Econ Chapter 4

A market in which buying and selling take place at prices that violate government price regulations.

Black market.

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

Consumer surplus.

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

Deadweight loss.

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 efficiency.

The sum of consumer surplus and producer surplus.

Economic surplus.

The additional benefit to a consumer from consuming one more unit of a good or service.

Marginal benefit.

The additional cost to a firm of producing one more unit of a good or service.

Marginal cost.

A legally determined maximum price that sellers may charge.

Price ceiling.

A legally determined minimum price that sellers may receive.

Price floor.

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

Producer surplus.

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

Tax incidence.

What is the name of a legally determined maximum price that sellers may charge? a. A price ceiling b. A price floor c. Marginal benefit d. Consumer surplus

a. A price ceiling

Which of the following is the definition of marginal benefit? a. The additional benefit to a consumer from consuming one more unit of a good or service. b. The additional cost to a firm of producing one more unit of a good or service. c. The difference between the highest price a consumer is willing to pay and the price the consumer actually pays. d. The difference between the lowest price a firm would have been willing to accept and the price it actually receives.

a. The additional benefit to a consumer from consuming one more unit of a good or service.

When is output inefficiently low? a. When marginal benefit is greater than marginal cost. b. When marginal cost is greater than marginal benefit. c. When marginal cost is equal to marginal benefit. d. Any of the above; output can be inefficiently low at any time.

a. When marginal benefit is greater than marginal cost.

If the average price that cable subscribers are willing to pay for cable television is $208, but the actual price they pay is $81, how much is consumer surplus per subscriber? a. $208 + $81 b. $208 - $81 c. $81 + $127 d. $81

b. $208 - $81

What is the name of a legally determined minimum price that sellers may receive? a. A price ceiling b. A price floor c. Marginal benefit d. Consumer surplus

b. A price floor

What does the sum of consumer surplus and producer surplus equal? a. Economic efficiency b. Economic surplus c. A deadweight loss d. Competitive equilibrium

b. Economic surplus

Precisely what does consumer surplus measure? a. The total benefit to consumers from participating in the market b. The net benefit to consumers from participating in the market c. The marginal cost of consumption d. The efficiency of competitive markets

b. The net benefit to consumers from participating in the market

Precisely what does producer surplus measure? a. The total benefit to producers from participating in the market b. The net benefit to producers from participating in the market c. The marginal cost of production d. The efficiency of competitive markets

b. The net benefit to producers from participating in the market

Which of the following statements is correct? a. There is a shortage of every good that is scarce. b. There is no shortage of most scarce goods c. Scarcity and shortage mean pretty much the same thing to economists. d. None of the above statements are correct.

b. There is no shortage of most scarce goods

Which of the following is the definition of marginal cost? a. The additional benefit to a consumer from consuming one more unit of a good or service. b. The difference between the highest price a consumer is willing to pay and the price the consumer actually pays. c. The additional cost to a firm of producing one more unit of a good or service. d. The difference between the lowest price a firm would have been willing to accept and the price it actually receives.

c. The additional cost to a firm of producing one more unit of a good or service.

Which of the following is the definition of consumer surplus? a. The additional benefit to a consumer from consuming one more unit of a good or service. b. The additional cost to a firm of producing one more unit of a good or service. c. The difference between the highest price a consumer is willing to pay and the price the consumer actually pays. d. The difference between the lowest price a firm would have been willing to accept and the price it actually receives.

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

When a competitive market is in equilibrium, what is the economically efficient level of output? a. Any output level where marginal benefit is greater than marginal cost. b. Any output level where marginal cost is greater than marginal benefit. c. The output level where marginal cost is equal to marginal benefit. d. Any of the above; any output level can be efficient or inefficient.

c. The output level where marginal cost is equal to marginal benefit.

36The term tax incidence refers to a. the type of product the tax is levied on. b. the amount of revenue collected by the government from a tax. c. the actual division of the burden of a tax. d. the actual versus the desired impact of a tax burden.

c. the actual division of the burden of a tax.

35When the government imposes price floors or price ceilings, which of the following occurs? a. Some people win b. Some people lose c. There is a loss of economic efficiency d. All of the above

d. All of the above

Which of the following terms corresponds to a market in which buying and selling takes place at prices that violate government price regulations? a. Price conspiracy b. Scalping c. Competitive market d. Black market

d. Black market

Which of the following is the definition of producer surplus? a. The additional benefit to a consumer from consuming one more unit of a good or service. b. The additional cost to a firm of producing one more unit of a good or service. c. The difference between the highest price a consumer is willing to pay and the price the consumer actually pays. d. The difference between the lowest price a firm would have been willing to accept and the price it actually receives.

d. The difference between the lowest price a firm would have been willing to accept and the price it actually receives.