1. Welfare analysis: Basic concepts
Identify whether each of the following statements best illustrates the concept of consumer surplus, producer surplus, or neither.
2. Individual demand and consumer surplus
Consider the market for yachts. The market price of each yachts is $200,000, and each buyer demands no more than one yacht.
Consider the market for antique cars. The market price of each antique car is
3. Consumer surplus for a group of consumers
The following graph shows the demand curve for a group of consumers in the U.S. market (blue line) for tablets. The market price of a tablet is shown by the black horizontal line at $150.
4. Consumer surplus for an individual and a market
The following graph shows Alex's weekly demand for apple pie, represented by the blue line. Point A represents a point along his weekly demand curve. The market price of apple pie is $3.00 per slice, as shown by the horizontal black line.
5. Producer surplus for a group of sellers
The following graph shows the supply curve for a group of sellers in the U.S. market for laptops (orange line). Each seller has only one laptop to sell. The market price of a laptop is shown by the black horizontal line at $175.
6. Producer surplus and price changes
The following graph shows the supply curve for a group of students looking to sell used smartphones. Each student has only one used smartphone to sell. Each rectangular segment under the supply curve represents the “cost,” or minimum acceptable price, for one student. Assume that anyone who has a cost just equal to the market price is willing to sell his or her used smartphone.
7. Producer surplus for an individual and a market
Suppose the market for pizza is a perfectly competitive market—that is, sellers take the market price as given. Amy owns a restaurant where she sells pizza. The following graph shows Amy's weekly supply curve, represented by the orange line. Point A represents a point along her supply curve. The price of pizza is $3.00 per slice, as shown by the horizontal black line.
8. Total economic surplus
The following diagram shows supply and demand in the market for smartphones.
9. Market efficiency and market failure
Suppose that the following graph shows a free market equilibrium, with as the equilibrium quantity.
Suppose a firm that produces for this market is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents
Suppose a firm that produces for this market is able to influence the market price, which leads to an outcome that differs from the free market equilibrium shown in the previous graph.
Suppose a firm that produces for this market employs a private security force that makes town residents, many of whom have no business with the company, feel safer.
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