Econ ch. 4

do the people who are legally required to pay a tax always bear the burden of the tax? explain

no. whoever bears the burden of the tax is not affected by who legally is required to pay the tax to the government

why do some consumers tend to favor price controls while others tend to oppose them

price ceilings generate shortages. consequently the consumers who obtain the product at a lower price win, but other consumers will lose because they would like to purchase the product but are unable to because of a shortage

do producers tend to favor price floors or price ceilings? why?

price floors because, when binding, price floors increase price above equilibrium and may increase producer surplus

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

producer

tax incidence indicates

the actual division of the burden of a tax

marginal benefit is

the additional benefit from consuming one more unit

marginal cost is

the additional cost of producing one more unit

producer surplus

the difference between lowest price a firm is willing to accept good or service

consumer surplus is

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

consumer surplus

the difference between the highest price a consumer is willing to pay for a good or service and the actual price consumer pays

producer surplus is

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

economic surplus is maximized when

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

deadweight loss is

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

"when a market is in equilibrium, there is no consumer surplus. we know this because in equilibrium, the market price is equal to the price consumers are willing to pay for the good" explain whether you agree

the student is incorrect because the price consumers are willing to pay and the market price are only equal for the last unit consumed

slumlords stop upkeep on the buildings because _____

their cost goes down

suppose that the government sets a price floor for milk that is above the competitive equilibrium price. with the price floor, the deadweight loss is equal to the area

under the demand curve and above the supply curve for units between the quantity with the price floor and market equilibrium quantity

how does consumer surplus change as the equilibrium price of a good rises or falls?

as the price of a good rises, consumer surplus decreases and as the price of a good falls, consumer surplus increases

how does producer surplus change as the equilibrium price of a good rises or falls

as the price of a good rises, producer surplus increases, and as the price of a good falls, producer surplus decreases

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

consumer

with the price floor, consumers are willing to purchase the quantity indicated where the price floor intersects the _____ curve

demand

if san Francisco were to repel its rent control law, the prices for short rentals in the city listed on airbnb and other peer to peer sites would likely

fall because more housing units would become available as the average rent increased

price ceiling

a legally determined max price that sellers can change

price floor

a legally determined minimum price that sellers may receive

a black market is

a market in which buying and selling occur at prices that violate government price regulations

black market

a market in which buying and selling take place that violate government price regulations ex: airbnb

economic surplus

a market is efficient if it maximizes the sum of producer and consumer surplus

tax incidence

actual division of the burden of a tax between buyers and sellers in a market

marginal benefit

additional benefit to a consumer consuming one or more unit of good and service

marginal cost

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

when the government emposes price controls...

-some are made better off -some worse off -the economy suffers as deadweight loss will generally occur

"a lower price in a market always increase economic efficiency in that market"

I disagree, because economic efficiency declines if price falls below the market equilibrium

why is airbnb an example of the black market

if someone destroys the house, you can't clim it for insurance and you can't sue them

according to economists, an efficient tax is one that

imposes a small deadweight loss relative to the tax revenue it raises

black markets may arise

in reaction to binding price ceilings

why is the demand curve referred to as a marginal benefit curve

it shows the willingness of consumers to purchase a product at different prices

why is the supply curve referred to as a marginal cost curve

it shows the willingness of firms to supply a product at different prices

how do you know when you have shortages

lines

lower the price, the lower the ____

marginal

marginal cost equals

marginal benefit

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