Chapter 5
Policy that sets the lowest / minimum price for a particular good or service
What is a price floor?
Formula for total revenue
What is price times quantity?
Value that determines how much a group pays in taxes
What is the tax base?
Formula for economic profit
What is benefits - (explicit + implicit costs)?
Policy that sets the highest price of a good or service below the market equilibrium (be specific)
What is a binding price ceiling?
In this case, raising prices would raise total revenue
What is an inelastic demand?
The two principles of fairness
What is the benefits principle and the ability to pay principle?
The choice in which a group or individual needs to decide how much of an activity to undertake
What is a marginal choice?
Area(s) that represent(s) producer surplus?
What is area D?
Determinants of the price elasticity of demand
What is...
1) Luxury vs. necessity
2) Availability of substitutes
3) Share of income
4) Passage of time
The three tax structures
What are progressive taxes, flat (proportional) taxes, and regressive taxes?
Things to ignore when performing cost-benefit analysis
What are sunk costs or sunk benefits?
Numerical value for consumer surplus
What is $2,400?
Value for income elasticity of demand if an 8 percent increase in income produces a 4 percent increase in the quantity of organic produce demanded
Primary characteristic of the group/individual who bears the higher tax burden
Times in which consumers may not make rational decisions
What are situations in which there are concerns about fairness or limited knowledge?
Amount of consumer surplus lost as a result of the quota
What is $1,500?
Price-elasticity of demand in the following scenario:
At a price of $24, Olivia sells 36 orchids. At a price of $30, she sells 24 orchids.
What is -1.8?
Value of the effective and marginal tax rates if you make $40,000:
> $0: 10%
> $10,000: 15%
> $25,000: 40%
> $75,000: 60%
What is an effective tax rate of 23% and a marginal tax rate of 40%?
Point of optimal consumption
What is the point at which marginal costs equal marginal benefits?