What is the significance of the concepts "consumer surplus" and "producer surplus"?
What will be an ideal response?
Each is a measure of economic welfare or well-being. The more consumer surplus a buyer can gain from a transaction, the greater is consumer welfare. The more producer surplus a seller can gain from a transaction, the greater is producer welfare. Total surplus is equal to the sum of consumer and producer surplus.
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Returns to specialization can occur when
A) increasing the amount of labor allows workers to specialize. B) the exponents of the Cobb-Douglas production function are greater than 1. C) a firm doubles its inputs. D) the average cost curve is above the marginal costs curve.
If a monopolist has an output price of $10, marginal revenue equal to $4, and faces a fixed wage rate of $7, then the monopolist should hire labor until the marginal revenue product is equal to
A) $10. B) $4. C) $7. D) $14.