Microeconomics: Market Efficiency and Surplus Review

These flashcards cover key concepts from the lecture on market efficiency, price floors, consumer surplus, and deadweight loss.

What is the intention of a price floor?

To help producers by setting a higher than equilibrium price.

What is one unintended consequence of a price floor policy?

A) Economic surplus decreases.

At the equilibrium point in the market, what do the S and D curves do?

They intersect.

What does consumer surplus represent in terms of areas under the demand curve?

The area below the demand curve above the market price.

What is the value of consumer surplus based on the provided table?

D) $6.

What occurs when the marginal benefit of an output exceeds the marginal cost?

A) Production of that output should be increased, in order to maximize economic surplus.

What does deadweight loss indicate if the output level is Q1?

The area representing economic surplus that is lost or unachieved.

What condition is NOT needed for a market to achieve allocative efficiency?

C) The total revenue received by producers equals total cost of production.

What happens to consumer surplus when a price ceiling is set at P1?

A) Consumer surplus equals area a + b.

What does deadweight loss equal if a price ceiling is set at P1 in the given figure?

B) Area d.