Economics: Consumer and Producer Surplus

These flashcards cover key concepts of consumer and producer surplus, market efficiency, and externalities based on the quiz questions from the lecture notes.

What is the consumer surplus if the price is $100 according to the quiz question QN=201?

$2,500

Inefficiency in a market can be caused by which of the following?

All of (i) market power, (ii) externalities, and (iii) imperfectly competitive markets.

If the price is $8 but only 4 units are bought and sold, what will the producer surplus be according to QN=203?

$24

What is Donald's producer surplus per ton if he produces nails at a cost of $200 per ton and sells them for $350 per ton?

$150

What will cause a decrease in consumer surplus according to QN=205?

The imposition of a binding price floor in the market.

Total surplus is equal to what?

Producer surplus plus consumer surplus.

At the equilibrium price in QN=207, what is the consumer surplus?

$480.

Which principle of economics does welfare economics explain more fully according to QN=208?

Markets are usually a good way to organize economic activity.

What are externalities?

Side effects passed on to a party other than the buyers and sellers in the market.

Which statement about efficiency and equality is correct?

Efficiency deals with the size of the economic pie, and equality deals with how fairly the pie is sliced.

Who would be willing to purchase the product if the price is $15 according to QN=211?

Mike, Sandy, and Jonathan.

Producer surplus measures what?

Benefits to sellers of participating in a market.

Consumer surplus is equal to what according to QN=213?

Value to buyers minus amount paid by buyers.

Raisins and milk are complementary goods. If supply of raisins increases, what happens to consumer surplus and producer surplus in the market for milk according to QN=214?

Consumer surplus in the market for raisins increases and producer surplus in the market for milk also increases.

What event would increase producer surplus according to QN=215?

Sellers' costs stay the same and the price of the good increases.

What is the producer surplus if the supply curve is S, the demand curve is D, and the equilibrium price is $100 according to QN=216?

$1,250.

What happens to consumer surplus in the market for lemons if there is an early freeze that ruins the lemon crop?

It decreases.

Consumer surplus equals what according to QN=218?

Value to buyers minus the amount paid by buyers.

If the price decreases from $22 to $16, by how much does consumer surplus increase according to QN=219?

$480.

When the price rises from P1 to P2, how does consumer surplus change according to QN=220?

It decreases by an amount equal to B+C.

In an auction, what is the maximum amount that each bidder is willing to pay called?

Willingness to pay.

Market efficiency occurs when what condition is met according to QN=222?

Total surplus is maximized.