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Principles of Microeconomics 4 th Canadian Edition Mankiw, Kneebone & McKenzie Chapter 7

Principles of Microeconomics 4 th Canadian Edition Mankiw, Kneebone & McKenzie Chapter 7. Turning Point Slides. P. A. Supply. D. F. E. C. Demand. B. G. 0. Q. When the market is in equilibrium, consumer surplus is the area…. CFE FEG0 AFE. 7. P. A. Supply. D. F. E. C.

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Principles of Microeconomics 4 th Canadian Edition Mankiw, Kneebone & McKenzie Chapter 7

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  1. Principles of Microeconomics4th Canadian EditionMankiw, Kneebone & McKenzieChapter 7 Turning Point Slides

  2. P A Supply D F E C Demand B G 0 Q When the market is in equilibrium, consumer surplus is the area… • CFE • FEG0 • AFE 7

  3. P A Supply D F E C Demand B G 0 Q When the market is in equilibrium, producer surplus is the area… • CFE • FEG0 • AFE 7

  4. P A Supply D F P1 E H P2 J K C Demand B G 0 Q When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers? • AFE • AHJ • FEJH • FEKH 7

  5. P A Supply D F P1 E H P2 J K C Demand B G 0 Q Which area represents producer surplus at a price of P1 • FEJH • FEC • CAE • AFE 7

  6. If Mr. Benoit would be willing to sell his business for $250,000, but in fact sells it for $300,000, he will receive: • Producer surplus of $300,000 • Producer surplus of $50,000 • Consumer surplus of $300,000 • Consumer surplus of $50,000 7

  7. If Mr. Smith bought Mr. Benoit’s business for $250,000, but in fact would have paid $300,000 for it, he would receive: • Producer surplus of $300,000 • Producer surplus of $50,000 • Consumer surplus of $300,000 • Consumer surplus of $50,000 7

  8. The study of how the allocation of resources affects economic well-being is called • consumer economics • macroeconomics • welfare economics • supply-side economics • demand-side economics 7

  9. A mint condition, signed copy of John Lennon’s “Imagine” album is available on e-Bay. You have in mind a maximum amount that you will bid. This maximum is called: • consumer surplus • producer surplus • a resistance price • willingness to pay 7

  10. Aaron would be willing to pay $75 to see his favorite band Sum 41, but buys a ticket for only $30. Aaron values the performance at: • $30 • $45 • $75 • $105 7

  11. Adam buys a new bike for $200. He receives consumer surplus of $300 on his purchase. His willingness to pay is: • $100 • $200 • $300 • $500 7

  12. A demand curve reflects each of the following EXCEPT the • willingness to pay of all buyers in the market • value each buyer in the market places on the good • highest price buyers are willing to pay for each quantity. • ability of buyers to obtain the quantity they desire 7

  13. Producer surplus is the • area under the supply curve to the left of the amount sold. • amount a seller is paid less the cost of production. • amount represented by the area under the supply curve. • cost to sellers of participating in a market. 7

  14. Producer surplus measures • the well-being of buyers and sellers. • unsold inventories. • the well-being of sellers. • only production costs. 7

  15. The equilibrium (market-clearing) price is • P1 • P2 • P3 • P4 7

  16. At the market-clearing equilibrium, total surplus is represented by the area • A + B + C • A + B + D + F • A + B + C + D + E + F • A + B + C + D + E + F + G + H 7

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