Microeconomics Quiz 2

Quiz on chapters 3-5 on textbook

Market Equilibrium

Consists of equilibrium price and quantity

price- the price in a competitive market at which the quantity demanded and the quantity supplied are equal

quantity- the quantity at which the intentions of buyers and sellers in a particular market match at a particular price such that the quantity demanded and the quantity supplied are equal

Determinants of Supply and Demand

Factors other than price that determine the quantities demanded of a good or service

Price Floors

A legally established minimum price for a good, or service; normally set at a price above the equilibrium price

Price Ceilings

A legally established maximum price for a good, or service; normally set at a price below the equilibrium price

Externalities

A cost or benefit from production or consumption that accrues to someone other than the immediate buyers and sellers of the product being produced or consumed

Taxes

a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions

Subsidies

A sum of money granted by the government/public body to assist a firm so that the price of a commodity/service may remain lower or competitive

Dead Weight Loss

Reductions in combined consumer and producer surplus caused by an underallocation or overallocation of resources to the production of a good or service— result of an externality

Consumer Surplus

The difference between the maximum price a consumer is willing to pay for an additional unit of a product and its market price; the triangular area below the demand curve and above the market price

Producer Surplus

The difference between how much a person would be willing to accept for a given quantity of a good versus how much they can receive by selling the good at the market price

Public Good

A good or service that is characterized by nonrivalry and nonexcludability; these characteristics typically imply that no private firm can break even when attempting to provide such products

Private Good

A good or service that is individually consumed and that can be profitably provided by privately owned firms because they can exclude nonpayers from receiving the benefits