# Shared Flashcard Set

## Details

Mankiw
Taxes/ consumers, producers, and the efficiency of Markets/ Application: The costs of taxation
30
Economics
11/04/2007

Term
 Consumer Surplus
Definition
 the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.area above price and below demand curve.
Term
 Change in Consumer Surplus
Definition
 Area between P1 and P2
Term
 Producer Surplus
Definition
 The amount a seller is paid for a good minus the seller's cost of providing it.The area below price and above the Supply curve
Term
 Marginal cost goes with the _______ curve.
Definition
 Supply
Term
 Marginal Value goes with the ______ curve.
Definition
 Demand
Term
 What is the formula to maximize Total Surplus
Definition
 Demand Curve - Supply Curve. orindividual Valuations - Firms Costs.
Term
 Who should Consume
Definition
 People who value it most, or have highest willingness to pay
Term
 Who Should Produce?
Definition
 Firms with lowest cost to produce
Term
 Efficiency is achieved when society_______________.
Definition
 is organized to maximize total surplus
Term
 Increase output when___________.
Definition
 marginal value is greater than marginal cost.
Term
 Reduce output when ________________.
Definition
 marginal cost is greater than marginal value.
Term
 What three things occur when a tax is added?
Definition
 1) price to consumers increases2) Price to producers decreases3) equilibrium quantity falls
Term
 taxes create
Definition
 Inefficiencies
Term
 Inefficiencies associated with taxes?
Definition
 Lost producer/consumer surplus
Term
 Dead Weight Loss arises out of_____________.
Definition
 change in equilibrium quantity.
Term
 As tax increases, DWL increases by___________
Definition
 the square of the tax.
Term
 Producer Cost
Definition
 below Q and Below S curve.
Term
 Dead Weight Loss is greater when the demand/supply curve is_______.
Definition
 More Elastic
Term
 Tax Incidence
Definition
 the manner in which the burden of a tax is shared among participants in a market.
Term
 a tax burdon falls more heavily on the side of the market that is______ elastic.
Definition
 less
Term
 Willingness to pay
Definition
 the maximum amount that a buyer will pay for a good
Term
 The perfectly competitive market price is efficient because it___________.
Definition
 Maximizes TOTAL SURPLUS
Term
 Firms eat the whole tax when_______.
Definition
 the supply curve is PERFECTLY INELASTIC.
Term
 Whatever curve is more ___________ bears the bigger burdon of the tax
Definition
 INELASTIC
Term
 Tax revenue is the same as _______.
Definition
 the change in consumer surplus
Term
 Perfectly competitive markets produce the same level of output as a _______.
Definition
 total surplus maximizing social planner.
Term
 Nick produces cookies. He sells them for 2 dollars a dozen. He realizes his producer surplus is 10. what is his total cost?
Definition
 12 dollars
Term
 nicole- 5bruce-8evan-5mary-10.If the market price for mowing lawns is 5 dollars, what is the TOTAL CONSUMER SURPLUS?
Definition
 8
Term
 What is the Dead Weight Loss of a tax?
Definition
 The reduction in total surplus that results from the tax
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