Refer to Table 14-4. What is the average revenue when 4 units are sold in a perfectly competitive market?
In a perfectly competitive market, average revenue equals the market price. If the price remains constant regardless of the quantity sold, the average revenue when 4 units are sold is simply the market price per unit.
What are some quantitative tools that economists use to analyze consumer and producer surplus at equilibrium?
Economists use algebraic equations for demand and supply, graphical representations, and area calculations (such as the area of triangles) to analyze consumer and producer surplus at equilibrium.
How do you calculate the per capita quantity of a good, such as cars, in a market?
To calculate the per capita quantity, divide the total number of goods (e.g., cars) by the total number of people. This gives the average quantity per person.
What is the first step in calculating consumer and producer surplus using algebraic equations?
The first step is to find the equilibrium price and quantity by setting the quantity demanded equal to the quantity supplied and solving for price.
How do you determine the 'access price' for the demand curve in surplus calculations?
Set the quantity demanded to zero in the demand equation and solve for price; this gives the price where the demand curve crosses the price axis.
What does the supply 'access price' represent in the context of producer surplus?
It is the price at which the quantity supplied equals zero, found by setting the supply equation to zero and solving for price.
When calculating the area for consumer surplus, what do the base and height of the triangle represent?
The base is the difference between the demand access price and the equilibrium price, and the height is the equilibrium quantity.
Why is it important for the supply curve to cross the price axis in these calculations?
It allows you to identify the supply access price, which is necessary for calculating the area representing producer surplus.
What is the formula used to calculate the area of consumer or producer surplus in this context?
The area is calculated as one-half times the base times the height, where base and height are determined from the graph and equations.
How does graphical representation support the calculation of surplus areas?
It visually shows the regions corresponding to consumer and producer surplus, helping to identify the necessary prices and quantities for the calculations.
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