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13 Cards in this Set
- Front
- Back
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Efficient allocation
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allocation of resources that occurs when G/S are produced that poeple highly value
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Marginal Benefit
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*benefit a consumer receives from consuming one more unit of good
*Maximum someone is willing to pay ***D = MB |
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Marginal Cost
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*OC of producing one more unit of a good or service
*As more product is producted the marginal cost increases *Minimum price a supplier will accept ****S = MC |
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Consumer surplus
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Value of the goood minus the price paid for it
Area under the D and above the market price |
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Producer surplus
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Price of the good minus the opportunity cost of producing it
Area below the market price and above the supply curve |
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When is a competitive market efficient?
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When MB = MC!
Occurs when the quantity produced is the same quantity highly valued/demanded |
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What happens when MB > MC
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Product is more highly valued than it costs
Increases production |
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What happens when MC > MB
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Product costs more than it is valued
Decrease in production |
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Effect of taxes on price and quantity produced
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Taxes increase the price to buyers
Lowers the price received by sellers Decreases the quantity produced |
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Deadweight loss
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Decrease in consumer surplus and producer surplus that results from an inefficient level of production
*A loss for society |
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Underproduction
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causese a deadweight loss to the left of the equilibrium price
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Overproduction
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causes a deadweight loss to the right of the equilibrium price
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Who is affected by a deadweight loss?
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Loss toward the entire society
Does not soley effect the producer or consumer |
