Ch 4 Microeconomics

Consumer surplus

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

Producer surplus

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

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.

Economic surplus

The sum of consumer surplus and producer surplus.

Economic efficiency

A market outcome where marginal benefit equals marginal cost and total surplus is maximized.

Deadweight loss

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

Price ceiling

A legally determined maximum price that sellers can charge.

Price floor

A legally determined minimum price that sellers may receive.

Black market

A market in which buying and selling take place at prices that violate government regulations.

Tax incidence

The actual division of the burden of a tax between buyers and sellers.

Per-unit tax

A tax assessed as a fixed dollar amount per unit sold.

Equilibrium condition

The point where quantity demanded equals quantity supplied.