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What does consumer surplus represent in economic terms?

  • The total amount a consumer spends on a good or service.
  • The difference between the price consumers are willing to pay and the market price. (correct)
  • The costs incurred by producers in providing goods or services.
  • The benefit to producers over and above their minimum accepted price.

    • How is producer surplus defined?

  • The additional benefits that consumers receive from market transactions.
  • The market price minus the costs of production for a product.
  • The total revenue a firm earns from selling its goods.
  • The difference between the lowest price a producer would accept and the actual price received. (correct)

    • Which of the following represents a consequence of rent control?

  • Better availability of apartments for tenants.
  • A shortage of rental units due to artificially low prices. (correct)
  • Enhanced market competition among landlords.
  • Increased profits for landlords due to higher demand.

    • What typically happens in a competitive market regarding efficiency?

    <p>Market equilibrium maximizes the total surplus of consumer and producer.</p> Signup and view all the answers

    Which statement is true regarding taxes and their economic impact?

    <p>Taxes can create deadweight loss and reduce total economic surplus.</p> Signup and view all the answers

    What is the primary function of a price ceiling?

    <p>To create a maximum price that can be charged for a good.</p> Signup and view all the answers

    Why might consumers prefer a market without rent control?

    <p>Higher rents provide better quality living spaces.</p> Signup and view all the answers

    What is meant by the efficiency of competitive markets?

    <p>Resources are allocated in a way that maximizes total surplus.</p> Signup and view all the answers

    What does the term marginal benefit refer to in the context of tea consumption?

    <p>The additional benefit from consuming one more unit of tea</p> Signup and view all the answers

    At a price of $3.50, how much consumer surplus does Theresa receive?

    <p>$2.50</p> Signup and view all the answers

    If the price of chai tea decreases to $3.00, how does this affect consumer surplus for Theresa, Tom, and Terri?

    <p>Each of them gains an additional $0.50 in consumer surplus</p> Signup and view all the answers

    What is the definition of consumer surplus in the market for chai tea?

    <p>The area below the demand curve and above the price consumers pay</p> Signup and view all the answers

    What happens to the total consumer surplus if the price of chai tea falls?

    <p>Total consumer surplus increases as consumer surplus per individual unit rises</p> Signup and view all the answers

    Which of the following statements about Tim's consumer behavior is true?

    <p>He is indifferent between buying the cup or not when the price is $3.00</p> Signup and view all the answers

    What is indicated by the demand curve in relation to consumer surplus?

    <p>The sum of consumer surplus across all consumers under varying prices</p> Signup and view all the answers

    How is the consumer surplus illustrated visually in a demand curve graph?

    <p>By the area above the price and below the demand curve</p> Signup and view all the answers

    What is the main factor needed to measure consumer surplus in the broadband internet service market?

    <p>The price of broadband internet service</p> Signup and view all the answers

    How is consumer surplus calculated in the broadband internet service market?

    <p>As the area of a shaded triangle on the demand curve</p> Signup and view all the answers

    What does producer surplus represent?

    <p>The difference between the lowest acceptable price and the actual price received</p> Signup and view all the answers

    What was the average price for broadband internet service in 2006?

    <p>$36 per month</p> Signup and view all the answers

    How much consumer surplus was estimated for broadband internet service per month?

    <p>$890.4 million</p> Signup and view all the answers

    What is the marginal cost in relation to producer surplus?

    <p>The added cost of producing one more unit of a good</p> Signup and view all the answers

    Which statement accurately describes how Heavenly Tea's producer surplus is calculated?

    <p>It is the sum of surpluses on individual cups sold</p> Signup and view all the answers

    Which of the following best describes the area represented by consumer surplus on a demand curve?

    <p>The area above the price line and below the demand curve</p> Signup and view all the answers

    What does producer surplus measure?

    <p>The net benefit received by producers from participating in the market</p> Signup and view all the answers

    Which statement defines economic efficiency in a market?

    <p>Marginal benefit equals marginal cost for the last unit produced</p> Signup and view all the answers

    What is total producer surplus equal to?

    <p>The area above the supply curve and below the market price</p> Signup and view all the answers

    How is consumer surplus defined?

    <p>The overall benefit consumers gain from buying goods above their cost</p> Signup and view all the answers

    What happens when the quantity produced is too low in a market?

    <p>The value to consumers of the next unit exceeds the cost to producers</p> Signup and view all the answers

    What is the result of achieving a competitive equilibrium?

    <p>Marginal benefit and marginal cost equate for the last unit produced</p> Signup and view all the answers

    Which of the following best describes the concept of economic surplus?

    <p>The sum of consumer surplus and producer surplus</p> Signup and view all the answers

    What is a characteristic of competitive markets regarding trade?

    <p>All trades take place where marginal benefit exceeds marginal cost</p> Signup and view all the answers

    What is the new price consumers need to pay for cigarettes after a $1 tax increase?

    <p>$5.90</p> Signup and view all the answers

    How much do producers effectively receive per pack of cigarettes after the tax is imposed?

    <p>$4.90</p> Signup and view all the answers

    In the market for gasoline, who bears the majority of the burden from a 10-cent tax per gallon?

    <p>Consumers pay 80% and producers pay 20%</p> Signup and view all the answers

    What factor primarily determines how the tax burden is shared between consumers and producers?

    <p>The relative slopes of the demand and supply curves</p> Signup and view all the answers

    If the demand curve for a good is steep, what does that imply about the tax burden on buyers?

    <p>Buyers will not change their purchasing behavior</p> Signup and view all the answers

    What is the effect of the tax on consumer surplus and producer surplus?

    <p>Some surplus becomes tax revenue while some becomes deadweight loss</p> Signup and view all the answers

    If the price elasticity of demand was higher, what would likely happen to the burden of a tax on sellers?

    <p>Sellers would bear a smaller burden of the tax</p> Signup and view all the answers

    What is a likely consequence of imposing a tax on a market with inelastic demand?

    <p>Larger tax burden on consumers</p> Signup and view all the answers

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