Microeconomics Terms Quizs

Deadweight loss

• The gain in total surplus when a market operates efficiently.

• The loss of total surplus (consumer and producer surplus) that occurs when a market is not operating efficiently, often due to under- or over-production.

• The increase in consumer surplus due to government intervention.

• The reduction in producer surplus caused by market competition.

Perfect competition

• A market structure with a single seller and differentiated products.

• A market structure characterised by many firms, homogeneous products, perfect information, and free entry and exit.

• A market structure where firms have significant control over prices and products are unique.

• A market structure with few firms and high barriers to entry.

Asymmetric information

• A type of market failure where one party in an economic transaction has access to more or better information than the other party.

• A situation where all parties in a transaction have equal information.

• A market condition where prices are set by government regulation rather than supply and demand.

• A scenario where information is shared equally among all participants in a market.

Price elasticity of demand (PED)

• A measure of the responsiveness of quantity demanded to a change in the price of a good.

• A measure of how much the price of a good changes in response to a change in demand.

• A measure of the total revenue generated from sales of a good.

• A measure of the relationship between the price of a good and its supply.

Marginal cost (MC)

• The total cost of producing all units of a good or service.

• The cost of producing one unit of a good or service.

• The additional cost incurred by producing one more unit of a good or service.

• The average cost of producing a good or service.

Private benefits

• Benefits received directly by the consumer or producer involved in an economic transaction.

• Benefits that are shared among the public and private sectors.

• Benefits that are only available to government entities.

• Benefits that are not measurable in monetary terms.

Allocative inefficiency

• When resources are perfectly allocated to maximize social welfare.

• When either more or less than the socially optimal amount is produced and consumed so that misallocation of resources results. MSB ≠ MSC.

• When the market is in equilibrium and all resources are utilized efficiently.

• When the total cost of production exceeds the total revenue generated.

Cross price elasticity of demand (XED)

• A measure of the responsiveness of the quantity demanded of one good to a change in the price of another good.

• A measure of how much the quantity demanded of a good changes when consumer income changes.

• A measure of the relationship between the price of a good and the quantity supplied.

• A measure of the total revenue generated from the sale of a good.

Consumer surplus

• The difference between what consumers are willing to pay and what they actually pay.

• The total amount of money consumers spend on goods and services.

• The additional benefit received by consumers when they purchase a product at a lower price than expected.

• The amount of money that producers receive from consumers for their goods.

Supply

• The quantity of a good or service that producers are willing and able to offer for sale at different prices over a period of time.

• The total amount of a product that consumers are willing to purchase at a given price.

• The amount of goods that are available in a market at any given time.

• The price at which a good or service is sold in the market.