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