Chapter 6
The legal maximum on the price at which a good can be sold
What is price ceiling
The equation on consumer surplus
What is WTP - P
The impact on a bystander is adverse
What is negative externality
What is a public good, a common resource, a private good, and a club good
Total surplus equal to
What is CS+PS
The government imposes a price floor on the market, which creates
What is surplus
The equation of producer surplus
What is 1/2BH
A positive externality will cause the private market to produce
What is less than the socially optimal or desirable quantity
What are the concepts of a club good
What is excludable and non rival
If a tax is placed on hamburgers who receives the tax
What is the government
If a tax is imposed on a market with elastic demand and inelastic supply, who bears the tax?
What is sellers bear most of the tax
Willingness to Pay definiton
What is the maximum price a customer will accept to buy one product or service
Why do private outcomes not always work
What is high transaction cost, lack of information, and coordination problems
An example of a private good
a) golf course
b) restroom
c) hotdogs
d) car
What is d) car
If a tax is placed on a product that is perfectly elastic, who bears the burden?
What is producers bears 100% tax
Using the graph on board, calculate the new CS, PS, and DWL
What is CS= $300, PS = $900, and DWL = $150
When the price of goods is P2, consumer surplus is?
What is CS = A
An example of private externality (consumption side)
Any private example can be given. EX: Vaccinations required for schooling
Streaming services ex; netflix is an example of
What is club good
The four consumers in the market have the following WTP, if the good is $25 who will buy the product?
Chloe- $30
Summer- $21
Brad- $22
Jack- $27
What is Chloe and Jack
Using the graph on the board, suppose the government imposed a $ 6-per-unit tax on this good. What would be the new CS, PS, and DWL, and tax Revenue
What is CS= $30, PS= $30, DWL= $24, Tax Revenue= $72
Calculate consumer and producer surplus
What is CS= 18 and PS=27
Any negative externality given. Ex: Factory air pollution
Wildlife and hunting grounds are examples of
What is common resource good
Looking at the graph on the board, what area represents deadweight loss?
What is A+B+C