Exam 2 microeco
Card Set Information
Exam 2 microeco
exam 2 microeco
the studies how the allocation of resources affects economic well being.
Willingness to Pay
The maximum amount the buyer is willing to pay for goods. Also, measure how much the buyer value their goods.
cost and willingness to sell.
the value of everything a seller must give up to produce a good. Meaning opportunity includes the cost of all resources used to produce good, including value of the sellers time.
The amount a seller is paid for a good minus the seller's cost of providing it.
the price of a good that prevails in the world market for that good.
the value of everything a seller must give up to produce a good
the property of a resource allocation of maximizing the the total surplus received by all members of society.
the fall in total surplus that results from a market distortion, such as a tax.
the uncompensated impact of one person's actions on the well-being of a bystander.
internalizing the externality
altering incentives so that people take account of the external effects of their actions.
a tax designed to induce private decision makers to take account for the social cost that arise from a negative externality.
the proposition that if private parites can bargain without cost over allocation of resouces they can solve the problem of externalities on their own.
a person who receives the benefit of a good but avoids paying for it.
cost- benefit analysis
a study that compares the costs and benefits to society of providing a public good.
tragedy of the commons
a parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole.
an excess of government spending over government receipts.
an excess of government receipts over government spending.
average tax rate
total taxes paid divided by total income
the idea that people should pay taxes based on the benefits they receive from government services.
ability to pay principle
the idea that taxes should be levied on a person according to how well that person can shoulder the burden.
the idea that taxpayers with a greater ability to pay taxes should pay larger amounts.
the idea that taxpayers with similar abilities to pay taxes should pay the same amount.
the market value of the inputs a firm uses in production
total revenue minus total cost, including both explicit and implicit costs.
total revenue minus total explicit cost.