Answered: What is consumer surplus? Explain in…

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter4: Prices: Free, Controlled, And Relative

Section: Chapter Questions

Problem 4WNG

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What is consumer surplus? Explain in words and by drawing supply and demand curves. What is producer surplus? Explain in words and by drawing supply and demand curves. What is total surplus? What is efficiency? How and why do unfettered market forces of supply and demand maximize total surplus and lead to an efficient outcome? What are some reasons that a free market would to fail to create an efficient outcome (ie: fail to maximize total surplus)? Consider the effects of a tax on consumers on consumer and producer surplus. Does this tax increase or decrease the equilibrium price and quantity produced in the market? Does this tax increase or decrease total surplus? Consider the effects of a tax on producers on consumer and producer surplus. Does this tax increase or decrease the equilibrium price and quantity produced in the market? Does this tax increase or decrease total surplus? What is equity of an economy? Is it possible to achieve both an efficient and equitable outcome in an economy? Do free market forces of supply and demand have anything to say about the equity of the free market outcome (ie: the price and quantity produced, the consumer and the producer surplus being fair to the consumers or the producers)?

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