Chapter 4 Consumer and Producer Surplus

Question 1

individual consumer surplus

Answer 1

net gain to an individual buyer from the purchase of a good

WTP-price paid

Question 2

individual producer surplus

Answer 2

net gain to a seller from selling a good
price received(not same as price paid) - marginal cost

Question 3

when does market fail?

Answer 3

1. externalities (3rd party is benefit or hurt)
2. market power (firm sets price higher than equilibrium price)
3. non-private goods