Chapter 4 Homework

A black market is:

A market in which buying and selling take place at prices that violate government price regulations.

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the​ diagram, deadweight loss is equal to the​ area(s):

C & E

______ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area ______

Consumer; A

___________ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram by area _______

Producer ; B

Economic efficiency is

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.

A price ceiling is a legally determined __________ price that sellers may charge. A price floor is a legally determined ____________ price that sellers may receive.

maximum; minimum

Consumer and producer surplus measure the ______________ benefit rather than the ____________ benefit.

net; total

​"Rent controls, government farm​ programs, and other price ceilings and price floors are​ bad." This is an example of a:

normative statement. The statement is concerned with what should be.

When the government imposes price floors or price​ ceilings,

some people​ win, some people​ lose, and there is a loss of economic efficiency.

Tax incidence is:

the actual division of the burden of a tax between buyers and sellers in a market.

Economic surplus in a market is the sum of​ _____ surplus and​ _____ surplus. In a competitive​ market, with many buyers and sellers and no government​ restrictions, economic surplus is at a​ _____ when the market is in​ _____.

​consumer; producer;​ maximum; equilibrium