Ch 5

Question 1

___ is the net benefit that a consumer receives from purchasing a good or service, measured by the difference between willingness to pay and actual price.

Answer 1

Consumer surplus

Question 2

___ is the net benefit that a producer receives from the sale of a good or service, measured by the difference between willingness to sell and actual price.

Answer 2

Producer surplus

Question 3

___ is the measure of the combined benefits that everyone receives from participating in an exchange of goods or services.

Answer 3

Total Surplus

Question 4

How is total surplus calculated?

Answer 4

Total surplus = consumer surplus + producer surplus

Question 5

At what point is total surplus maximized?

Answer 5

Market equilibrium

Question 6

___ is the total surplus at market equilibrium before intervention minus the total surplus after a market intervention.

Answer 6

Deadweight loss