Ch 4. Economic Efficiency, Government Price Setting, and Taxes
Price ceiling
A legally determined maximum price that sellers may charge.
Price floor
A legally determined minimum price that sellers may receive.
Black market
A market in which buying and selling take places at prices that violate government regulations.
Economic efficiency
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 of surplus is at a maximum.
Tax incidence
The actual division of the burden of a tax between buyers and sellers in a market.
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.
Consumer surplus
The difference between the highest price a consumer is willing to pay for a good or service and the price the consumer actually pays.
Producer surplus
The difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives.
Deadweight loss
The reduction in economic surplus resulting from a market not being in competitive equilibrium.
Economic surplus
The sum of consumer surplus and producer surplus.
