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

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1.If the market equilibrium price falls from $10 to $5,what is the change in total consumer surplus in the market?

Figure 7-32 -Refer to Figure 7-32.How much are consumer surplus,producer surplus,and total surplus at the market equilibrium price?

Figure 7-34 -Refer to Figure 7-34.Suppose there is initially a price ceiling set at $4 in this market.If the government removed the price ceiling,by how much would total producer surplus increase for those producers entering the market after the price ceiling is removed?

Figure 7-33 -Refer to Figure 7-33.How much is total surplus in this market at the equilibrium price?

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?

Figure 7-33 -Refer to Figure 7-33.How much is total producer surplus in this market at the equilibrium price?

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2.Suppose a reduction in input prices shifts the market supply curve to How much total consumer surplus goes to new consumers who enter the market after the supply curve shifts?

Figure 7-32 -Refer to Figure 7-32.At what price will total surplus be maximized in this market?

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 producer surplus change,assuming the producers with the lowest cost were the ones supplying the market when the price floor was in place?

Figure 7-34 -Refer to Figure 7-34.Suppose the government imposes a price floor at $10 per unit in this market.With the price floor,how much is total consumer surplus?

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1.If the market equilibrium price is $10,how much is total consumer surplus in this market?

Figure 7-32 -Refer to Figure 7-32.If the government imposed a price floor at $35 in this market,how much is consumer surplus?

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2.How much is total producer surplus at the equilibrium price in this market?

Figure 7-32 -Refer to Figure 7-32.If the government imposed a price ceiling at $20 in this market,how much are consumer surplus,producer surplus,and total surplus?

What do economists call the highest amount a consumer will pay to purchase a good?

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?

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 producer surplus in this market at the new equilibrium price?

Suppose John's cost for performing some carpentry work is $120.If John is paid $200 for the carpentry work,what is his producer surplus?

Figure 7-31 -Refer to Figure 7-31.If the market equilibrium price rises from $25 to $35,how much is the increase in producer surplus to the producers supplying units at the initial $25 price?

Figure 7-34 -Refer to Figure 7-34.Suppose the government imposes a price floor at $10 per unit in this market.With the price floor,how much is total producer surplus assuming those producers with the lowest cost are the ones who supply the market?