Chapter 7: Consumers, Producers, and the Efficiency of Markets

Question 1

Individual Consumer Surplus is

Answer 1

the amount one is willing to pay-the price

Question 2

the willingness to pay measures

Answer 2

how much the buyer values the good and how much someone is willing to pay for a good

Question 3

the more your willingness to pay the _____ the consumer surplus (benefit)

Answer 3

more

Question 4

the “quantity bought and demanded” represents

Answer 4

the number of people who benefit and are willing to pay for a good

Question 5

a marginal buyer is the buyer who

Answer 5

would leave the market if the price was any higher (the demand curve shows the willingness to pay of the marginal buyer at each quantity)

Question 6

Consumer Surplus is the

Answer 6

sum of individual CS and the economic benefits obtained by the consumers

Question 7

Total CS is

Answer 7

everyone’s consumer surplus combined

Question 8

competitive markets ____________ CS

Answer 8

maximize

Question 9

a price decrease __________ CS

Answer 9

increases

Question 10

a price increase _________ CS

Answer 10

decreases

Question 11

the value of everything a seller must give up to produce a good

Answer 11

Cost

Question 12

Individual Producer Surplus is the

Answer 12

amount a seller is paid minus the production cost

Question 13

the higher the price the __________the PS

Answer 13

larger

Question 14

the higher production cost the ____________the PS

Answer 14

lower

Question 15

less productive workers=

Answer 15

higher labor cost

Question 16

more productive workers=

Answer 16

lower labor cost

Question 17

producer surplus is the

Answer 17

sum of individual PS in market

Question 18

if price decreases, PS

Answer 18

decreases

Question 19

competitive markets ______________ PS

Answer 19

maximize

Question 20

Total PS is

Answer 20

everyone’s PS combines

Question 21

the “quantity supplied”

Answer 21

is the number of people who would do their service for a certain price

Question 22

the market supply curve represents

Answer 22

the quantity supplied at different prices

Question 23

when price increases, PS ______________

Answer 23

increases

Question 24

one who measures TS, CS and PS and wants to maximize the economic well being of everyone in society is called a

Answer 24

Benevolent Social Planner

Question 25

Consumer Surplus Calculation:

Answer 25

value to buyers - amount paid by sellers

Question 26

Producer Surplus Calculation:

Answer 26

amount received by sellers - cost to sellers

Question 27

Total Surplus Calculation:

Answer 27

CS+PS

Question 28

moving consumption of a low value buyer to a high value buyer or moving productions from a high cost producer to a low cost producer are things that raise

Answer 28

total surplus and economic efficiency

Question 29

competitive markets are

Answer 29

economically efficient

Question 30

economic efficiency is something that

Answer 30

maximizes economic benefits

Question 31

decreasing quantity _____________ total surplus

Answer 31

raises

Question 32

when the quantity demanded and the quantity supplied are the same

Answer 32

competitive equilibrium

Question 33

after competitive equilibrium is achieved

Answer 33

no more gains from trade are possible

Question 34

competitive markets have

Answer 34

-maximized PS and CS -allocates the goods to consumers whose willingness to pay are the highest (cs maximized) -allocates the production of the goods to the least cost producers (ps maximized)

Question 35

govt policies ________ TS

Answer 35

decrease (cause economic inefficiency)

Question 36

environmental policies _________ TS

Answer 36

increase (improve market)

Question 37

an inability of unregulated markets to allocate resources efficiently is a

Answer 37

market failure

Question 38

fairness of the distribution of well-being among members of society is

Answer 38

equity