Econ test 2

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good or service and the market price.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total economic benefit.

Price Ceiling

A maximum price set by the government that can be charged for a good or service.

Price Floor

A minimum price set by the government that must be paid for a good or service.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable.

Externality

A consequence of an economic activity that affects unrelated third parties.

Positive Externality

A benefit received by third parties as a result of an economic transaction.

Negative Externality

A cost imposed on third parties not involved in an economic transaction.

Marginal Cost

The additional cost incurred when producing one more unit of a good.

Marginal Revenue

The additional revenue gained from selling one more unit of a good.

Economies of Scale

A proportionate saving in costs gained by an increased level of production.

Diseconomies of Scale

The point at which the increase in production leads to an increase in per-unit costs.

Public Good

A good that is non-excludable and non-rival in consumption.

Common Resource

A resource that is non-excludable but rival in consumption.

Free Rider Problem

A situation where individuals benefit from resources without paying for their cost.

Tragedy of the Commons

A situation where individuals overuse a common resource leading to its depletion.

Fixed Costs

Costs that do not change regardless of the level of production.

Variable Costs

Costs that change based on the level of production.

Total Cost

The total expenses incurred in producing a given level of output.

Average Total Cost

The total cost divided by the number of units produced.

Short Run

A period in which at least one input is fixed.

Long Run

A period in which all inputs can be varied.

Price Taker

A buyer or seller that is unable to affect the market price.

Equilibrium Price

The price at which the quantity supplied and quantity demanded are equal.

Shutdown Point

The price at which a firm is indifferent between producing and shutting down.

Break-even Price

The price at which total revenue equals total costs, resulting in zero profit.