tut4

Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car. Susie's consumer surplus is $2,000

• True

• False

Suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market.

• True

• False

If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase.

• True

• False

Producer surplus is the amount a seller is paid minus the cost of production.

• True

• False

Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window-cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $200.

• True

• False

The area below the demand curve and above the supply curve measures the producer surplus in a market.

• True

• False

Efficiency refers to whether a market outcome is fair, while equality refers to whether the maximum amount of output was produced from a given number of inputs.

• True

• False

If the United States legally allowed for a market in transplant organs, it is estimated that one kidney would sell for at least $100,000.

• True

• False

Markets will always allocate resources efficiently.

• True

• False

When markets fail, public policy can potentially remedy the problem and increase economic efficiency.

• True

• False