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Econ Exam II

Terms in this set (28)

Consumer Surplus
The difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays.
Producer Surplus
is the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives
Marginal Cost
the additional cost to a firm of producing one more unit of good or service
Deadweight Loss
The reduction in economic surplus resulting from a market not being in competitive equilibrium
Price Ceiling
A legally determined maximum price that sellers can charge
Price Floor
A legally determined minimum price that sellers may receive
Tax Incidence
The actual division of the burden of a tax between buyers and sellers in a market
Area of CS or PS
Area= 1/2 (Base)(height)
Externality
A benefit or cost that affect someone who is not directly involved in the production or consumption of a good or service
Private costs
Paid by the firm or consumer and must be included in production and consumption decisions
Social Costs
Include both the private costs and any other external costs to society arising from the production or consumption of a good or service
Transactions costs
the costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services
Command-and-control approach
A policy that involves the government imposing quantitative limits on the amount of pollution firms are allowed to emit, or requiring firms to install specific pollution control devices
Rivalry
the situation that occurs when one person's consuming a unit of a good means no one else can consume it
Excludability
the situation in which anyone who does not pay fora good cannot consume it
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