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26 Cards in this Set

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A legally determined maximum price that sellers may charge

Price ceiling

A legally determined minimum price that sellers may receive

Price floor

A benefit or cost that affects someone who isn't directly involved in the production or consumption of a good or service

Externality

The difference between the highest price a consumer is willing to pay for a good or service and the price the consumer actually pays

Consumer surplus

The additional benefit to a consumer from consuming one more unit of a good or service

Marginal benefit

Total amount of __ __ is equal to the area below the demand curve and above the market price

Consumer surplus

The additional cost to a firm of producing one more unit of a good or service

Marginal cost

The difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives

Producer surplus

Total amount of __ __ is the area above the market supply curve and below the market price

Producer surplus

Equilibrium in a competitive market results in the economically efficient level of output, where __ __ equals __ __

Marginal benefit; marginal cost

The sum of consumer surplus and producer surplus

Economic surplus

The reduction in economic surplus resulting from a market not being in competitive equilibrium

Deadweight loss

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 consumer surplus and producer surplus is at a maximum

Economic efficiency

Equilibrium in a competitive market results in the greatest amount of __ __, or the total net benefit to society, from the production of a good or service

Economic surplus

A market in which buying and selling take place at prices that violate govt price regulations

Black market

The cost borne by the producer of a good or service

Private cost

The total cost of producing a good or service, including both the private cost and any external cost

Social cost

The benefit received by the consumer of a good or service

Private benefit

The total benefit from consuming a good or service, including both the private benefit and any external benefit

Social benefit

When there is a __ __ in producing a good or service, too much of the good or service will be produced at market equilibrium

Negative externality

When there is a __ __, too little of the good or service will be produced at market equilibrium

Positive externality

A situation in which the market fails to produce the efficient level of output

Market failure

The rights individuals or businesses have to the exclusive use of their property, including the right to buy or sell it

Property rights

__ & __ __ result from incomplete property rights or from the difficulty of enforcing property rights in certain situations

Externalities & market failures

Govt taxes and subsidies intended to bring about an efficient level of output in the presence of externalities

Pigovian taxes and subsidies

An approach that involves the govt imposing quantitative limits on the amount of pollution firms are allowed to emit or requiring firms to install specific pollution control devices

Command-and-control approach