Macro Chapter 4 HW
In the diagram to the right, 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 by area _______.
Producer; B
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
Tax incidence is
the actual division of the burden of a tax between buyers and sellers in a market.
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 to the right, illustrating a binding price floor at P Subscript 1, the amount of consumer surplus transferred to producers is represented by area _____ and the deadweight loss is equal to areas _________.
B; C and E.
Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram, deadweight loss is equal to the area(s):
C and E
In the diagram to the right, 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 by area ______.
Consumer; A
In the diagram, marginal benefit ________ marginal cost at output level Q2. This output level is considered economically _______.
is equal to; efficient.
"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.
When the government imposes price floors or price ceilings,
some people win, some people lose, and there is a loss of economic efficiency.
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.
