Lecture 8 Flashcards

1
Q

scare resources might be allocated by:

A

-Market price
-command
-majority rule
-first come, first serve
-lottery

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2
Q

Value is…
Price is…

A

Value is what we get, price is what we pay

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3
Q

describe value

A

The value for one more unit of a good or service is its marginal benefit.

value is measured as the MAX price that a person is willing to pay.

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4
Q

what does willingness to pay determine

A

Determines demand, a demand curve is a marginal benefit curve

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5
Q

What is consumer surplus

A

-excess benefit received from a good over the amount paid for it.

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6
Q

how to calculate consumer surplus

A

-the area below the demand curve, above market price @ level of output (Q)

1/2BH

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7
Q

Supply and Marginal cost

A

-firm’s goal is to make a profit
-firms must sell their output for a price that exceeds the cost of production.

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8
Q

Cost is…
Price is…

A

Cost is what the producer gives up; price is what the producer receives.

-marginal cost is the minimum a firm is willing to accept

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9
Q

What is a producer surplus?

A

The excess amount received from the sale of a good over the cost of producing it.

Price received for good - minimum-supply price (marginal cost), summed over quantity sold

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10
Q

How to calculate producer surplus

A

area above the supply curve, below market price @ level of production (Q)

1/2BH

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