Revisiting the Market Equilibrium. Consumers, Producers, and the Efficiency of Markets. Consumer Surplus. Welfare Economics
|
|
- Patricia Randall
- 5 years ago
- Views:
Transcription
1 Consumers, Producers, and the Efficiency of Markets Chapter 7 Copyright 21 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida Revisiting the Market Equilibrium Do the equilibrium price and quantity maximize the total welfare of buyers and sellers? Market equilibrium reflects the way markets allocate scarce resources. Interesting question: is this equilibrium allocation desirable? Welfare Economics Consumer Consumer surplus measures economic welfare from the buyer s side. Producer surplus measures economic welfare from the seller s side. Willingness to pay is the maximum price that a buyer is willing and able to pay for a given amount of a good, when the alternatives are all or nothing. It measures how much the buyer values the good or service. 1
2 Consumer Consumer surplus is the amount a buyer is willing to pay for a given amount of a good minus the amount the buyer actually pays for it. Four Possible Buyers Willingness to Pay... Buyer Willingness to Pay John $1 Paul 8 George 7 Ringo 5 Consumer The market demand curve depicts the various quantities that buyers would be willing and able to purchase at different prices. Four Possible Buyers Willingness to Pay... Buyer ed More than $1 None $8 to $1 John 1 $7 to $8 John, Paul 2 $5 to $7 John, Paul, George 3 $5 or less Ringo 4 2
3 Measuring Consumer with the Curve... Measuring Consumer with the Curve... = $8 $1 8 7 John s willingness to pay Paul s willingness to pay George s willingness to pay $1 8 7 John s consumer surplus ($2) 5 Ringo s willingness to pay 5 Measuring Consumer with the Curve... There are 2 available. Who should get them? $1 8 7 = $7 John s consumer surplus ($3) Paul s consumer surplus ($1) $ Total consumer surplus ($4) 5 3
4 Competitive equilibrium: price will be between 7 and 8 ISU method: price = 5 and lottery $1 John s consumer surplus ($3) $ Paul s consumer surplus ($1) p=7 ISU s surplus ($14) Paul s consumer surplus ($3) George s consumer surplus ($2) P=5 ISU s surplus ($1) Measuring Consumer with the Curve How the Affects Consumer... A Copyright 21 by Harcourt, Inc. All rights reserved The area below the demand curve and above the price measures the consumer surplus in the market. Initial consumer surplus P 1 B C Consumer surplus to new consumers P 2 D Additional consumer surplus to initial consumers E Q 1 Q 2 F 4
5 Consumer and Economic Well-Being Consumer surplus, the amount that buyers are willing to pay for a good minus the amount they actually pay for it, measures the benefit that buyers receive from a good as the buyers themselves perceive it. Producer Producer surplus is the amount a seller is paid minus the cost of production. It measures the benefit to sellers participating in a market. The Costs of Four Possible Sellers... Seller Cost Mary $9 Frida 8 Georgia 6 Grandma 5 Producer and the Curve Just as consumer surplus is related to the demand curve, producer surplus is closely related to the supply curve. At any quantity, the price given by the supply curve shows the cost of the marginal seller, the seller who would leave the market first if the price were any lower. 5
6 Schedule for the Four Possible Sellers... Producer and the Curve... Sellers $9 or more Mary, Frida, Georgia, Grandma Supplied $8 to $9 Frida, Georgia, Grandma 3 $6 to $8 Georgia, Grandma 2 $5 to $6 Grandma 1 Less than $5 None 4 House Painting $ Grandma s cost Frida s cost Georgia s cost Mary s cost of Houses Painted Producer and the Curve The area below the price and above the supply curve measures the producer surplus in a market. Measuring Producer with the Curve... House Painting $ = $6 Grandma s producer surplus ($1) of Houses Painted 6
7 Measuring Producer with the Curve... How Affects Producer... House Painting $9 8 = $8 Total producer surplus ($5) P 2 D Additional producer surplus to initial producers E F 6 5 Grandma s producer surplus ($3) Georgia s producer surplus ($2) of Houses Painted P 1 B Initial Producer surplus A C Q 1 Q 2 Producer surplus to new producers Market Efficiency Economic Well-Being and Total Consumer surplus and producer surplus may be used to address the following question: Consumer = Value to buyers _ Amount paid by buyers Is the allocation of resources determined by free markets in any way desirable? Producer = and Amount received by sellers _ Cost to sellers 7
8 Economic Well-Being and Total Market Efficiency Total Total = Consumer = or Value to buyers Producer + _ Cost to sellers Market efficiency is achieved when the allocation of resources maximizes total surplus. Evaluating the Market Equilibrium... A D Consumer and Producer in the Market Equilibrium... A D Equilibrium price E Equilibrium price Consumer surplus Producer surplus E B B Equilibrium quantity C Equilibrium quantity C 8
9 Three Insights Concerning Market Outcomes Free markets allocate the supply of goods to the buyers who value them most highly. Free markets allocate the demand for goods to the sellers who can produce them at least cost. Free markets produce the quantity of goods that maximizes the sum of consumer and producer surplus. The Efficiency of the Equilibrium Value to buyers Cost to sellers Equilibrium quantity Value to buyers is greater than cost to sellers. Cost to sellers Value to buyers Value to buyers is less than cost to sellers. Measuring Consumer with the Curve... Measuring Consumer with the Curve... $ price p s $1 p d Tax revenue Deadweight loss 3 3 9
Lecture 7. Consumers, producers, and the efficiency of markets
Lecture 7 Consumers, producers, and the efficiency of markets Revisiting the Market Equilibrium Do the equilibrium price and quantity maximize the total welfare of buyers and sellers? Market equilibrium
More informationWTP. EFFICIENCY: Demand Supply and SURPLUS
EFFICIENCY: Demand Supply and SURPLUS WTP Willingness to pay is the maximum amount that a buyer will pay for a good. It measures how much the buyer values the good or service. 1 CONSUMER SURPLUS Consumer
More informationSurplus and Welfare: Example 1. The efficiency of competitive markets. Surplus and Welfare: Example 1. Surplus and Welfare: Example
14.3.212 Surplus and Welfare: xample 1 The efficiency of competitive markets onsumer Willingness Firm ost pay X TL 1 Firm TL 2 Y TL 8 Firm TL 4 Z TL 7 Firm TL 6 T TL 5 Firm TL 9 ach consumer will consume
More informationEcon 200 Fall Opportunity Cost and the Gains from Trade Supply and Demand Firms and Industries
Econ 200 Fall 2012 Microeconomics Opportunity Cost and the Gains from Trade Supply and Demand Firms and Industries Macroeconomics The Data of Macroeconomics Growth Saving and Investment Money and Exchange
More informationConsumers, Producers, and the Efficiency of Markets
Consumers, Producers, and the Efficiency of Markets PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 Welfare economics Consumer Surplus How the allocation of resources affects
More informationWelfare economics part 2 (producer surplus) Application of welfare economics: The Costs of Taxation & International Trade
Welfare economics part 2 (producer surplus) Application of welfare economics: The Costs of Taxation & International Trade Dr. Anna Kowalska-Pyzalska Department of Operations Research Presentation is based
More informationIntroduction to Economic Institutions
Introduction to Economic Institutions ECON 1500 Week 3 Lecture 2 13 September 1 / 35 Recap 2 / 35 LAW OF SUPPLY AND DEMAND the price of any good adjusts to bring the quantity supplied and quantity demanded
More informationEfficiency and Equity
Chapter 5: Efficiency and Equity Objectives After studying this chapter, you will be able to: Describe the alternative methods of allocating scarce resources Explain the connection between demand and marginal
More informationMonopoly. While a competitive firm is a price taker, a monopoly firm is a price maker.
Monopoly Monopoly While a competitive firm is a price taker, a monopoly firm is a price maker. Monopoly A firm is considered a monopoly if... it is the sole seller of its product. its product does not
More informationBasic Economics Chapter 7
1 Basic Economics Chapter 7 Consumers, Producers, Efficiency of Markets Welfare economics = how the allocation of resources affects economic well-being Willingness to pay = maximum amount that a buyer
More informationMonopoly. Cost. Average total cost. Quantity of Output
While a competitive firm is a price taker, a monopoly firm is a price maker. A firm is considered a monopoly if... it is the sole seller of its product. its product does not have close substitutes. The
More informationLecture 12. Monopoly
Lecture 12 Monopoly By the end of this lecture, you should understand: why some markets have only one seller how a monopoly determines the quantity to produce and the price to charge how the monopoly s
More informationMarkets. Markets. The Market Forces of Supply and Demand. The Market Forces of Supply and Demand. Competition: Perfect and Otherwise
The Market Forces of and Demand Chapter 4 All rights reserved. Copyright 21 by Harcourt, Inc. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department,
More informationIB Economics Competitive Markets: Demand and Supply 1.4: Price Signals and Market Efficiency
IB Economics: www.ibdeconomics.com 1.4 PRICE SIGNALS AND MARKET EFFICIENCY: STUDENT LEARNING ACTIVITY Answer the questions that follow. 1. DEFINITIONS Define the following terms: [10 marks] Allocative
More informationMonopoly. Chapter 15
Monopoly Chapter 15 Monopoly While a competitive firm is a price taker, a monopoly firm is a price maker. Monopoly u A firm is considered a monopoly if... it is the sole seller of its product. its product
More informationThe Firm s Objective. A Firm s Total Revenue and Total Cost. The economic goal of the firm is to maximize profits. A Firm s Profit
The s of Production Chapter 13 Copyright 2001 by Harcourt, Inc. The s of Production The Law of Supply: Firms are willing to produce and sell a greater quantity of a good when the price of the good is high.
More informationClass Agenda. Note: As you hand-in your quiz, pick-up graded HWK #1 and HWK #2 (due next Tuesday).
Class 7 Class Agenda 1. Finish discussion on consumer and producer surplus (welfare theory). 2. Elasticity problems (individual/group work to prep for quiz). 3. Quiz #1. Note: As you hand-in your quiz,
More information1. Welfare economics is the study of a. the well-being of less fortunate people. b. welfare programs in the United States.
1. Welfare economics is the study of a. the well-being of less fortunate people. b. welfare programs in the United States. c. the effect of income redistribution on work effort. d. how the allocation of
More informationBasics of Economics. Alvin Lin. Principles of Microeconomics: August December 2016
Basics of Economics Alvin Lin Principles of Microeconomics: August 2016 - December 2016 1 Markets and Efficiency How are goods allocated efficiently? How are goods allocated fairly? A normative statement
More information1. Perfect Competition and Efficiency 2. Extending the Reach of the Invisible Hand: 3. Extending the Reach of the Invisible Hand:
Chapter 7: and the Invisible Hand Chapter Outline 1. 2. 3. Allocation of Resources across Industries 4. Prices Guide the Invisible Hand 5. Equity and Efficiency Modified by Key Ideas 1. The invisible hand
More informationMicroeconomics, marginal costs, value, and revenue, final exam practice problems
Microeconomics, marginal costs, value, and revenue, final exam practice problems (The attached PDF file has better formatting.) *Question 1.1: Effects on Marginal Cost Which of the following is most likely
More informationDEMAND AND SUPPLY. Chapter 3. Principles of Macroeconomics by OpenStax College is licensed under a Creative Commons Attribution 3.
DEMAND AND SUPPLY Chapter 3 Principles of Macroeconomics by OpenStax College is licensed under a Creative Commons Attribution 3.0 Unported License Demand for Goods and Services Demand refers to the amount
More informationTen Principles of Economics. Principles of Economics. Economy... Scarcity... N. Gregory Mankiw. A household and an economy face many decisions:
A Lecture Presentation in PowerPoint to Accompany Principles of Economics Second Edition by N. Gregory Mankiw Ten Principles of Economics by Greg Mankiw Chapter 1 Copyright by Harcourt, Inc. Prepared by
More informationEcon 200, Summer 2011, Dr. Alan and Prof. Crossley. Problem Set 2. (Reference: Mankiw and Taylor, Chapters 6, 7, 8, 13)
Multiple Choice Econ 200, Summer 2011, Dr. Alan and Prof. Crossley Problem Set 2 (Reference: Mankiw and Taylor, Chapters 6, 7, 8, 13) 1 Refer to the Figure below. Consider the impact of a tax on sellers,
More information4. Which of the following statements about marginal revenue for a perfectly competitive firm is incorrect? A) TR
Name: Date: 1. Which of the following will not be true of a perfectly competitive market? A) Buyers and sellers will have an imperceptible effect on the market. B) Firms can freely enter and exit the market.
More informationProblem Set 3 Eco 112, Spring 2011 Chapters covered: Ch. 6 and Ch. 7 Due date: March 3, 2011
Problem Set 3 Eco 112, Spring 2011 Chapters covered: Ch. 6 and Ch. 7 Due date: March 3, 2011 There are 30 multiple choice questions in this problem set. Answer these questions by the beginning of the class
More informationChoose the single best answer for each question. Do all of your scratch-work in the side and bottom margins of pages.
Econ 101, Sections 3 and 4, S11, Schroeter Exam #2, Special code = 0002 Choose the single best answer for each question. Do all of your scratch-work in the side and bottom margins of pages. 1. The cross-price
More informationEcon*1050 Introductory Microeconomics Instructor: Vitali Alexeev. Quiz 6 (Chapter 8)
Econ*1050 Introductory Microeconomics Instructor: Vitali Alexeev Quiz 6 (Chapter 8) 1) A tax on a good a. raises the price buyers pay and lowers the price sellers receive. b. raises both the price buyers
More informationMicroeconomics: MIE1102
TEXT CHAPTERS TOPICS 1, 2 ECONOMICS, ECONOMIC SYSTEMS, MARKET ECONOMY 3 DEMAND AND SUPPLY. MARKET EQUILIBRIUM 4 ELASTICITY OF DEMAND AND SUPPLY 5 DEMAND & CONSUMER BEHAVIOR 6 PRODUCTION FUNCTION 7 COSTS
More informationECON 4100: Industrial Organization. Lecture 2- Efficiency
ECON 4100: Industrial Organization Lecture 2- Efficiency 1 Overview Efficiency and markets Pareto Efficiency Consumer Surplus and Producer Surplus revisited A non-surplus approach to efficiency 2 Efficiency
More informationGovernment Policy, Efficiency, and Welfare
Government Policy, Efficiency, and Welfare Econ 102: Introduction to Microeconomics 1 1.1 Goals of today s class Goals of today s class Learn about consumer surplus and producer surplus, a convenient way
More informationCopyright 2016 Pearson Canada Inc. 5-1 EFFICIENCY AND EQUITY. After studying this chapter, you will be able to:
5 EFFICIENCY AND EQUITY After studying this chapter, you will be able to: Describe the alternative methods for allocating scarce resources Explain the connection between demand and marginal benefit and
More informationECON (ENT) COURSE LESSON THREE. Supply and Demand. CHAPTER 7 Supply and Demand. Lesson Three Supply and Demand 93
ECON (ENT) COURSE LESSON THREE Supply and Demand CHAPTER 7 Supply and Demand Lesson Three Supply and Demand 93 EXERCISES Matching (28 points) From the list below, select the term that matches each of the
More informationConsumers, Producers, and the Efficiency of Markets. Premium PowerPoint Slides by Vance Ginn & Ron Cronovich
C H A T E R Consumers, roducers, and the Efficiency of Markets Economics R I N C I L E S O F N. Gregory Mankiw remium oweroint Slides by Vance Ginn & Ron Cronovich 2009 South-Western, a part of Cengage
More informationSOLUTIONS TO TEXT PROBLEMS 7
SOLUTIONS TO TEXT PROBLEMS 7 Quick Quizzes 1. Figure 1 shows the demand curve for turkey. The price of turkey is P 1 and the consumer surplus that results from that price is denoted CS. Consumer surplus
More information9.1 Zero Profit for Competitive Firms in the Long Run
9.1 Zero Profit for Competitive Firms in the Long Run Chapter 9 Applications of the Competitive Model With Free Entry into the Market Along with identical costs and constant input prices, implies firms
More informationSupply and. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e
Supply and Demand Chapter 3 Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Supply and Demand Market Demand Market Supply Market Equilibrium i Comparative
More informationProfessor Christina Romer. LECTURE 8 WELFARE ANALYSIS February 8, 2018
Economics 2 Spring 2018 Professor Christina Romer Professor David Romer LECTURE 8 WELFARE ANALYSIS February 8, 2018 I. OVERVIEW II. CONCEPT OF ECONOMIC SURPLUS A. Consumer Surplus B. Producer Surplus III.
More informationAfter studying this chapter you will be able to
3 Demand and Supply After studying this chapter you will be able to Describe a competitive market and think about a price as an opportunity cost Explain the influences on demand Explain the influences
More informationMonopoly CHAPTER. Goals. Outcomes
CHAPTER 15 Monopoly Goals in this chapter you will Learn why some markets have only one seller Analyze how a monopoly determines the quantity to produce and the price to charge See how the monopoly s decisions
More informationGetting ready for the AP Macroeconomics Exam Lesson 2
Getting ready for the AP Macroeconomics Exam Lesson 2 Quantity S / D vs. Supply and Demand, Law of Supply and Demand, Reasons for Change of Supply and Demand How does a demand schedule differ from a market
More informationQuestion 1 A. In order to find optimal level of consumption and utility, we set MRS=MRT. These are found by:
Question 1 A. In order to find optimal level of consumption and utility, we set MRS=MRT. These are found by: With x isolated, we now insert to budget constraint: Therefore, optimal consumption is: x=100,
More informationExternalities. PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University
10 Externalities PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 Externalities Government action can sometimes improve upon market outcomes Why markets sometimes fail to
More informationProfessor Christina Romer. LECTURE 8 WELFARE ANALYSIS February 14, 2019
Economics 2 Spring 2019 Professor Christina Romer Professor David Romer LECTURE 8 WELFARE ANALYSIS February 14, 2019 I. OVERVIEW II. CONCEPT OF ECONOMIC SURPLUS A. Consumer surplus B. Producer surplus
More informationChapter 16: Equilibrium
Econ Microeconomic Analysis Chapter : Equilibrium Instructor: Hiroki Watanabe Spring Watanabe Econ Equilibrium / Review Market Clearance Tax Who Pays the Tax? Tax Incidence First Theorem Summary Watanabe
More informationPrice discrimination by a monopolist
Review Imperfect Competition: Monopoly Reasons for monopolies Monopolies problem: Choses quantity such that marginal costs equal to marginal revenue The social deadweight loss of a monopoly Price discrimination
More informationEcon 101, sections 2 and 6, S06 Schroeter Exam #2, Red. Choose the single best answer for each question.
Econ 101, sections 2 and 6, S06 Schroeter Exam #2, Red Choose the single best answer for each question. 1. If the own-price elasticity of demand for a good is -2.0, this implies that consumers would a.
More informationChapter 6. Competition
Chapter 6 Competition Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1-1 Chapter 6 The goal of this
More informationDownloaded for free from 1
Micro Chapter 6 -price ceiling or price cap: government regulation that makes it illegal to charge a price higher then a specified level -effects of the price cap on the market depend on whether the ceiling
More informationEcon 2113 Test #2 Dr. Rupp Fall 2008
D Econ 2113 Test #2 Dr. Rupp Fall 2008 Name Pledge: I have neither given nor received aid on this exam Version A Signature: Directions: Bubble in name: Last, First Bubble in 00 in Special Codes Sign the
More informationEcon 101, section 3, F06 Schroeter Exam #2, Red. Choose the single best answer for each question.
Econ 101, section 3, F06 Schroeter Exam #2, Red Choose the single best answer for each question. 1. Which of the following is consistent with elastic demand? a. A 10% increase in price results in a 5%
More informationChapter 5- Efficiency and Equity Resource Allocation Methods evaluate the ability of markets to allocate resources efficiently and fairly we must
Chapter 5- Efficiency and Equity Resource Allocation Methods evaluate the ability of markets to allocate resources efficiently and fairly we must compare it with its alternative resources are scare, must
More informationEconomics. Monopoly. N. Gregory Mankiw. Premium PowerPoint Slides by Vance Ginn & Ron Cronovich C H A P T E R P R I N C I P L E S O F
C H A P T E R Monopoly Economics P R I N C I P L E S O F N. Gregory Mankiw Premium PowerPoint Slides by Vance Ginn & Ron Cronovich 2009 South-Western, a part of Cengage Learning, all rights reserved In
More information2010 Pearson Education Canada
What Is Perfect Competition? Perfect competition is an industry in which Many firms sell identical products to many buyers. There are no restrictions to entry into the industry. Established firms have
More information1. As a matter of public policy, people are not allowed to sell their organs.
Chapter 7/Consumers, Producers, and the Efficiency of Markets 141 D. Case Study: Should There Be a Market in Organs? 1. As a matter of public policy, people are not allowed to sell their organs. a. In
More informationMonopoly. Basic Economics Chapter 15. Why Monopolies Arise. Monopoly
1 Why Monopolies Arise Basic Economics Chapter 15 Monopoly Monopoly - The monopolist is a firm that is the sole seller of a product (or service) without close substitutes - The monopolist is a price maker
More informationMICROECONOMICS Midterm Test (sample)
Student Name:.. MICROECONOMICS Midterm Test (sample) Time: 60 minutes Student Number:. Total Mark:... /50 Class:. Converted Mark:../10 Section A: QUIZ 20 marks Show your answers on the ANSWER SHEET at
More informationFRAMINGHAM STATE COLLEGE PRINCIPLES OF MICROECONOMICS PROBLEM SET NUMBER 6
FRAMINGHAM STATE COLLEGE PRINCIPLES OF MICROECONOMICS PROBLEM SET NUMBER 6 My Name is? Text Chapter 7 Producer Surplus and Market Efficiency 2. Ernie owns a water pump. Because pumping large amounts of
More informationChapter 5: Price Controls: Multiple Choice Questions Chapter 6: Elasticity Multiple Choice Questions
Chapter 5: Price Controls: Multiple Choice Questions 1. ANSWER: d. ceiling. 2. ANSWER: a. a shortage, which cannot be eliminated through market adjustment. 3. ANSWER: b. the equilibrium price is below
More informationEastern Mediterranean University Faculty of Business and Economics Department of Economics Fall Semester
Eastern Mediterranean University Faculty of Business and Economics Department of Economics 2016-17 Fall Semester Duration: 110 minutes ECON101 - Introduction to Economics I Final Exam Type A 11 January
More informationDemand, Supply, and Efficiency
OpenStax-CNX module: m48832 1 Demand, Supply, and Efficiency OpenStax College This work is produced by OpenStax-CNX and licensed under the Creative Commons Attribution License 4.0 (This appendix should
More information!"#$#%&"'()#*(+,'&$-''(.#/-'((
Lecture 1 Basic Concerns of Economics What is Economics! Economics is the study of how society manages its scarce resources. o Economic Problem: How a society can satisfy unlimited wants with limited resources
More informationExternalities. (a short presentation)
Externalities (a short presentation) WHY EXTERNALITIES ARE IMPORTANT? Adam Smith s invisible hand : self-interested buyers and sellers maximize the total benefit that society can derive from a market.
More informationWHAT IS A COMPETITIVE MARKET?
Chapter 14. Firms in Competitive Markets WHAT IS A COMPETITIVE MARKET? A perfectly competitive market has the following characteristics: There are many buyers and sellers in the market. small relative
More informationEastern Mediterranean University Faculty of Business and Economics Department of Economics Fall Semester
Duration: 50 minutes Eastern Mediterranean University Faculty of Business and Economics Department of Economics 2016-17 Fall Semester ECON101 - Introduction to Economics I Quiz 2 Answer Key 16 December
More informationEcon 2113: Principles of Microeconomics. Spring 2009 ECU
Econ 2113: Principles of Microeconomics Spring 2009 ECU Chapter 12 Monopoly Market Power Market power is the ability to influence the market, and in particular the market price, by influencing the total
More informationAP Econ Section 9 Micro
Name: Date: _ ID: A AP Econ Section 9 Micro Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Gas prices recently increased by 25%. In response, purchases
More informationTo do today. Efficiency MB and MC Consumer surplus Producer surplus Deadweight loss. Theories of fairness
To do today Efficiency MB and MC Consumer surplus Producer surplus Deadweight loss Theories of fairness MB and consumer surplus A key concept in defining efficiency Consumer surplus is the MB from a
More informationECON 101 KONG Midterm 2 CMP Review Session. Presented by Benji Huang
ECON 101 KONG Midterm 2 CMP Review Session Presented by Benji Huang Chapter 5 Efficiency and Equity Benefit, Cost, Surplus Consumers (1) A consumer benefits from the consumption of a product this benefit
More informationMonopoly. PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University
15 Monopoly PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 Market power Why Monopolies Arise Alters the relationship between a firm s costs and the selling price Monopoly
More informationProfessor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2
Economics 2 Spring 2018 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 2 1.a. In this problem we are dividing everything the household buys into two categories child care
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Each correct answer gives you 1 pt.
AUBG, Fall 2015, Micro 101 with P. Stankov Sample midterm ------------------------------------------------------------------------------------------------ MULTIPLE CHOICE. Choose the one alternative that
More informationChapter 4: The Market Forces of Supply and Demand
Chapter 4: The Market Forces of Supply and Demand What factors affect buyers demand for goods? What factors affect sellers supply of goods? How do supply and demand determine the price of a good and the
More informationGovernment Regulation
Government Regulation What do you think is the market price for renting an apartment in Plainfield? What happens to the quantity of demand and supply after the price change? List four outcomes that would
More informationCh 7 Consumers, Producers, Market Efficiency
Ch 7 Consumers, Producers, Market Efficiency Multiple Choice Identify the choice that best completes the statement or answers the question 1 Suppose Chris and Laura attend a charity benefit and participate
More informationMONOPOLY SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes
1 MONOPOLY SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. A market might have a monopoly because: (1) a key resource is owned by a single firm; (2) the government gives a single firm the exclusive right
More informationPrice = The Interaction of Supply and Demand WEDNESDAY, FEBRUARY 17 THURSDAY, FEBRUARY 18
Price = The Interaction of Supply and Demand WEDNESDAY, FEBRUARY 17 THURSDAY, FEBRUARY 18 Chapter 4: Section 1 Understanding Demand What Is Demand? Markets are where people come together to buy and sell
More informationMarket structures. Why Monopolies Arise. Why Monopolies Arise. Market power. Monopoly. Monopoly resources
Market structures Why Monopolies Arise Market power Alters the relationship between a firm s costs and the selling price Charges a price that exceeds marginal cost A high price reduces the quantity purchased
More informationPolicy Evaluation Tools. Willingness to Pay and Demand. Consumer Surplus (CS) Evaluating Gov t Policy - Econ of NA - RIT - Dr.
Policy Evaluation Tools Evaluating Gov t Policy - Econ of NA - RIT - Dr. Jeffrey Burnette In economics we like to measure the impact government policies have on the economy and separate winners and losers.
More informationMicroeconomics. Basic Information
Microeconomics Basic Information Title: Microeconomics Code: ECN101 Credit Hours: 3 C.H. Prerequisite(s): None Classification: Compulsory Faculty Core Course Description Microeconomics is a basic core
More informationAP Microeconomics Chapter 4 Outline
I. Learning Objectives In this chapter students should learn: A. How to differentiate demand-side market failures and supply-side market failures. B. The origin of consumer surplus and producer surplus,
More informationPrinciples of. Economics. Week 6. Firm in Competitive & Monopoly market. 7 th April 2014
Principles of Economics Week 6 Firm in Competitive & Monopoly market 7 th April 2014 In this week, look for the answers to these questions:!what is a perfectly competitive market?!what is marginal revenue?
More informationEconomics 381/Environmental Studies 312 Review Assignment
Economics 381/Environmental Studies 312 Review Assignment This Review Assignment is worth 5% of your grade. The purpose of this part of the assignment is twofold. First, it is designed to help you recall
More informationECON 115. Industrial Organization
ECON 115 Industrial Organization 1. Linear (3rd Degree) Price Discrimination First Hour QUIZ Second Hour Introduction to Price Discrimination Third-degree price discrimination Two Rules Examples of price
More informationMonopoly and How It Arises
Monopoly and How It Arises A monopoly is a market: That produces a good or service for which no close substitute exists In which there is one supplier that is protected from competition by a barrier preventing
More informationProblem Set #2 - Answers. Due February 2, 2000
S/Econ 573 roblem Set # - Answers age 1 of 11 roblem Set # - Answers ue February, [Numbers in brackets are the points allocated in the grading. There are 13 points total] 1. [19]In the figure at the right
More informationNAME: INTERMEDIATE MICROECONOMIC THEORY FALL 2006 ECONOMICS 300/012 Final Exam December 8, 2006
NAME: INTERMEDIATE MICROECONOMIC THEORY FALL 2006 ECONOMICS 300/012 Section I: Multiple Choice (4 points each) Identify the choice that best completes the statement or answers the question. 1. The slope
More informationEconomics 110 Midterm #2 Practice Multiple Choice Qs Spring 2014
Midterm #2 Practice Multiple Choice Questions: Elasticity is a. a measure of how much buyers and sellers respond to changes in market conditions. b. the study of how the allocation of resources affects
More informationMarket Equilibrium, the Price Mechanism and Market Efficiency. Chapter 3
Market Equilibrium, the Price Mechanism and Market Efficiency Chapter 3 Equilibrium Equilibrium is defined as a state of rest, self-perpetuating in the absence of any outside disturbance. Example: a book
More informationAlberta Capacity Market
Alberta Capacity Market Comprehensive Market Design (CMD 1) Design Proposal Document Section 4: Forward Capacity Auction Prepared by: Alberta Electric System Operator Date: January 26, 2018 Table of Contents
More informationLECTURE NOTES ON MICROECONOMICS
LECTURE NOTES ON MICROECONOMICS ANALYZING MARKETS WITH BASIC CALCULUS William M. Boal Part 3: Firms and competition Chapter 12: Welfare analysis Problems (12.1) [Pareto improvement, economic efficiency]
More information5-3 - Copyright 2017 Pearson Education, Inc. All Rights Reserved
Chapter 5 Lecture - Externalities, Environmental Policy, and Public Goods 1 What s the Best Level of Pollution? Is there a way to know what is the optimal level of pollution for a society? No pollution
More informationEconomics E201 (Professor Self) Sample Questions for Exam Two, Fall 2013
, Fall 2013 Your exam will have two parts covering the topics in chapters 4 (page 91 through end of chapter), 5 and 6 from the Parkin chapters and chapter 10 (up to page 317, up to but not including the
More informationTitle: Micro In the market below, what would be true at a price of $6?
Title: Micro 1.1 1. In the market below, what would be true at a price of $6? a. There is excess demand (a shortage) of 10 units. b. The market is in equilibrium. *c. There is excess supply (a surplus)
More informationMICROECONOMICS - CLUTCH CH PERFECT COMPETITION.
!! www.clutchprep.com CONCEPT: THE FOUR MARKET MODELS Market structure describes the environment in which a firm operates, determined by the Perfect Competition Monopolistic Competition Oligopoly Monopoly
More informationEconomics 323 Microeconomic Theory Fall 2015
pink=a FIRST EXAM Chapter Two Economics 323 Microeconomic Theory Fall 2015 1. The equilibrium price in a market is the price where a. supply equals demand b. no surpluses or shortages result c. no pressures
More informationFirms in competitive markets: Perfect Competition and Monopoly
Lesson 6 Firms in competitive markets: Perfect Competition and Monopoly Henan University of Technology Sino-British College Transfer Abroad Undergraduate Programme 0 In this lesson, look for the answers
More informationwithin this range? c. Over what range of prices is the demand for motel rooms unit elastic? To
1. Identify the parts of the circular-flow diagram immediately involved in the following transactions. a. Mary buys a car from Jaguar for 40,000. b. Jaguar pays Joe 2,500/month for work on the assembly
More informationMonopolistic Competition. Chapter 17
Monopolistic Competition Chapter 17 The Four Types of Market Structure Number of Firms? Many firms One firm Few firms Differentiated products Type of Products? Identical products Monopoly Oligopoly Monopolistic
More informationAssessment Schedule 2015 Economics: Demonstrate understanding of the efficiency of market equilibrium (91399)
NCEA Level 3 Economics (91399) 2015 page 1 of 11 Assessment Schedule 2015 Economics: Demonstrate understanding of the efficiency of market equilibrium (91399) Assessment criteria with Merit with Demonstrate
More information