Principles of Microeconomics Review Session for Midterm Exam II

These flashcards cover key concepts and terms from the Principles of Microeconomics lecture notes, focusing on price controls, taxes, consumer and producer surplus, externalities, and market failures.

Price Floors

Minimum prices set by the government for certain goods that prevent prices from falling below a certain level.

Price Ceilings

Maximum prices set by the government for certain goods that prevent prices from rising above a certain level.

Taxes

Mandatory financial charges imposed by the government on individuals or businesses to raise revenue.

Consumer Surplus (CS)

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

Producer Surplus (PS)

The difference between what producers are willing to accept for a good and what they actually receive.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total benefits to society.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved.

Negative Externalities

Costs that are suffered by a third party as a result of an economic transaction.

Positive Externalities

Benefits that are enjoyed by a third party as a result of an economic transaction.

Corrective Taxes

Taxes imposed to encourage businesses and consumers to reduce negative externalities.

Coase Theorem

The proposition that in the presence of externalities, private parties can negotiate without cost over the allocation of resources.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they cannot be withheld from others and one person's use does not reduce availability.

Common Resources

Resources that are rivalrous but non-excludable, which leads to overuse.