CH 5 Market outcomes and Tax incentives

Question 1

Consumer surplus

Answer 1

when consumer pays below willingness to pay price. p153

Question 2

deadweight loss

Answer 2

Decrease in economic activity caused by market distortions p166

Question 3

efficient

Answer 3

when an allocation of resources are maximized p160

Question 4

equity

Answer 4

refers to the fairness of the distribution of benefits among the members of society p160

Question 5

excise taxes

Answer 5

taxes put on a particular good. Like gas p163

Question 6

incidence

Answer 6

the burden of taxation on the party who pays the tax through higher prices p163

Question 7

producer surplus

Answer 7

when a producer sells a good above the willingness to sell price. p155

Question 8

social welfare

Answer 8

(total surplus) a measure of the well being of all participants in a market, w/o gov. intervention p158

Question 9

total surplus

Answer 9

when the consumer and producer surplus are added up. p158

Question 10

welfare economics

Answer 10

study of how allocation of resources affect economic well being p152

Question 11

willingness to pay

Answer 11

max price consumer will pay for good p153

Question 12

willingness to sell

Answer 12

max price sellers willing to sell good p155