Micro chapter 4
If the average price that cable subscribers are willing to pay for satellite TV service is $200, but the actual price they pay is $80, how much is consumer surplus per subscriber?
$200 - $80 = $120
When a competitive market is in equilibrium, what is the economically efficient level of output?
. the output level where marginal cost is equal to marginal benefit
Which of the following statements is correct about a shortage?
There is no shortage of most scarce goods
In response to information regarding the salaries of executives at firms receiving bailout funds in the United States, some people called for a limit on the salaries paid to executives. Such a limit on the compensation executives can receive is an example of
a price ceiling
What is the name of a legally determined maximum price that sellers may charge?
a price ceiling
Some people believe there should be legally determined minimum prices for farm products such as milk. A limit on the price of milk would be an example of
a price floor
What is the name of a legally determined minimum price that sellers may receive?
a price floor
When 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.
Which of the following terms corresponds to a market in which buying and selling take place at prices that violate government price regulations?
black market
What does the sum of consumer surplus and producer surplus equal?
economic surplus
The term tax incidence refers to
the actual division of the burden of a tax between buyers and sellers in a market.
Which of the following is the definition of marginal benefit?
the additional benefit to a consumer from consuming one more unit of a good or service
Which of the following is the definition of marginal cost?
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?
the difference between the highest price a consumer is willing to pay and the price the consumer actually pays
Which of the following is the definition of producer surplus?
the difference between the lowest price a firm would have been willing to accept and the price it actually receive
When is output lower than the efficient level?
when marginal benefit is greater than marginal cost
