Market Economics Quiz: Price Ceilings and Taxes

A government-imposed maximum price for a good or service. It prevents prices from rising above a certain level.

A government-imposed minimum price for a good or service. It prevents prices from falling below a certain level.

The percentage change in the response variable divided by the percentage change in the trigger variable. It measures the sensitivity of one variable to changes in another.

A type of tax levied on the production or sale of a specific good or service. The burden of the tax can be shared between producers and consumers.

The output level where the combined welfare of producers and consumers is maximized. This occurs at the equilibrium point where supply and demand intersect.

The difference between a consumer's willingness to pay for a good and the actual price they pay.

A measure of the well-being of consumers, calculated as the area below the demand curve and above the market price.

Describes a situation where the total surplus (consumer surplus + producer surplus) is maximized.

The amount producers gain from selling a good, measured as the difference between the market price and the minimum price they're willing to sell at.

The area below the market price and above the supply curve.

The sum of consumer surplus and producer surplus, representing the total welfare from a market.

A situation where the market fails to allocate resources efficiently, often due to factors like externalities or monopolies.

The study of how resource allocation impacts economic well-being, considering the welfare of both consumers and producers.

The fairness or equity of the distribution of benefits from a market among buyers and sellers.

The assumption that markets should be left alone to function without government intervention.

The level of output produced by a market.

The process of determining the optimal allocation of resources in a market by finding the equilibrium price and quantity where supply and demand intersect.

The willingness to pay for the last unit of a good consumed.

The sum of all individual willingness to pay for a particular quantity of goods or services in a market.

The relationship between the quantity of a good demanded and the price consumers are willing to pay for it.

The point where the supply and demand curves intersect. It represents the equilibrium price and quantity.

The loss of total surplus that occurs when the quantity of a good traded is below the market equilibrium quantity.

The burden of an excise tax, who ultimately bears the cost of the tax.

The area below the demand curve and above the equilibrium price. It represents the consumer surplus.

The area above the supply curve and below the equilibrium price. It represents the producer surplus.

The area between the demand and supply curves, representing the lost total surplus due to a market intervention.

The concept that the government's intervention in markets, like taxes and price controls, can create deadweight loss.

Taxes and price controls, which interfere with free market equilibrium, can create deadweight loss.

A situation where the quantity traded is zero or close to zero, leading to a lower total surplus than what could be achieved in a well-functioning market.

A situation where the quantity traded is not at the efficient level, resulting in a loss of total surplus.

A situation where the gains of one party come at an equal expense to another party. There's no net gain in the overall value.

The concept that voluntary exchanges can benefit everyone involved. It creates value and makes both buyers and sellers better off.

The ability of a market to reach its efficient outcome, maximizing total surplus. This occurs when the market is perfectly competitive and well-functioning.

The minimum price a seller is willing to accept for a good or service.

The difference between the price paid by buyers and the price received by sellers in a market with a tax imposed.

The situation where the distribution of surplus in a market might not be equitable, even if the market is efficient.

Government intervention in the market to alter the distribution of surplus, such as through imposing a minimum wage.

A statement focusing on objective facts and relationships.

A statement expressing value judgments and opinions about what ought to be.

A statement about how much an individual would be willing to pay for a good or service, reflecting their preferences.

The amount of money the government collects from taxes.

When a tax is imposed, the quantity supplied and demanded decreases.

The amount of money the government spends on a program.

The price that sellers receive after paying the tax.

The new supply curve that reflects the tax on sellers.

Both producers and consumers share the burden of the tax.

When the government provides financial assistance to producers.

Buyers pay a higher share of the tax when demand is less elastic than supply.

When producers receive a subsidy, the supply curve shifts downward.

A situation where the quantity supplied exceeds the quantity demanded at the prevailing price, often caused by a price floor.

The point where the supply and demand curves intersect, representing the price and quantity at which the market is in perfect balance.

The amount of a good or service that buyers are willing and able to purchase at a given price.

The amount of a good or service that producers are willing and able to sell at a given price.

A measure of how responsive the quantity demanded is to changes in the price. It helps determine how much the price influences consumer purchases.

A measure of how responsive the quantity supplied is to changes in the price. It helps determine how much the price influences producer supply.

The portion of a tax burden that falls on consumers.

The portion of a tax burden that falls on producers.

The impact of a tax on the price and quantity traded in a market.

A tax levied as a percentage of the value of a good or service.

The situation when demand is more responsive to price changes than supply.

The situation when supply is more responsive to price changes than demand.

Costs that a firm incurs for the factors of production, like land, labor, and capital. These costs represent the payments made to resource owners for their contributions to the firm's production process.

Costs that involve actual out-of-pocket expenses or payments made by a firm. These are the costs that appear on the company's accounting records.

Opportunity costs associated with a firm's resources that don't involve a direct cash outlay. These costs represent the value of the resources in their best alternative use.

The value of the resources a firm uses in their best alternative employment. For example, the value of the firm's land in its highest-paying alternative use.

The profit calculated by subtracting explicit costs from total revenue. This is the bottom line reported by accountants.

The profit calculated by subtracting both explicit and implicit costs from total revenue. This reflects the true cost of using resources in a particular business activity.

A formula for calculating the total satisfaction a person derives from consuming a combination of goods and services.

A unique combination of goods and services that a person chooses to consume. Refers to a specific set of items a person decides to buy.

A decision-making method where individuals choose actions that they believe will yield the highest level of satisfaction (utility).

The additional satisfaction a person gains from consuming one more unit of a good or service.

The principle that as a person consumes more of a good or service, the additional satisfaction (marginal utility) gained from each additional unit tends to decrease. The extra joy from one more is less than the joy from the previous one.

A line that represents all the possible combinations of goods and services that an individual can consume given their budget and the prices of those goods.

A consumer who always makes rational decisions to maximize their utility given their budget constraint.

The value of something that is forgone when a person chooses one option over another. It represents the alternative that was not chosen.

The value the seller could gain by using the product for themselves or selling it elsewhere.

Measures the responsiveness of quantity demanded to changes in price.

Measures the responsiveness of quantity supplied to changes in price.

The total satisfaction a consumer gains from consuming a specific good or service within a given time period.

The principle that each additional unit consumed provides less additional satisfaction than the previous unit.

The combined welfare of producers and consumers is maximized at the equilibrium point where supply and demand intersect.

The analysis of subsidies is the opposite of an excise tax, shifting the supply curve down instead of up, leading to a lower equilibrium price and higher quantity.

Consumer preferences are the tastes and desires that drive their choices.

Incomes of consumers affect demand depending on whether the good is normal or inferior.

The price of related goods can shift the demand curve for a good. Substitutes compete, complements enhance.

The price of a good itself causes movement along the demand curve.

The number of buyers in a market affects overall demand.

The per-unit cost of producing an additional unit of output. It's calculated as the change in total cost divided by the change in quantity.

The average cost per unit of output. It's calculated by dividing total cost by the quantity produced.

The cost of fixed inputs (like rent) divided by the quantity produced. AFC decreases as output increases.

The cost of variable inputs (like labor) divided by the quantity produced. AVC may increase or decrease as output changes.

The relationship where Marginal Cost (MC) intersects Average Total Cost (ATC) at its lowest point. When MC < ATC, ATC decreases; when MC > ATC, ATC increases.

A shift in the budget line outward, indicating an increase in purchasing power.

The tendency to consume more of a good when its price decreases, reflecting the increased purchasing power.

The tendency to substitute a cheaper good for a more expensive one.

The satisfaction we receive from a product, taking into account factors like personal preferences and the opinions of others.

Getting a good feeling from helping others, leading to a personal increase in utility.

The tendency to respond to an action with a similar action, either positive or negative.

The relationship between the quantity of inputs used and the quantity of output produced.

The total quantity of goods or services that a firm can produce.

Factors of production that can be changed in the short run.

Factors of production that cannot be easily changed in the short run.

The additional output gained by hiring one more worker.

As you keep adding workers to a fixed amount of resources, the extra output from each new worker will eventually decrease.

Costs that remain the same regardless of the level of production.

Costs that vary directly with the level of production.

The additional profit generated from selling one more unit of output.

The difference between the marginal cost and the marginal revenue.

The point where the total revenue is maximized.

The revenue per unit of output.

The relationship between the quantity of a good supplied and the price producers are willing to sell it for.

The additional output generated from adding one more unit of input.

The additional cost from adding one more unit of input.