Microeconomics 2Nd Edition (Krugman, Wells) - Chapter 5: Key Terms

Front 1

"Price controls"
(p. 118)

Back 1

__________ are legal restrictions on how high or low a market price may go. They can take two forms:

Front 2

"Price ceiling"
(p. 118)

Back 2

A ________, a maximum price sellers are allowed to charge for a good or service.

Front 3

"Price floor"
(p. 118)

Back 3

________, a minimum price buyers are required to pay for a good or service.

Front 4

"Deadweight loss"
(p. 121)

Back 4

_________ is the loss in total surplus that occurs whenever an action or a policy reduces the quantity transacted below the efficient market equilibrium quantity.

Front 5

"Inefficient allocation to consumers"
(p. 123)

Back 5

Price ceilings often lead to inefficiency in the form of ____________: people who want the good badly and are willing to pay a high price don't get it, and those who care relatively little about the good and are only willing to pay a low price do get it.

Front 6

"Wasted resources"
(p. 123)

Back 6

Price ceilings typically lead to inefficiency in the form of ___________: people expend money, effort, and time to cope with the shortages caused by the price ceiling.

Front 7

"Inefficiently low quality"
(p. 124)

Back 7

Price ceilings often lead to inefficiency in that the goods being offered are of ____________: sellers offer low-quality goods at a low price even though buyers would prefer a higher quality at a higher price.

Front 8

"Black markets"
(p. 125)

Back 8

A ____________ is a market in which goods or services are bought and sold illegally--either because it is illegal to sell them at all or because the prices charged are legally prohibited by a price ceiling.

Front 9

"Minimum wage"
(p. 127)

Back 9

The ____________ is a legal floor on the wage rate, which is the market price of labor.

Front 10

"Inefficient allocation of sales among sellers"
(p. 130)

Back 10

Price floors lead to ____________: those who would be willing to sell the good at the lowest price are not always those who actually manage to sell it.

Front 11

"Inefficiently high quality"
(p. 130)

Back 11

Price floors often lead to inefficiency in that good of ____________ are offered: sellers offer high-quality goods at a high price, even though buyers would prefer a lower quality at a lower price.

Front 12

"Quantity control"
(p. 133)

Back 12

A __________ or quota, is an upper limit on the quantity of some good that can be bought or sold.

Front 13

"Quota"
(p. 133)

Back 13

A quantity control or _________, is an upper limit on the quantity of some good that can be bought or sold.

Front 14

"Quota limit"
(p. 133)

Back 14

The total amount of a good that can be legally transacted is the ____________.

Front 15

"License"
(p. 133)

Back 15

A _______ gives its owner the right to supply a good.

Front 16

"Demand price"
(p. 134)

Back 16

The ____________ of a given quantity is the price at which consumers will demand that quantity.

Front 17

"Supply price"
(p. 135)

Back 17

The ____________ of a given quantity is the price at which producers will supply that quantity.

Front 18

"Wedge"
(p. 136)

Back 18

A quantity control, or quota, drives a _______ between the demand price and the supply price of a good; that is, the price paid by buyers ends up being higher than that received by sellers.

Front 19

"Quota rent"
(p. 136)

Back 19

The difference between the demand and supply price at the quota limit is the ___________, the earnings that accrue to the license-holder from ownership of the right to sell the good. It is equal to the market price of the license when the licenses are traded.