maximized if

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

The distinction between efficiency and equality can be described as follows: