Chapter 7

Question 1

The difference between the price a consumer is willing and able to pay for an additional unit of a good and the price a consumer actually pays; for the whole market, it is the sum of all the individual consumer surpluses

Answer 1

Consumer surplus

Question 2

The difference between what a producer is paid for a good and the cost of producing that unit of the good; for the market, it is the sum of all the individual sellers’ producer surpluses – the area above the market supply curve and below the market price

Answer 2

Producer surplus

Question 3

The cost of producing one more unit of a good

Answer 3

Marginal cost

Question 4

Net loss of total surplus that results from an action that alters a market equilibrium

Answer 4

Deadweight loss

Question 5

The sum of consumer and producer surpluses

Answer 5

Total welfare gains

Question 6

The gains and losses associated with government intervention in markets

Answer 6

Welfare effects