Consumer and Producer Surplus-Part Two

The height of the supply curve is the marginal seller's cost.

• True

• False

Total surplus is the seller's cost minus the buyer's willingness to pay.

• True

• False

Producer surplus is the area above the supply curve and below the price.

• True

• False

In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should

• choose a price below the market equilibrium price.

• choose any price the planner wants because the losses to the sellers (buyers) from any change in price are exactly offset by the gains to the buyers (sellers).

• choose a price above the market equilibrium price.

• allow the market to seek equilibrium on its own.

Producer Surplus is the area

• Below the price and above the supply curve

• Under the supply curve

• Between the supply and demand curves

• Under the demand curve, and above the price

Gordon lists his old Lionel electric trains on eBay and sets a minimum acceptable price at $75. He received three bids after five days on eBay: $25, $50, and $75. He accepts the latter. His producer surplus is:

• $0

• $25

• $50

• $75

What letters represent total surplus if the current price of this good is at equilibrium

• A + B + C + D + E + F

• C + E

• A + B + D + F

• A + B + C + D + E + F+ G

• G

Producer surplus is

• Measured using the demand curve for a good

• Always a negative number for sellers in a competitive market

• The amount a seller is paid minus the cost of production/opportunity cost

• The opportunity cost minus the cost of producing goods that go unsold