Chelsea Katz ECON200 2 21 13 Exam will cover Thinking at the Margin Chapters 4 5 6 7 8 25 Multiple Choice Questions Two problems Copies of old exams and answer keys accessible on ELMS in Old Exams Module Scientific Calculator Permitted no phones graphing calculators calculators with memory that can be saved Review sessions at 11 00 AM 12 00 PM on Friday March 1st in Tydings 0130 NO SIMULATIONS At any quantity the price given by the demand curve shows the willingness to pay of the marginal buyer the buyer who would leave the market first if the price were any higher Consumer Surplus a buyer s willingness to pay minus the amount the buyer actually pays Benefit consumers receive from consuming a good Consumer surplus is the area below the demand curve and above price between the quantity 0 and the quantity consumers choose to buy Producer Surplus is the amount a seller is paid for a good minus the seller s cost of producing it The area above the supply curve and below the price curve It is between the quantity zero and the quantity firms choose to produce Benefit firms receive from producing a good Efficiency the property of a resource allocation of maximizing the total surplus received by all members of society Maximizing Total Surplus Total surplus a consumer surplus producer surplus sum of the both b value to buyers amount paid by buyers amount received by sellers cost to sellers value to buyers cost to sellers Maximizing total surplus any planned economy 1 Who should consume what we produce People who value the good the highest should consume what we produce 2 How should we produce it The firms that can produce the good at the lowest cost should produce the good 3 What should we produce We should continue to produce each good as long as willingness to pay is at least as large as cost Individuals and firms can make better decisions by thinking at the margin A rational decision maker continues to take an action if and only if the marginal benefit of the action is at least as large at the marginal cost if we are going to follow this rule it tells us that we must continue to produce this good as long as willingness to pay is at least as large as the cost of producing this unit maximize this different by keeping producing as long as above mentioned circumstances are met Clicker Question Answer Explanations 3 electric cars should be produced
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