Producer Surplus and Willingness to Sell quiz #1 Flashcards
Producer Surplus and Willingness to Sell quiz #1
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How do you determine a product's producer surplus? Producer surplus is determined by calculating the difference between the market price and the minimum price each producer is willing to sell for, summed across all units sold. Graphically, it is the area above the supply curve and below the market price. Why does producer surplus exist in a market? Producer surplus exists because some producers are willing to sell their goods for less than the market price, allowing them to earn extra profit above their minimum acceptable price. What is the amount of producer surplus after the government imposes an excise tax on the market? After an excise tax is imposed, producer surplus decreases because the price received by producers falls, reducing the area above the supply curve and below the new, lower effective price. Assume the market depicted in the graph is in equilibrium. What is producer surplus at this equilibrium? At equilibrium, producer surplus is the area above the supply curve and below the equilibrium market price, up to the equilibrium quantity. What is the best definition of producer surplus? Producer surplus is the difference between the market price and the minimum price a producer is willing to accept, summed over all units sold. Which of the following events would increase producer surplus? An increase in market price would increase producer surplus, as producers receive more above their minimum willingness to sell. Which of the following statements best illustrates the existence of producer surplus? A producer is willing to sell a product for $10 but sells it for $20, earning a surplus of $10. Producers often work to maximize their producer surplus and make it as large as possible. True. Producers aim to maximize their producer surplus by selling at higher prices relative to their minimum acceptable price. Producer surplus is the difference between what two values? Producer surplus is the difference between the market price and the producer's minimum willingness to sell (marginal cost). How do the deeds and actions of a producer relate to producer surplus? Producers' decisions to sell at market prices above their minimum willingness to sell generate producer surplus. If demand is p = 50 - 2q and supply is p = 20 + 3q, what is the value of the producer surplus? First, find equilibrium: 50 - 2q = 20 + 3q → 5q = 30 → q = 6, p = 50 - 2(6) = 38. Producer surplus is the area above the supply curve and below price: Area = 0.5 × (38 - 20) × 6 = 0.5 × 18 × 6 = 54. To determine a product's producer surplus, which of the following must be compared? You must compare the market price to each producer's minimum willingness to sell (marginal cost) for all units sold.
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