Economics Chapter 4

A black market is

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

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

In the diagram, illustrating a binding price floor at P1, the amount of consumer surplus transferred to producers is represented by area ____ and the deadweight loss is equal to areas ____

B; C and E

In the diagram, marginal benefit ____ marginal cost at output level Q2. This output level is considered economically ____

Is equal to; efficient

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

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

C&E

In the diagram, illustrating a binding price ceiling at P3, the amount of producer surplus transferred to consumers is represented by area ____ and the deadweight loss is equal to areas ____

C; B and D

________________ 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 to the right by area ____

Consumer; A

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

In the diagram, illustrating a per-unit tax equal to P2 minus P3, tax revenue is represented by the areas ____ and the excess burden of the tax is represented by areas ____

D and F; E and G

____ 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 to the right by area ____.

Producer; B

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