CH.5 MARKET OUTCOMES & TAX INCIDENCE

Question 1

The branch of economics that studies how the allocation of resources affects economic well-being

Answer 1

Welfare Economics

Question 2

The difference between the willingness to pay for a good (or service) and the price that is paid to get it.

Answer 2

Consumer Surplus

Question 3

The minimum price a seller will accept to sell a good or service.

Answer 3

Willingness to Sell

Question 4

The difference between the willingness to sell a good or service and the price that the seller receives.

Answer 4

Producer Surplus

Question 5

Adding consumer and producer surplus gives us

Answer 5

Total Surplus/Social Welfare

Question 6

When an allocation of resources maximizes total surplus, the result is said to be

Answer 6

Efficient

Question 7

The fairness of the distribution of benefits among

the members of a society

Answer 7

Equity

Question 8

Taxes levied on a particular good or service

Answer 8

Excise Taxes

Question 9

The burden of taxation on the party who pays the tax through higher prices, regardless of whom the tax is actually levied on

Answer 9

Incidence

Question 10

The decrease in economic activity caused by market distortions.

Answer 10

Deadweight Loss

Question 11

The maximum price a consumer will pay for a good; also called the reservation price

Answer 11

Willingness to Buy