Chapter 3

Question 1

Transfer

Answer 1

surplus that moves from producers to consumers, or vice versa, as a result of a regulation

Question 2

Deadweight loss (DWL)

Answer 2

the reduction in total surplus that occurs as a result of a market inefficiency

Question 3

Nonbinding Price Ceiling

Answer 3

a price ceiling set at a level above the equilibrium market price

Question 4

Nonbinding Price Floor

Answer 4

a price floor set at a level below the equilibrium market price

Question 5

Quota

Answer 5

a regulation that sets the quantity of a good or service provided

Question 6

Rule of Tax Incidence and Elasticities

Answer 6

The more elastic curve (supply or demand) bares the least burden (producer or consumer)

Question 7

Share of Tax Borne by Consumer

Answer 7

Elasticity of Supply/Elasticity of Supply + IElasticity of DemandI

Question 8

Share of Tax Borne by Producer

Answer 8

IElasticity of DemandI / /Elasticity of Supply + IElasticity of DemandI

Question 9

Subsidy

Answer 9

a payment by the government to a buyer or seller of a good or service

Question 10

Price Received by Sellers after Subsidy

Answer 10

Pb + subsidy