Economics Exam #2
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 & 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 & D
Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram to the right, 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 to the right by area ___.
- Consumer -A
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 & F - E & G
A black market is:
A market in which buying and selling takes places at prices that violate government price regulations.
How do property rights affect externalities and market failure?
Externalities and market failure will result from market failure.
"Rent controls, government farm programs, and other price ceilings and price floors are bad." This is an example of a: (1) Normative statement - concerned with what should be (2) Positive Statement - concerned with what is
Normative statement - the statement is concerned with what should be.
If an externality is present, resulting in market failure, then:
Private solutions may reduce or correct market failures.
The incidence is:
The actual division of the burden of a tax between buyers and seller in a market
In the diagram, marginal benefit is ________ marginal cost at output level Q2. This output level is considered economically _________.
- Equal to - Efficient
Consumer and producer surplus measure the _____ benefit rather than the _____ benefit.
- Net -Total
A _________ is a legally determined maximum that sellers may charged. A _________ is a legally determined minimum price that sellers may receive.
- Price Ceiling -Price Floor
Economic efficiency is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to:
It's marginal cost of production and in which the the sum of consumer and producer surplus is at a maximum.
When the government imposes price floors or price ceilings: (1) Everyone wins, good and services distribution is more just, and there is an increase in economic efficiency. (2) Some people win, some people lose, and there is an increase in economic efficiency. (3) Some people win, some people lose, and there is a loss of economic efficiency.
Some people win, some people lose, and there is a loss of economic efficiency.
_______ 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
Economic surplus in a market is the sum of ____ surplus and _____ surplus. In a competitive market with many buyers and sellers and no government restriction, economic surplus is at a _______ when the market is in ______.
-Consumer -Producer -Maximum -Equilibrium
