7-1 Consumer Surplus
We begin our study of welfare economics by looking at the benefits buyers receive from
participating in a market.
7-1a Willingness to Pay
Imagine that you own a mint-condition recording of Elvis Presley's first album. Becaus
The economy is made up of thousands of firms that produce the goods and services you enjoy every
day: General Motors produces automobiles, General Electric produces lightbulbs, and General Mills
produces breakfast cereals. Some firms,
Test 1: Practice Questions
Suppose that for a given activity, we have the
following: MC = 600; MB = 750. In order to
maximize total net benefit (Profit),
a. The level of the activity should be reduced.
b. More should be produced.
c. No change should be
This firm is a perfectly competitive firm.
This firm is currently earning zero economic profit
This firm has excess capacity in the amount of (Q4 Q2)
Both b and c are correct.
A market has the following characteris
Refer to the graph below. Assume that this is a competitive
market. Which of the following does not exist when
the price is $2.00?
A deadweight loss.