4. Economic Efficiency, Government Price Setting, and Taxes

4 Economic - minus the total amount they must pay to buy the good or services Similarly producer surplus measures the net benefit received by

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Economic Efficiency, Government Price Setting and Taxes - Price ceiling – a legally determined maximum price that sellers may charge - Price Floor- a legally determined minimum price that sellers may receive - Consumer Surplus – the difference between the highest price a consumer is willing to pay for a good or service and the price the consumer actually pays - Marginal Benefit – the additional benefit to a consumer from consuming one more unit of a good or service - Marginal Cost – the additional cost to a firm of producing one more unit of a good or service - Producer Surplus – the difference between the lowest price a firm would be willing to accept for a good or service and the price actually receives Consumer surplus measures the net benefit to consumers from participating in a market rather than the total benefit. Consumer surplus in a market is equal to the total benefit received by consumers
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: minus the total amount they must pay to buy the good or services Similarly, producer surplus measures the net benefit received by producers from participating in a market Producer surplus in a market is equal to the total amount firms receive from consumers minus the cost of producing the good or service-Deadweight Loss – the reduction in economic surplus resulting from a market not being in competitive equilibrium-Economic Efficiency – 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 consumers surplus and producer surplus is at a maximum-Black Market – a market in which buying and selling take place at prices that violate government price regulation-Tax Incidence – the actual division of the burden of a tax between buyers and sellers in a market...
View Full Document

This note was uploaded on 01/19/2012 for the course CIT 230 taught by Professor Staff during the Fall '08 term at Oakland University.

Page1 / 2

4 Economic - minus the total amount they must pay to buy the good or services Similarly producer surplus measures the net benefit received by

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online