Chapter 4 Homework

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.

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

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

"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 floor or price ceilings,

some people win, some people lose, and there is a loss of economic efficiency.

Tax incidence is

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