Econ Test 3 Flashcards
Efficient Quantity
the quantity that maximizes value to society
When MC=MB
Marginal Benefit Curve
always slope downward (equal to demand curves)
Marginal Cost Curve
always slope upward (equal to supply curves)
Price ceiling
legal maximum price
Dead weight loss
a loss of efficiency due to a market distortion
Price floor
legal minimum price
2 Consequences of price ceiling
shortage (QD > QS) & dead weight loss
Invisible hand
market forces direct individuals through self interest to outcomes that benefit society
Total surplus
the sum of producer surplus and consumer surplus
Producer surplus
the difference between price and marginal cost
Consumer surplus
the difference between the marginal benefit of consuming a good and the price you actually pay for
2 Consequences of a Price floor
surplus (QS>QD) & deadweight loss
Price controls
legally mandated prices
Price floor on labor
minimum wage
Unemployment
a surplus in the labor market
Why do we not observe substantial unemployment because of minimum wage?
-minimum wage may be inelastic
-minimum wage may be close to P*
-difficult to measure
Black markets
a market that operates outside of the legal system
3 Consequences of making goods and services illegal
-lower quality
-higher prices
-more violence
Plurality voting
the option that receives the most votes wins
Approval voting
voters select as many candidates as they wish
Instrumental voting
making a decision as if your vote will change the outcome of the election
Alternatives to plurality voting
-runoff elections
-ranked choice voting
-approval
