Exam 2 Flashcards
(48 cards)
surplus
difference between the price at which the buyer or seller would be willing to trade and the actual price
consumer surplus
measure of consumers benefit from the purchase
producer surplus
measure of a producers benefit from the sale
total surplus
combined benefits that everyone receives from participating in an exchange of goods and services
meanings of efficiency (5)
1.) market is in EQ
2.) total surplus is maximized
3.) there is no under production
4.) there is no over production
5.) no one can be made better off without making someone else worse off
What is deadweightloss
the loss of total surplus that results when the quantity of a good that is bought
and sold below the market equilibrium
total surplus in the economy is reduced when __________ happens
deadweight loss
utility
measures the amount of satisfacti9on a person derives from something
marginal ultility
change in total utility from consuming an additional unit of a good/service
diminishing marginal ultility
additional utility gained from consuming excessive units of a good or service tends to be smaller than the utility gained from the previous
utility maximization
individuals maximize total satisfaction when consuming where marg ult. per dollar is equal for all goods/services
price ceiling
a maximum legal price set by the gov, below the equilibrium
non binding price ceiling
a price ceiling does not always affect the market outcome if the ceiling is set above the equilibrium price
price floor
minimum legal price, price set above the equilibrium, causes deadweight loss
ineffective price floor
a price floor does not always affect the market outcome if the floor is set below the equilibrium price
taxes
typically placed on sellers
tax incidence
the division of tax between buyers and sellers
tax wedge
difference between price paid by buyers and price recieved by sellers
tax causes _______
deadweight loss
a firms goal
maximize profit
accounting profit
TR- Firms explicit costs
Economic profit
TR-Explicit AND implicit costs
Short run
a time frame in which at least one or more resources used in production is fixed, other resources may be variable
long run
a time frame in which the quantities of all resources can be varied or change
