Econ 2 Assignment Flashcards

  1. An excess of tax revenue (spending) over government spending (tax revenue)
    Budget Surplus
  2. The maximum amount that a buyer will pay for a good
    Willingness to Pay
  3. The property of distributing economic prosperity uniformly among the members of society
  4. Fall in total surplus that results from market distortion, such as tax
    Deadweight Loss
  5. The uncompensated impact of one persons actions on the well-being of a bystander
  6. A tax to induce private decision makers to take account of the social costs that arise from a negative externality
    Corrective Tax
  7. Goods that are both excludable and rival in consumption
    Private Goods
  8. Goods that are rival in consumption but are not excludable
    Common Resources
  9. The proposition that if private parties can bargain without cost over the allocation of resources, they can solve problems of externalities on their own.
    Coase Theorem
  10. The costs that parties incure in the process of agreeing to and following through on a bargain
    Transaction Costs
  11. The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
    Consumer Surplus
  12. The value of everything a seller must give up to produce a good
  13. A tax for which high-income taxpayers pay a larger fraction of their income than do low-income taxpayers
    Progressive Tax
  14. The amount a seller is paid for a good minus the sellers cost of providing it
    Producer Surplus
  15. The property of a good whereby a person can be prevented from using it
  16. The property of a good whereby one persons use diminishes other peoples use
    Rivalry in consumption
  17. Total taxes paid divided by total income
    Average tax rate
  18. Goods that are neithe excludable nor rival in consumption
    Public Goods
  19. The extra taxes paid on an additional dollar of income.
    Marginal tax rate
  20. A tax that is the same amount for every person.
    Flat tax
  21. A tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers.
    Regressive tax
  22. The study of how the allocation of resources affects economic well-being.
    Welfare Economics
  23. Price elasticity of demand is defined as the ______ change in quantity demanded divided by the ______ change in price.
    Total; total
  24. Demand is said to be _______ when the quantity demanded is not very responsive to changes in price.
  25. When demand is inelastic,
    Consumers are not very responsive to change in price
  26. Price elasticity of demand is said to be greater
    the longer the period of time consumers have to adjust to price changes
  27. The long-run demand curve for gasoline is likely to be 
    more elastic than the short-run demand curve for gasoline
  28. Demand curves for goods tend to become more inelastic
    when people have less time to adapt to a given price change
  29. A straight-line demand curve would
    have a higher elasticity of demand near its top than near its bottom
  30. If demand was relatively inelastic in the short run, but elastic in the long run, a price increase would _____ total revenue in the short run and _____ total revenue in the long run
    increase, decrease
  31. * If the cross-price elasticity of demand between two goods is negative, we know that
    they are compliments
  32. For a given increase in price, the greater the elasticity of supply, the greater the resulting
    increase in quantity supplied
  33. If the demand for gasoline is highly inelastic and the supply is highly elastic, and then a tax is imposed on gasoline, it will be paid
    largely by the buyers of gasoline
  34. At the market equiibrium price and quantity, the total welfare gains from trade are measured by
    the sum of consumer surplus and producer surplus
  35. An increase in supply will lead to a _____ price and an _____ in consumer surplus.  A decrease in supply will lead to a _____ price and a ______ in consumer surplus
    lower, increase; higher, decrease
  36. After imposition of a tax,
    consumers pay a higher price, consumers lose consumer surplus, producers receive a lower price after taxes, producers lose producer surplus
  37. With a Subsidy,
    the subsidy leads to the production of more than the efficient level of output
  38. The longer a price ceiling is left below the equilibrium price in a market, the _____ is the reduction in the quantity exchanged and the ______ is the resulting deadweight loss.
    greater; greater
  39. The presense of negative externalities leads to a misallocation of societal resources because
    some costs are associated with production that the producer fails to take into consideration
  40. A tax equal to the external cost on firms that emit pollutants would
    provide firms with the incentive to decrease the level of activity creating the pollution.
  41. In the case of a good whose production generates negative externalities,
    those not directly involved in the market transactions are harmed
  42. If firms were required to pay the full social costs of the production of goods, including both private and external costs, other things being equal, there would probably be a decrease in production
    decrease in production
  43. Assume that production of a good imposes external costs on others.  The market equilibrium price will be ______ and the equilibrium quantity ______ for efficient resource allocation.
    too low; too high
  44. Assume that production of a good generates external benefits of consumption.  The market equilibrium price of the good will be ______ and the equilibrium quantity _______ for efficient resource allocation.
    too low; too low
  45. In the case of externalities, appropriate government corrective policy would be 
    subsidies in the case of external benefits and taxes in the case of external costs
  46. Taxes on the emissions of polluting firms are primarily to intend to 
    encourage firms to pollute less
  47. An ideal pollution tax
    forces a firm to internalize the externality
  48. If compliance standards are too stringent,
    the marginal social cost of pollution reduction may outweigh the marginal social benefit of pollution reduction
  49. An advantage that emission taxes and tradable emissions permits have over compliance standards is that the former
    make it in the interests of firms to reduce pollution in the most efficient manner possible
  50. According to the Coase theorem, one way to deal with an externality problem when transaction costs are low is
    for the government to make certain that property rights are well-defined.
  51. The Coase Theorem suggests that private solutions to externailty problems
    Can lead to an optimal allocation of resources if private parties can bargain at relatively low cost
  52. In the case of a private solution to the externality problem, the distribution of rights
    determines who bears the cost of the solution but does not affect the efficient result.
  53. The market system fails to provide the efficient output of public goods because 
    private firms cannot restrict the benefits from those goods to consumers who are willing to pay for them
  54. Public goods, like national defense, are usually funded through government because
    it is prohibitively difficult to withhold national defense from someone unwilling to pay for it
  55. A public good is both ________ in consumption and _______
    nonrivalrous; nonexclusive
  56. Who must legally pay social security and medicare taxes?
  57. Expenditures on _________ comprise the largest component of state and local government budgets.
  58. ________ taxes are designed to take a larger percentage of high incomes as compared to lower incomes
  59. An example of a proportional tax would be
    a flat rate income tax
  60. The largest single source of revenue for the federal government is the
    personal income tax
  61. The U.S. Federal income tax is an example of a 
    progressive tax
  62. The ability-to-pay principle states:
    Those with the greatest ability to pay taxes should pay more
Card Set
Econ 2 Assignment Flashcards
Econ 201 Assignment 2