Exam 7: Consumers Producers and the Efficiency of Markets: Part B

All else equal,an increase in demand will cause an increase in producer surplus.

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

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

Joel has a 1966 Mustang,which he sells to Susie,an avid car collector.Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car.Susie's consumer surplus is $2,000.

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.

The current policy on kidney donation effectively sets a price ceiling of zero.

The cost of production plus producer surplus is the price a seller is paid.

Total surplus in a market is consumer surplus minus producer surplus.

If the government imposes a binding price floor in a market,then the consumer surplus in that market will decrease.

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.

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.

If a market is in equilibrium,then it is impossible for a social planner to raise economic welfare by increasing or decreasing the quantity of the good.

If producing a soccer ball costs Jake $5,and he sells it for $40,his producer surplus is $35.

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

For any given quantity,the price on a demand curve represents the marginal buyer's willingness to pay.

Connie can clean windows in large office buildings at a cost of $1 per window.The market price for window-cleaning services is $3 per window.If Connie cleans 100 windows,her producer surplus is $200.

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.

If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175,the price of the tickets is $625.

The lower the price,the lower the producer surplus,all else equal.

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