Exam 3 (Chapters 7,9,10) Flashcards
Consumer surplus is located..
Area below the demand curve
Producer surplus is located…
Area above supply curve
New buyers enter the market, increasing consumer surplus as a result of…
A decrease in price
Cost is a measure of the
Sellers willingness to sell
Producer surplus directly measures
The well-being of sellers
For any country that allows free trade…
The domestic price is EQUAL to the world price
A negative externality will cause a private market to produce…
MORE than is socially desirable
Consumer surplus
The amount a buyer is WILLING to pay for a good minus the amount the buyer ACTUALLY pays for it
to calculate:
Total surplus = consumer surplus + producer surplus
Welfare economics
The study of how the allocation of resources affects economic well-being
Externalities
Positive: impact on bystander is beneficial
Negative: impact on bystander is adverse
Exporting country with International trade
Domestic PRODUCERS of good are better off
Domestic CONSUMERS of good are worse off
*gains of the winners exceeds the losses of the losers
Arguments for restricting trade
- jobs
- national-security
- infant-industry
Market failure
The inability of some unregulated makers to allocate resources efficiently
Willingness to pay
The maximum amount that a buyer will pay for a good