55. The study of how the allocation of resources affects economic well-being is

Question

55. The study of how the allocation of resources affects economic well-being is called welfare economics. We have learned that markets are usually a good way to organize economic activity. Consequently, a result of welfare economics is that the equilibrium price of a product determined by the market forces of supply and demand is considered to be the best price because it a. allows both consumers and producers to maximize their welfare by maximizing welfare of society ir welfare by maximizing welfare of society minimizes the level of welfare payments to those who no longer live below the poverty line . maximizes total revenue for firms and maximizes the quantity supplied of the product d. only allows producers to minimize their costs and maximize profits. Table#2: Per Unit ofa Good Buyer Willingness To Pay(WTP Marcia Jan Cind Gre Peter Bobby $200 $250 S350 $400 $700 $800 56, Refer to Table#2. Who is (or are) reluctant consum a. Marcia, Jan, and Cindy c. Only Cindy. b. Cindy and Greg. d. Peter and Bobby. 57 Refer to Table#2. If the market price is $400, the consumer surplus in the market is a. S50. b. $350 c. d. $850. 58. A seller is NOT willing to sell a product only if the seller receives a price that is, a, just equal to seller's cost of production. c. caused producer surplus lesser than zero. b. caused producer surplus greater than zero. d. caused producer surplus just equal to zero

Explanation / Answer

56). a) Marcia, Jan and Cindy. This is because there willingness to pay is lower than price charged

57). Consumer surplus = Excessive willingness to pay - market price = 800 - 400 + 700 - 400 = 700. Thus the answer is c).

58). c). caused producer surplus lesser than zero. This price will be the price below equilibrium price level, hence making seller incur losses.

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