Economic Efficiency and Government Price Setting

Question 1

Total producer surplus is equal to the area

Answer 1

above the supply curve and below the market price of $2.00.

Question 2

If the market ends up producing Q¹ at a price of P¹:

What is the Consumer Surplus?

Answer 2

A

Question 3

If the market ends up producing Q1 at a price of P3:

How is the Producer Surplus now different than in the Competitive Equilibrium case, and do we know if it’s bigger or smaller?

Answer 3

Producers lose C + F and it is deffinetly smaller.

Question 4

Economic efficiency:

Answer 4

A market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Question 5

If the market ends up producing Q¹ at a price of P¹:

How is the Consumer Surplus now different than in the Competitive Equilibrium case, and do we know if it’s bigger or smaller?

Answer 5

Consumers lose B+E , it is definetly smaller.

Question 6

If the market ends up producing Q¹ at a price of P³:

What is the Consumer Surplus?

Answer 6

A+B+C

Question 7

the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays is known as:

Answer 7

Consumer surplus

Question 8

What is the consumer surplus if the price is P1 and the Quantity is Q1.

Answer 8

A

Question 9

If the market is at the competitive equilibrium:

What is the Consumer Surplus?

Answer 9

A+B+E

Question 10

Marginal cost:

Answer 10

the additional cost to a firm of producing one more unit of a good or service.

Question 11

If the market ends up producing Q¹ at a price of P¹:

How is the Producer Surplus now different than in the Competitive Equilibrium case, and do we know if it’s bigger or smaller?

Answer 11

Producers gain B but lose F , we dont know if its bigger without data points.

Question 12

deadweight loss:

Answer 12

The reduction in economic surplus resulting from a market not being in competitive equilibrium

Question 13

A market is efficient if it maximizes the sum of consumer and producer surplus. This is known as:

Answer 13

economic surplus

Question 14

Producer surplus

Answer 14

Producer surplus is the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives.

Question 15

Price floor:

Answer 15

A legally determined minimum price that sellers may receive.

Question 16

If the market ends up producing Q¹ at a price of P³:

How is the Consumer Surplus now different than in the Competitive Equilibrium case, and do we know if it’s bigger or smaller?

Answer 16

Consumers get C but don’t get E . We dont’ know is consumers are better off without E.

Question 17

What is the producer surplus if the price is P² and produers can sell as much as they wish at that price?

Answer 17

K+O+L

Question 18

If the market ends up producing Q1 at a price of P3:

What is the Producer Surplus?

Answer 18

D

Question 19

Producer surplus in a market is equal to the total amount firms receive from consumers minus the cost of producing the good or service. This is the _______ Benefit

Answer 19

Net Benefit.

Question 20

If the market is at the competitive equilibrium:

What is the price and quantity?

Answer 20

P² and Q²

Question 21

Consumer surplus-

the net benefit to consumers is equal to:

Answer 21

the net benefit to consumers is equal to the total benefit received by consumers (measured in dollars) minus the total amount they must pay to buy the good or service.

Question 22

marginal benefit

Answer 22

the additional benefit to a consumer from consuming one more unit of a good or service.

If the price is low, many of the consumers benefit.

If the price is high, few (if any) of the consumers benefit.

Question 23

What is the consumer surplus if the price is P2 and the consumers can purchase as much as they could ever want.

Answer 23

A+B+E

Question 24

If the market is at the competitive equilibrium:

What is the Producer Surplus?

Answer 24

C+D+F

Question 25

Price ceiling:

Answer 25

A legally determined maximum price that sellers can charge.

Question 26

Economic surplus equals

Answer 26

the sum of consumer surplus and producer surplus

Question 27

Answer 27

This law helps some consumers , as they will be able to purchase flour at a lower price and have more purchasing power

The law harms all producers, and some consumers who will not have access to the four as there is a shortage.

Efficiency is ultimetly reduced.

Question 28

The difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives is know as:

Answer 28

Producer surplus

Question 29

Deadweight loss can be thought of as the amount of __________________ in a market. In competitive equilibrium, deadweight loss is zero.

Answer 29

inefficiency

Question 30

What is the consumer surplus if the price is P³ and the Quantity is Q².

Answer 30

A+B+C+E+F

Question 31

When a market is not in equilibrium, there is a

Answer 31

deadweight loss

Question 32

What is the producer surplus if the price is P¹ and Quantity is Q¹.

Answer 32

L+K+J

Question 33

Answer 33

This law helps some farmers, who will be able to sell their wheat for a higher price.

This law harms all consumers, and some farmers who will not be able to sell their wheat at any price.

This law ultimetly reduces effiiciency.

Question 34

Consumer surplus measures

Answer 34

the net benefit to consumers from participating in a market rather than the total benefit.

Question 35

Producer surplus-

the net benefit to Produces is equal to:

Answer 35

the net benefit to Produces is equal to the total amount firms receive from consumers minus the cost of producing the good or service.

Question 36

If the market ends up producing Q1 at a price of P1:

What is the Producer Surplus?

Answer 36

B+C+D

Question 37

Marginal benefit equals marginal cost only at the

Answer 37

competitive equilibrium

Question 38

What is the producer surplus if the price is P1 and Quantity is Q2.

Answer 38

J+N+K+O+L

Question 39

Consumer surplus in a market is equal to the total benefit received by consumers (measured in dollars) minus the total amount they must pay to buy the good or service. This is known as the ______ Benefit

Answer 39

Net Benefit

Question 40

What is the lowest price a firm would accept for a good or service?

Answer 40

The marginal cost of producing that good or service.

Question 41

C+E represents a____________

Answer 41

Deadweight loss

Question 42

Consumer Surplus

Answer 42

Consumer surplus is the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays.

Question 43

We can think about efficiency in a market in two ways:

Answer 43

1. A market is efficient if all trades take place where the marginal benefit exceeds the marginal cost, and no other trades take place
2. A market is efficient if it maximizes the sum of consumer and producer surplus (i.e. the total net benefit to consumers and firms), known as the economic surplus.

Question 44

What is the consumer surplus if the price is P³ and the Quantity is Q¹.

Answer 44

A+B+C

Question 45

Consumer surplusis the area

Answer 45

below the demand curve, above price.

Question 46

What is the producer surplus if the price is P³ and Quantity is Q¹.

Answer 46

L