Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key

image

Play button

image

Play button

image

Progress

1/26

Click to flip

26 Cards in this Set

  • Front
  • Back
Price Ceiling
A legally determined max price that sellers may charge.
Price Floor
A legally determined min price that sellers may receive.
When the gov't imposes a price ceiling or a price floor, the amount of economic surplus in a market is _____.
Reduced
Marginal benefit
The additional benefit to a consumer from consuming one more unit of a good or service.
Consumer Surplus
The difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
Consumer Surplus
The difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
Nearly all consumers in this market receive some consumer surplus from their purchases because the marginal benefit they receive is__________.
--greater than the price they pay.
The total amount of consumer surplus in a market is equal to the area ________________.
--below the demand curve and above the market price.
Consumer Surplus allows us to measure the __________________________.
--benefit consumers receive in excess of the price they paid to purchase the product.
Marginal Cost
The additional cost to a firm of producing one more unit of a good or service.
Producer Surplus
The difference between the lowest price a firm would have been willing to accept and the price it actually receives.
Therefore, the total amount of producer surplus in a market is equal to the area _____________________.
--above the market supply curve and below the market price.
Equilibrium in a competitive market results in the ___________________________.
--economically efficient level of output, where marginal benefit equals marginal cost.
Economic Surplus
The sum of consumer surplus and producer surplus.
Deadweight Loss
The reduction in economic surplus resulting from a market not being in competitive equilibrium.
Economic Efficiency
A market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production, and in which the sum of consumer surplus and producer surplus is at a maximum.
Equilibrium in a competitve market results in the greatest amount of _______________________.
--economic surplus, or total net benefit to society, from the production of a good or service.
The Gov't can intervene in 2 ways:
1.) attempt to aid sellers by requiring that a price be above equilibrium--a price floor
2.) or to aid buyers by requiring that a price be below equilibrium--a price ceiling.
To affect a market outcome.....a price floor must be set ___ eq price.
--above
..a price ceiling must be set _____ the eq. price.
--below
Price Floor in Ag Markets
*Farm program--where farmers convinced the government to raise prices by setting price floors on ag products.
Price Floor in Labor Markets
*Min Wage--congress set a min wage so it would increas the income of low-skilled workers.
Price Ceilings example
Rent Controls

--price ceiling on the max rent that landlords can charge for an apartment.
Black Market
Buying and selling at prices that violate Gov't price regulations.

example: when producers and consumers find a way around gov't controls like price ceilings and price floors.
The result of Gov't intervention:
1.) some people win
2.) some people lose
3.) There is a loss of economic efficiency.
Tax Incidence
The actual division of the burden of a tax between buyers and sellers in a market.