Economics HW #4

In the diagram to the right, illustrating a binding price floor at P1, the amount of consumer surplus transferred to producers is represented by area _______ and the deadweight loss is equal to areas ________.

B; C and E

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram, deadweight loss is equal to the area(s):

C & E

In the diagram to the right, illustrating a binding price ceiling at P3, the amount of producer surplus transferred to consumers is represented by area __________ and the deadweight loss is equal to areas _________.

C; B and D

In the diagram to the right, illustrating a per-unit tax equal to P2 minus P3 tax revenue is represented by the areas ________ and the excess burden of the tax is represented by areas _________.

D and F; E and G

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 sim of consumer surplus and producer surplus is at a maximum

________ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area _______.

consumer; A

Economic surplus in a market is the sim of ________ surplus and ________ surplus. In a competitive market, with many buyers and sellers and no government restrictions, the economic surplus is at a ________ when the market is in ___________.

consumer; producer; maximum; equilibrium

In the diagram, marginal benefit _________ marginal cost at output level Q1. This output level is considered economically ________.

is greater than; inefficient for Q2, is equal to and efficient

A price ceiling is 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.

___________ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram by area ______.

producer; B

When government imposes price floors on 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.