Exam 3 (Chapters 7,9,10)

Question 1

Consumer surplus is located..

Answer 1

Area below the demand curve

Question 2

Producer surplus is located…

Answer 2

Area above supply curve

Question 3

New buyers enter the market, increasing consumer surplus as a result of…

Answer 3

A decrease in price

Question 4

Cost is a measure of the

Answer 4

Sellers willingness to sell

Question 5

Producer surplus directly measures

Answer 5

The well-being of sellers

Question 6

For any country that allows free trade…

Answer 6

The domestic price is EQUAL to the world price

Question 7

A negative externality will cause a private market to produce…

Answer 7

MORE than is socially desirable

Question 8

Consumer surplus

Answer 8

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

Question 9

Welfare economics

Answer 9

The study of how the allocation of resources affects economic well-being

Question 10

Externalities

Answer 10

Positive: impact on bystander is beneficial
Negative: impact on bystander is adverse

Question 11

Exporting country with International trade

Answer 11

Domestic PRODUCERS of good are better off
Domestic CONSUMERS of good are worse off

*gains of the winners exceeds the losses of the losers

Question 12

Arguments for restricting trade

Answer 12

• jobs
• national-security
• infant-industry

Question 13

Market failure

Answer 13

The inability of some unregulated makers to allocate resources efficiently

Question 14

Willingness to pay

Answer 14

The maximum amount that a buyer will pay for a good