Macro Chapter 4
Country Talmar produces 100,000 cars during a particular year. The market price of cars in Talmar is $5,000. In a recent meeting of the Economic Council, an economist, Carl Anderson claimed the nation's production of cars was inefficiently high because the industry seemed to have positive inventory every year. Another economist, Tara Henderson, felt that the production was inefficiently low because there is a huge segment of the population that does not own cars.
There is a deadweight loss at the given production level.
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.
"Rent controls, government farm programs, and other price ceilings and price floors are bad."
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.
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
Consumer and producer surplus measure the _____ benefit rather than the _____ benefit.
net; total
