According to the lecture, economic welfare or value created represents:

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Question restatement: According to the lecture, economic welfare or value created represents:

Option 1: The total costs of production including opportunity cost. This describes total costs (costs to produce), not economic welfare. Welfare is not the sum of costs; it is concerned with benefits to buyers and sellers relative to costs, so this option misidentifies welfare as a cost measure.

Option 2: The sum of consumer surplus and producer surplus. This matches the standard definition of economic welfare: total benefits to society from a market, captured by the area between the willingness-to-pay (demand) and the price, plus the area received by producers (price minus cost) across all units sold. It aggregates both sides of the market and thus represents value created in the economy.

Option 3: The difference between the market price and production cost. That difference resembles a per-unit measure akin to profit or producer surplus on a per-unit basis, but welfare is an aggregate of both consumer and producer surpluses over all units, not just price minus production cost for a single unit. This option captures only part of welfare and ignores consumer benefits.

Option 4: The profits earned by producers in a competitive market. Producer profits are only one component of economic activity and do not account for consumer benefits. Welfare is broader, encompassing both producer and consumer gains, not just profits.

Putting it together, the option that aligns with the lecture’s concept of economic welfare as the total benefits from a market equals the sum of consumer and producer surpluses, while the other options confuse welfare with costs, single-unit profits, or something limited to producers alone.

According to the lecture, economic welfare or value created represents:

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According to the lecture, economic welfare or value created represents:

View Explanation

Log in for full answers

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The sum of consumer surplus and producer surplus is equal to

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Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Tony experiences a

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Figure 9-2Refer to Figure 9-2. The increase in total surplus resulting from trade is