Chapter 2 Flashcards
The most basic form of regulation is ____
price controls or price fixing
Another way to say price controls or price fixing is ____
non-price rationing
Where prices are allowed to move freely in the market, they ___ the amount supplied to fit with the amount demanded
automatically ration
If prices are not allowed to move freely, ___ rations the amount available among those who want the product at the fixed price
some other method
the amount that would be purchased of a particular product at various given prices at a particular time is __
demand
the maximum price that would be paid for a particular quantity of a particular product at a particular time is __
demand price
the increase in price of substitute, decrease in price of complement, increase in income, or change in taste cause
an increase in demand
change in price results in
change in quantity demanded
change in demand results in
movement of the demand curve
change in something other than the price or demand (income, prices, tastes, expectations) results in
change in both price and quantity demanded
the amount of a particular product that would be produced and sold at a particular price at a particular time is called __
supply
the minimum price for which a particular quantity of a particular product would be supplied for sale at a particular time is __
supply price
supply curves are derived from __
demand curves of suppliers
decrease in costs and improvements in technology may cause __
an increase in supply
change in the amount supplied refers to a (shift of supply curve OR movement along a supply curve)
movement along a supply curve
change in price results in __
change in amount supplied
change in supply results in __
shift of the supply curve
the addition to total revenue from selling an additional unit of output is __
marginal revenue
the addition to total cost from producing an additional unit of output is __
marginal cost
as long as one adds more to TR (MR) than one adds to TC (MC), one should produce (more or less)
more
adding more to revenue than cost implies (increase or decrease) profit
increase
point at which one adds no more to revenue than to cost is where __
profit is maximized
the difference between the value that a consumer puts on any unit of a product and price they actually have to pay for it is the __ surplus
consumer
for any unit, the maximum price is given by the __
demand curve
the area under the demand curve above the market price (P*) is __ surplus
consumer
the difference between the minimum cost that a producer faces to produce any unit of a product and the price actually received for it is __ surplus
producer
for any unit, the minimum price is given by the __
supply curve
the area above the supply curve under the market price (P*) is __ surplus
producer
T/F: Price fixing always has the unintended consequences that are opposite of what is intended
true
price floors cause __
surpluses
price ceilings cause __
shortages
the most well-known form of price-control is __
minimum wage
Why is the idea that employers will take extra wages out of profits false?
it would cause shareholders to invest less in minimum-wage industries
Why is the idea that employers will increase the price of a product and pass wage increase on to consumers false?
consumers will not buy the same amount at a higher price
the loss of consumer surplus plus the loss of producer surplus equals __
deadweight or social loss
the unintended impact of minimum wage is that __
employment will decrease
the consequences of minimum wage primarily affect __
the least productive/poorest people
who benefits from minimum wage laws?
organized labor or trade unions
interest rate controls within broader financial market regulations are an example of __
price ceiling
rent control is an example of __
price ceiling
the unintended consequence of rent control is __
reduction in affordable housing available
who do rent control laws benefit?
not clear
quantity fixing is another form of __
non-price rationing
__ is a favorite form of quantity-control
licensing
who benefits from licensure of doctors?
administrators
the unintended consequence of banning sale of items is __
reduce amount supplied and increase price
how are government regulations paid for?
taxes
the incidence of a tax is __ compared to the impact of a tax
insignificant
T/F: taxes have existed from the beginning of trade
true
T/F: taxes are necessarily coercive
true
the oldest form of taxes are __ taxes
expenditure
__ tax refers to a fixed amount per unit sold
excise
__ tax refers to a fixed percentage of the price of the unit sold
sales
__ tax refers to a rising percentage of the price of the unit sold
progressive sales
__ tax refers to a fixed amount per person
poll
__ tax refers to a fixed percentage per person
flat
__ tax refers to an increasing or decreasing percentage of income
progressive or regressive
SS/Medicare/Medicaid are __ taxes
regressive
a __ is a tax imposed on importers
tariff
an excise tax results in a seller producing (more or less) at a (lower or higher) MC
less, lower
how much buyer/seller pay depends on 2 things:
size of the tax and size of the slopes of the D/S curves relative to each other
tax is shared between buyers and sellers depending on __
how steep the curves are relative to each other
T/F: collection is relevant to who actually pays the tax
false
steeper the demand curve relative to the supply curve, the more of the tax will be paid by the __
buyer
steeper the supply curve relative to the demand curve, the more of the tax will be paid by the __
seller
__ indicates how sensitive the amount demanded or supplied are to a change in price
slope
if demand is vertical, amount demanded is not sensitive to changes in price, and whole tax will be paid by __
buyer
if supply is vertical, amount supplied is not sensitive to changes in price, and whole tax will be paid by __
seller
the steeper the curves are, the (more or less) the amount produced will be affected
less
T/F: the greater the effect of sensitivity, the greater the loss of consumer and producer surplus (deadweight loss)
true
tax revenue is transferred to __, while deadweight loss is transferred to __
the government, no one
immediate effects are called __
impact effects
T/F: there are many ripple effects when it comes to taxes that are difficult to predict
true
tariff is exactly like an __ tax, but imposed on foreign producers only
excise
the effects of subsidies are (the same or opposite) of the effects of taxes
opposite
subsidies are thought of as a __ tax
negative
the incidence of a subsidy is __ compared to the impact of a subsidy
insignificant
T/F: subsidies are never given to exporters
false
a subsidy will result in (more or less) being produced
more
subsidy benefit is shared between buyers and sellers depending on
how steep the curves are relative to each other
subsidies impose __
inefficiencies
T/F: price controls are the worst type of regulatory devices
true
all per-unit subsidies affect
the price paid by the buyer and the price received by the seller
setting a maximum rent above the market rent will have (effect or no effect)
no effect
the real cost of a tax is always paid in a manner (shared or separated) by buyers and sellers
shared
a per unit tax always results in a (increase or decrease) in output of the product being taxed
decrease
a per unit subsidy always results in a (increase or decrease) of the output of the product subsidized
increase
raising the level of minimum wage will (increase or decrease) level of unemployment
increase
__ always achieves the opposite of stated intentions
price-fixing
Mandating the installation of airbags is a perfect example of the provoking of ___ in regulatory policy
unintended consequences
