Economic Efficiency and Government Price Setting Flashcards
Total producer surplus is equal to the area
above the supply curve and below the market price of $2.00.
If the market ends up producing Q1 at a price of P1:
What is the Consumer Surplus?
A
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?
Producers lose C + F and it is deffinetly smaller.
Economic efficiency:
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.
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?
Consumers lose B+E , it is definetly smaller.
If the market ends up producing Q1 at a price of P3:
What is the Consumer Surplus?
A+B+C
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:
Consumer surplus
What is the consumer surplus if the price is P1 and the Quantity is Q1.
A
If the market is at the competitive equilibrium:
What is the Consumer Surplus?
A+B+E
Marginal cost:
the additional cost to a firm of producing one more unit of a good or service.
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?
Producers gain B but lose F , we dont know if its bigger without data points.
deadweight loss:
The reduction in economic surplus resulting from a market not being in competitive equilibrium
A market is efficient if it maximizes the sum of consumer and producer surplus. This is known as:
economic surplus
Producer surplus
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.
Price floor:
A legally determined minimum price that sellers may receive.
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?
Consumers get C but don’t get E . We dont’ know is consumers are better off without E.
What is the producer surplus if the price is P2 and produers can sell as much as they wish at that price?
K+O+L
If the market ends up producing Q1 at a price of P3:
What is the Producer Surplus?
D
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
Net Benefit.
If the market is at the competitive equilibrium:
What is the price and quantity?
P2 and Q2
Consumer surplus-
the net benefit to consumers is equal to:
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.
marginal benefit
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.
What is the consumer surplus if the price is P2 and the consumers can purchase as much as they could ever want.
A+B+E
If the market is at the competitive equilibrium:
What is the Producer Surplus?
C+D+F
Price ceiling:
A legally determined maximum price that sellers can charge.
Economic surplus equals
the sum of consumer surplus and producer surplus
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.
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:
Producer surplus
Deadweight loss can be thought of as the amount of __________________ in a market. In competitive equilibrium, deadweight loss is zero.
inefficiency
What is the consumer surplus if the price is P3 and the Quantity is Q2.
A+B+C+E+F
When a market is not in equilibrium, there is a
deadweight loss
What is the producer surplus if the price is P1 and Quantity is Q1.
L+K+J
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.
Consumer surplus measures
the net benefit to consumers from participating in a market rather than the total benefit.
Producer surplus-
the net benefit to Produces is equal to:
the net benefit to Produces is equal to the total amount firms receive from consumers minus the cost of producing the good or service.
If the market ends up producing Q1 at a price of P1:
What is the Producer Surplus?
B+C+D
Marginal benefit equals marginal cost only at the
competitive equilibrium
What is the producer surplus if the price is P1 and Quantity is Q2.
J+N+K+O+L
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
Net Benefit
What is the lowest price a firm would accept for a good or service?
The marginal cost of producing that good or service.
C+E represents a____________
Deadweight loss
Consumer Surplus
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.
We can think about efficiency in a market in two ways:
- A market is efficient if all trades take place where the marginal benefit exceeds the marginal cost, and no other trades take place
- 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.
What is the consumer surplus if the price is P3 and the Quantity is Q1.
A+B+C
Consumer surplusis the area
below the demand curve, above price.
What is the producer surplus if the price is P3 and Quantity is Q1.
L
