Ch 7 Quiz – Flashcards
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Welfare economics is the study of how
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the allocation of resources affects economic well-being
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An example of normative analysis is studying
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whether equilibrium outcomes are socially desirable.
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Which of the Ten Principles of Economics does welfare economics explain more fully?
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Markets are usually a good way to organize economic activity.
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Willingness to pay
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measures the value that a buyer places on a good.
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Consumer surplus is
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the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
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In a market, the marginal buyer is the buyer
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who would be the first to leave the market if the price were any higher.
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Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?
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$8
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Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?
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For the three individuals together, consumer surplus amounts to $35
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If the cost of producing sofas decreases, then consumer surplus in the sofa market will
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increase
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A seller's opportunity cost measures the
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value of everything she must give up to produce a good.
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Producer surplus is
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the amount a seller is paid minus the cost of production
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Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software?
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$350
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Producer surplus directly measures
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the well-being of sellers.
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Economists typically measure efficiency using
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total surplus
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At the equilibrium price of a good, the good will be sold by those sellers
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whose cost is less than price
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Economists tend to see ticket scalping as
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a way of increasing the efficiency of ticket distribution.
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If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will
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increase producer surplus
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Economists say that a market where goods are not consumed by those valuing the goods most highly is
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inefficient
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Inefficiency can be caused in a market by the presence of
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all of the above are correct
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When markets fail, public policy can
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potentially remedy the problem and increase economic efficiency.
