Chapter 6: Market Efficiency and Government Intervention Flashcards

Vocabulary flashcards covering core definitions from Chapter 6: Market Efficiency and Government Intervention.

Efficiency

A situation in which people do the best they can, given their limited resources.

Willingness to pay

The maximum amount a consumer is willing to pay for a product.

Consumer surplus

The amount a consumer is willing to pay for a product minus the price the consumer actually pays.

Willingness to sell

The minimum amount a producer is willing to accept as payment for a product; equal to the marginal cost of production.

Producer surplus

The price a producer receives for a product minus the marginal cost of production.

Total surplus

The sum of consumer surplus and producer surplus.

Price ceiling

A maximum price set by the government.

Price floor

A minimum price set by the government.

Deadweight loss

The decrease in the total surplus of the market that results from a policy such as rent control.

Deadweight loss from taxation

The difference between the total burden of a tax and the amount of revenue collected by the government.

Excess burden of a tax

Another name for deadweight loss.