曼昆经济学原理英文版习题答案第7章CONSUMERS PRODUCERS AND THE EFFICIENCY OF MARKETS.docx
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曼昆经济学原理英文版习题答案第7章CONSUMERS PRODUCERS AND THE EFFICIENCY OF MARKETS.docx
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曼昆经济学原理英文版习题答案第7章CONSUMERSPRODUCERSANDTHEEFFICIENCYOFMARKETS
7
CONSUMERS,PRODUCERS,ANDTHEEFFICIENCYOFMARKETS
rkets
WHAT’SNEWINTHESEVENTHEDITION:
ThereisanewIntheNewsfeatureon"TheInvisibleHandCanParkYourCar."
LEARNINGOBJECTIVES:
Bytheendofthischapter,studentsshouldunderstand:
Øthelinkbetweenbuyers’willingnesstopayforagoodandthedemandcurve.
Øhowtodefineandmeasureconsumersurplus.
Øthelinkbetweensellers’costsofproducingagoodandthesupplycurve.
Øhowtodefineandmeasureproducersurplus.
Øthattheequilibriumofsupplyanddemandmaximizestotalsurplusinamarket.
CONTEXTANDPURPOSE:
Chapter7isthefirstchapterinathree-chaptersequenceonwelfareeconomicsandmarketefficiency.Chapter7employsthesupplyanddemandmodeltodevelopconsumersurplusandproducersurplusasameasureofwelfareandmarketefficiency.TheseconceptsarethenutilizedinChapters8and9todeterminethewinnersandlosersfromtaxationandrestrictionsoninternationaltrade.
ThepurposeofChapter7istodevelopwelfareeconomics—thestudyofhowtheallocationofresourcesaffectseconomicwell-being.Chapters4through6employedsupplyanddemandinapositiveframework,whichfocusedonthequestion,“Whatistheequilibriumpriceandquantityinamarket?
”Thischapternowaddressesthenormativequestion,“Istheequilibriumpriceandquantityinamarketthebestpossiblesolutiontotheresourceallocationproblem,orisitsimplythepriceandquantitythatbalancesupplyanddemand?
”Studentswilldiscoverthatundermostcircumstancestheequilibriumpriceandquantityisalsotheonethatmaximizeswelfare.
KEYPOINTS:
∙Consumersurplusequalsbuyers’willingnesstopayforagoodminustheamounttheyactuallypay,anditmeasuresthebenefitbuyersgetfromparticipatinginamarket.Consumersurpluscanbecomputedbyfindingtheareabelowthedemandcurveandabovetheprice.
∙Producersurplusequalstheamountsellersreceivefortheirgoodsminustheircostsofproduction,anditmeasuresthebenefitsellersgetfromparticipatinginamarket.Producersurpluscanbecomputedbyfindingtheareabelowthepriceandabovethesupplycurve.
∙Anallocationofresourcesthatmaximizesthesumofconsumerandproducersurplusissaidtobeefficient.Policymakersareoftenconcernedwiththeefficiency,aswellastheequality,ofeconomicoutcomes.
∙Theequilibriumofsupplyanddemandmaximizesthesumofconsumerandproducersurplus.Thatis,theinvisiblehandofthemarketplaceleadsbuyersandsellerstoallocateresourcesefficiently.
∙Marketsdonotallocateresourcesefficientlyinthepresenceofmarketfailuressuchasmarketpowerorexternalities.
CHAPTEROUTLINE:
I.Definitionofwelfareeconomics:
thestudyofhowtheallocationofresourcesaffectseconomicwell-being.
Studentsoftenareconfusedbytheuseoftheword“welfare.”Remindthemthatwearetalkingaboutsocialwell-beingandnotpublicassistance.
II.ConsumerSurplus
A.WillingnesstoPay
1.Definitionofwillingnesstopay:
themaximumamountthatabuyerwillpayforagood.
2.Example:
Youareauctioningamint-conditionrecordingofElvisPresley’sfirstalbum.Fourbuyersshowup.Theirwillingnesstopayisasfollows:
StudentswillunderstandconsumersurplusifyoutakethetimetoworkthroughtheElvisPresleyexample.Ifyoustartwiththissimpleexample,studentswillhavenotroubleunderstandinghowtofindconsumersurplusonagraph.
Table1
Buyer
WillingnesstoPay
John
$100
Paul
$80
George
$70
Ringo
$50
Ifthebiddinggoestoslightlyhigherthan$80,allbuyersdropoutexceptforJohn.BecauseJohniswillingtopaymorethanhehastoforthealbum,hederivessomebenefitfromparticipatinginthemarket.
3.Definitionofconsumersurplus:
theamountabuyeriswillingtopayforagoodminustheamountthebuyeractuallypaysforit.
4.Notethatifyouhadmorethanonecopyofthealbum,thepriceintheauctionwouldendupbeinglower(alittleover$70inthecaseoftwoalbums)andbothJohnandPaulwouldgainconsumersurplus.
Activity1—ValueofaTimeMachine
Type:
In-classdemonstration
Topics:
Consumersurplus
Materialsneeded:
None
Time:
10minutes
Classlimitations:
Worksinanysizeclass
Purpose
Consumersurpluscanbeahardconceptforstudentsbecauseitisbasedonavoidedexpenseratherthanonmoneythatisactuallyexchanged.Thisexampleputsaspecificdollarvalueonconsumersurplus.
Instructions
Telltheclass,“Anewtechnologyhasbeendevelopedthatallowsindividualstotravelbackwardorforwardintime.Wewanttoidentifythevaluethistimemachineprovidestoconsumers.Let’sassumethefourconsumerswhomostdesirethisproductareinthisclass.”
Choosefourstudentnamesandusetheminthefollowingexample:
“Scottistheconsumerwhomostvaluesthisproduct.Hewantstogobacktothetimeofthedinosaurs.Heiswillingtopay$3,000.”
“Carolistheconsumerwiththenexthighestwillingnesstopay.Shewouldliketosee200yearsinthefuture.She’dpay$2,500.”
“Steveisthenexthighestbidder.He’dliketorelivethisentiresemester.He’llpayupto$800.”
“Jeanneisourfourthconsumer.She’dpay$200tomovetheclockforwardtotheendofthisclassperiod.”
Ontheboardwrite:
Scott$3,000
Carol$2,500
Steve$800
Jeanne$200
“Thisrepresentsthedemandcurveforthetimemachine.Consumersurplusisthedifferencebetweenwhatconsumersarewillingtopayandtheamounttheyactuallyhavetopay.Themarketpricewilldeterminewhousesthetimemachineandhowmuchsurplustheykeep.”
“Ifthepriceofatimemachineridewas$500,threerideswouldbesold—onetoScott,onetoCarol,andonetoSteve.Jeanneisnotwillingtopay$500,soshewouldn’ttimetravel.”
“Wecancalculatetheconsumersurplusofthreetimetrips.Scottwouldpay$3,000butonlypays$500,leaving$2,500ofnetbenefits.”(Putthesenumbersontheboard.)“Carolhasnetbenefitsof$2,000.Stevehas$300innetbenefits.Addingupthesenetsavingsgives$4,800inconsumersurplus.”
PointsforDiscussion
Theconsumersurplusdependsonagood’ssellingpriceandthenumberofconsumerswhoarewillingtopurchasethegoodatthatprice.Thelowertheprice,thegreatertheconsumersurplus.
B.UsingtheDemandCurvetoMeasureConsumerSurplus
1.WecanusetheinformationonwillingnesstopaytoderiveademandcurvefortherareElvisPresleyalbum.
PriceofAlbum
Figure1
100
Price
Buyers
80
QuantityDemanded
Morethan$100
None
70
0
$80to$100
John
1
$70to$80
John,Paul
50
2
$50to$70
John,Paul,George
Demand
3
$50orless
John,Paul,George,Ringo
4
Quantity
4
2
3
1
0
2.Atanygivenquantity,thepricegivenbythedemandcurvereflectsthewillingnesstopayofthemarginalbuyer.Becausethedemandcurveshowsthebuyers’willingnesstopay,wecanusethedemandcurvetomeasureconsumersurplus.
Figure2
3.Consumersurpluscanbemeasuredastheareabelowthedemandcurveandabovetheprice.
C.HowaLowerPriceRaisesConsumerSurplus
Figure3
1.Aspricefalls,consumersurplusincreasesfortworeasons.
a.Thosealreadybuyingtheproductwillreceiveadditionalconsumersurplusbecausetheyarepayinglessfortheproductthanbefore(areaAonthegraph).
b.Becausethepriceisnowlower,somenewbuyerswillenterthemarketandreceiveconsumersurplusontheseadditionalunitsofoutputpurchased(areaBonthegraph).
D.WhatDoesConsumerSurplusMeasure?
Itisimportanttostressthatconsumersurplusismeasuredinmonetaryterms.Consumersurplusgivesusawaytoplaceamonetarycostoninefficientmarketoutcomes(duetogovernmentinvolvementormarketfailure).
1.Rememberthatconsumersurplusisthedifferencebetweentheamountthatbuyersarewillingtopayforagoodandthepricethattheyactuallypay.
2.Thus,itmeasuresthebenefitthatconsumersreceivefromthegoodasthebuyersthemselvesperceiveit.
ALTERNATIVECLASSROOMEXAMPLE:
ReviewthematerialonpriceceilingsfromChapter6.Redrawthemarketfortwo-bedroomapartmentsinyourtown.Drawinapriceceilingbelowtheequilibriumprice.
Thengothrough:
▪consumersurplusbeforethepriceceilingisputintoplace.
▪consumersurplusafterthepriceceilingisputintoplace.
III.ProducerSurplus
A.CostandtheWillingnesstoSell
1.Definitionofcost:
thevalueofeverythingasellermustgiveuptoproduceagood.
Youwillneedtotakesometimetoexplaintherelationshipbetweentheproducers’willingnesstosellandthecostofproducingthegood.Therelationshipbetweencostandthesupplycurveisnotasapparentastherelationshipbetweenthedemandcurveandwillingnesstopay.
2.Example:
Youwanttohiresomeonetopaintyourhouse.Youacceptbidsfortheworkfromfoursellers.Eachpainteriswillingtoworkifthepriceyouwillpayexceedsheropportunitycost.(Notethatthisopportunitycostthusrepresentswillingnesstosell.)Thecostsare:
Table2
Seller
Cost
Mary
$900
Frida
$800
Georgia
$600
Grandma
$500
3.Biddingwillstopwhenthepricegetstobeslightlybelow$600.AllsellerswilldropoutexceptforGrandma.BecauseGrandmareceivesmorethanshewouldrequiretopaintthehouse,shederivessomebenefitfromproducinginthemarket.
4.Definitionofproducersurplus:
theamountasellerispaidforagoodminustheseller’scostofprovidingit.
5.Notethatifyouhadmorethanonehousetopaint,thepriceintheauctionwouldendupbeinghigher(alittleunder$800inthecaseoftwohouses)andbothGrandmaandGeorgiawouldgainproducersurplus.
B.Usingt
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