econ exam

demand curve

a curve that shows the relationship between the price of a product and the quantity of the product demanded

perfectly competitive market

a market where there are many buyers and sellers, all the products being sold are identical, and there are no barriers to new firms entering the market

demand schedules

a table that shows the relationship between price of a product and the quantity of the product demanded

if the price of a product were zero, the consumer surplus in a market would be

all of the area under the demand curve

when the price is not zero, consumer surplus is the

area below the demand curve and above the market price

producer surplus will equal the total revenue received by firms from selling a product in the special case when

cost is zero

when the price of a product falls, the quantity demanded of the product will

decrease

as the price of a good falls, producer surplus

decreases

as the price of a good rises, consumer surplus

decreases

when the price of a product rises, the quantity demanded of the product will

increase

as the price of a good falls, consumer surplus

increases

as the price of a good rises, producer surplus

increases

black market

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

marginal cost of producing a good increases as

more of the good is produced

consumer and producer surplus measure the _____ benefit rather than the _____ benefit

net; total

when the government 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

marginal cost

the additional cost to a firm of producing one more unit of a good or service

quantity demanded

the amount of a good or service that a consumer is willing and able to purchase at a given price

substitution effect

the change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes

income effect

the change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power

market demand

the demand by all the consumers of a given goods or service

consumer surplus

the difference between the highest price a consumer is willing to pay and the price the consumer actually pays

producer surplus is

the difference between the lowest price a firm would be willing to accept and the price it actually receives

law of demand

the inverse relationship between the price of a product and the quantity of the product demanded

economic surplus is maximized when

the marginal benefit of consumption is equal to the marginal costs of production

purchasing power

the quantity of goods a consumer can buy with a fixed amount of income

deadweight loss is

the reduction in economic surplus resulting from a market not being in competitive equilibrium

producer surplus differs from the total benefit producers receive from producing products because it measures

the total revenue received from consumers less the cost incurred to produce the products, and only the net benefit to producers from participating in the market

producer surplus in a market is equal to the

total amount firms receive from consumers minus the cost of producing the good or service

consumer surplus in a market is equal to the

total benefit consumers receive minus the total amount they must pay to buy the good or service