Micro, Market Efficiency

If the rectangular area representing the tax revenue collected by the government is __________ and the deadweight loss area is _______ the tax is relatively inefficient at raising revenue.

small and large

When calculating consumer surplus for an individual:

subtract the market price from the price that the person is willing to pay.

A tax on suppliers shifts the:

supply curve up vertically.

Graphically total economic surplus is the entire area between the ___________ and ____________ curves from a quantity of zero to the quantity traded.

supply, demand

All else equal producer________increases at higher prices.

surplus

When a market is not allowed to adjust to the equilibrium price and quantity traded some economic________ will be lost

surplus

When marginal benefit equals marginal cost economic ______ is maximized in that market.

surplus

If high prices are the result of government intervention some producers will be worse off because:

they are not able to sell the good at the given price.

Deadweight loss represents_______-that was never created.

trade, wealth

You received $250 for a stationary bike and had a producer surplus of $50. You were willing to accept $____

200

You paid $25 for a concert ticket and received a consumer surplus of $10. You were willing to pay $

35

The sum of consumer and producer surplus is________ surplus

economic

The value of the __________ surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the deadweight loss.

economic

The value of the_______surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the deadweight loss.

economic

If the rectangular area representing the tax revenue collected by the government is large and the deadweight-loss area is small the tax is relatively_______at raising revenue.

efficient

When the price of a good is exactly equal to the willingness to pay there is negative surplus from the purchase.

false

Producers may gain a little but society as a whole will be worse off with a price _____ because of the deadweight losses.

floor

If an economy is producing on the production possibilities frontier the economy is:

getting as much output as possible from its resources.

Consumer surplus exists when the price that people are willing to pay is_______than what they actually pay

higher

If production exceeds equilibrium quantity:

resources are being wasted.

Suppose the government imposes a tax on suppliers of energy drinks equal to $1 per can. Before the tax, 10,000 cans were sold. After the tax, 8,000 cans are sold. The tax revenue is equal to $

8000

Tax Revenue

= Tax x Qt, where Qt is the quantity traded

price ceiling

A maximum legal price at which a good a service or a resource can be sold is a

excise tax

A tax based on the number of units purchased, not on the price paid for a good or service.

Points that are productively efficient would be located where on the production possibilities frontier (PPF)?

On the PPF

When markets are taxed at low rates it generates a _______ amount of deadweight loss in each of the markets.

Blank 1: small, low, little, lower, smaller, or minimal

Suppose the price of sunglasses falls to $40. What would happen to consumer surplus?

Consumer surplus would increase.

Productive efficiency

Producing output at the lowest possible average total cost of production; using the fewest resources possible to produce a good or service.

Welfare Economics

a branch of economics that focuses on measuring the welfare of market participants and how changes in the market change their well-being

A price floor is:

a minimum legal price at which a good a service or a resource can be sold.

Price floor

a minimum legal price buyers are required to pay for a good or service

Graphically consumer surplus is the area _______ the demand curve and _________ the equilibrium price from zero to the quantity traded.

below, above

Marginal ________ is measured by the demand curve.

benefit

A person will purchase a good or service so long as the person's marginal ___________ is greater than the marginal________

benefit, cost

When calculating producer surplus for the market:

calculate the area above the supply curve and below the equilibrium price from zero to the quantity traded.

When calculating consumer surplus for an entire market:

calculate the area below the demand curve and above the equilibrium price from zero to the quantity traded.

If you are willing and able to pay up to $40 for a new pair of jeans and you then find out that they are on sale for $30 you will receive $10 in _________ surplus

consumer

______________ surplus will always be less with a binding price floor than without.

consumer

Marginal ____________ is measured by the supply curve.

cost

Consumers may gain a little but society as a whole will be worse off with a price ceiling because of the _______ losses.

deadweight

Consumers may gain a little but society as a whole will be worse off with a price ceiling because of the_______losses

deadweight

The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the_________loss

deadweight

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the_______loss

deadweight

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the______loss

deadweight

When too much or too little output gets produced there is:

deadweight loss.

________(one word) loss represents wealth that was never created.

deadweight loss.

As tax rates change:

deadweight losses change.

_________ loss is the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium.

deadwight

The unit used to measure consumer surplus is________

dollars

Low prices are good for consumers:

if they occur naturally in a market.

Producer surplus can increase or decrease as a result of a price floor depending on how much the price is forced to:

increase and how much the quantity supplied rises.

All else equal, as the price of a good decreases, consumer surplus

increases

A tax:

increases the cost of goods produced and shifts the supply curve up.

A person will purchase a good or service so long as the person's:

marginal benefit is greater than the marginal cost.

If low prices are the result of government intervention:

overall consumer surplus can increase or decrease depending on how much the price is forced to decrease and how much the quantity supplied falls.

If high prices are the result of government intervention:

overall producer surplus can increase or decrease depending on how much the price is forced to increase and how much the quantity supplied rises.

Allocative and productive efficiency occur when the equilibrium_____ such that the quantity demanded equals the quantity supplied.

price

Gains from trade in the market are maximized when the equilibrium ________ is such that the quantity demanded equals the quantity supplied.

price

All else equal ________ surplus is higher at higher prices.

producer

If you were willing to sell your used car for $3,000 but someone paid you $3,500 for it, you received________surplus of $500.

producer

The difference between the price producers receive for a good or a service and the minimum price they are willing and able to accept is ________surplus.

producer

________ surplus will always be less with a binding price ceiling than without.

producer

_________surplus will always be less with a binding price ceiling than without.

producer

With a binding price ceiling:

producers always lose.

allocative efficiency

producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost Marginal Benefit of Last Unit = Marginal Cost of Last Unit MB = MC

If an economy is producing on the production possibilities frontier the economy is:

productively efficient.

Consumer Surplus

the difference between the maximum price a consumer is willing to pay for a good or service and the price they actually pay. Consumer surplus also can be thought of as the wealth that trade creates for consumers in a market. Consumer surplus is measured in dollars. Graphically, consumer surplus is the area below the demand curve and above the equilibrium price, from zero to the quantity traded .

Producer Surplus

the difference between the price producers receive for a good or service and the minimum price they are willing and able to accept. Producers surplus also can be thought of as the wealth that trade creates for producers in a market. Producers surplus is measured in dollars. Graphically, producers surplus is the area below the equilibrium price and above the supply curve, from zero to the quantity traded

Gains from trade in the market are maximized when:

the equilibrium price is such that the quantity demanded equals the quantity supplied.

Economic Surplus

the sum of consumer surplus and producer surplus; measure of total welfare or wealth, that trade creates for consumers and producers in a market. Also known as social welfare or total surplus.

The quantity traded times the tax equals:

the tax revenue from a tax.

Deadweight loss

the value of the economic surplus that is foregone when a market is not allowed to adjust to its competitive equilibrium

Producer surplus can be thought of as the:

wealth that trade creates for producers in a market.

Graphically consumer surplus is the area below the demand curve and above the equilibrium price from ________ to the quantity traded.

zero