Cfa Level 1 Reading 14 Efficiency And Equity

Front 1

Resources

Back 1

scarce, some mechanism must allocate them

Front 2

Alternative allocation method

Back 2

1. Market Price
2. Command
3. Majority Rule
4. Contest
5. First-come, first served
6. Lottery
7. Personal Characteristics
8. Force

Front 3

Marginal Benefit

Back 3

determines demand, anda demand curve is a marginal benefit curve

Front 4

Market Demand Curve

Back 4

is the horizontal sum of the individual demand curves and is the marginal social benefit curve

Front 5

Value

Back 5

is what people are willing to pay; price is what people must pay

Front 6

Consumer Surplus

Back 6

equals value minus price, summed over the quantity bought

Front 7

Minimum supply price

Back 7

determines supply, and the supply curve is the marginal cost curve

Front 8

Market Supply Curve

Back 8

is the horizontal sum of hte indiividual supply curves and is the marginal social cost curve

Front 9

Opportunity Cost

Back 9

is what producers pay; price is what producers receive

Front 10

Producer Surplus

Back 10

equals price minus opportunity cost, summed over the quantity sold

Front 11

Competitive equilibrium

Back 11

marginal social benefit equals marginal social cost and resource allocation is efficient

Front 12

Buyers and Sellers

Back 12

acting in their self-interest end up promoting the social interest

Front 13

Consumer Surplus and Producer Surplus

Back 13

the sum off consumer surplus and producer surplus is maximized

Front 14

Deadweight Loss

Back 14

producing less than or more than the efficient quantity creates deadweight loss

Front 15

Inefficiency and Deadweight Loss can be created by

Back 15

1. Price and Quantity Regulations
2. Taxes and Subsidies
3. Externalities
4. Public goods
5. Commons Resources
6. Monopoly
7. High Transactions costs

Front 16

Demand Curve

Back 16

is a marginal benefit curve

Front 17

Individual demand

Back 17

hte relationship between the price of a good and the quantity demanded by one person

Front 18

Market Demand

Back 18

the relationship between the price of a good and the quantity demanded by all buyers

Front 19

Market Demand Curve

Back 19

is the horizontal sum of the individual demand curves and is formed by adding the quantities demanded by all the individuals at each price

Front 20

Marginal Social Benefit (MSB)curve

Back 20

The market demand curve

Front 21

Consumer Surplus

Back 21

is the value or marginal benefit of a good minus the price paid for it, summed over teh quantity bought

Front 22

Marginal Cost

Back 22

the cost of producing one more unit of a good or service; the minimum price that producers must receive to induce them to offer to sell another unit of the good ro service, but the minimum supply-price determines supply, a supply curve is a marginal cost curve

Front 23

Market Supply Curve

Back 23

The market supply curve is the horizontal sum of the individual supply curves and is formed by adding the quantities supplied by all the producers at each price; the market supply curve is the economy's marginal social cost(MSC)curve

Front 24

Producer Surplus

Back 24

whenn price exceeds marginal cost, the firm receives a producer surplus; a producer surplus is the price received for a good minus its minimum supply-price or marginal cost, summed over the quantity sold

Front 25

Marginal Social Benefit (MSB)

Back 25

Demand curve is also the MSB curve

Front 26

Marginal Social Cost (MSC)

Back 26

the supply curve is the MSC curve

Front 27

Equilibrium

Back 27

where the demand curve and the supply curve intersect marginal social benefit equals marginal social cost, this condition delivers an efficient use of resources, when the efficient quantity is produced, total surplus (the sum of consumer surplus and producer surplus) is maximized