ECO 201 Miami University Exam 2
Questions and Answers 100% Pass
consumer surplus - ✔✔the sum (of each unit sold) of the difference between what the
buyer is willing to pay (given by the height of the demand curve) and the price the
buyer actually pays (market price)
how is consumer surplus calculated? - ✔✔area beneath the demand curve and above
market price for the number of units sold
1/2 base * height
producer surplus - ✔✔the difference between the price received by the seller (market
price) and the minimum price the seller is willing to accept (as given by the height of
the supply curve for all units sold)
how is producer surplus calculated? - ✔✔the area above the supply curve & below the
market price for all units sold
in an efficient market, total surplus (CS + PS) is ______________ - ✔✔maximized
total surplus - ✔✔consumer surplus + producer surplus
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
, allocative efficiency - ✔✔in the last unit sold, P=MC
price floor - ✔✔legally established minimum price in a market. Set above market price
if government decides the market price is unfairly low
persistent surplus leads to - ✔✔unemployment
deadweight loss - ✔✔lost CS & PS in a market that is not efficient (relative to what it
would be if the market was efficient)
price ceiling - ✔✔legally established maximum price in a market (set below market
price if government believes the market price is unfairly high (binding))
ceiling causes - ✔✔Qs to go down and Qd to go up which creates a persistent shortage
tax incidence - ✔✔the study of whether consumers or producers pay the greater share
of a tax on goods & services
excise - ✔✔tax per unit sold
how would a $1 per gallon tax affect the market? - ✔✔-causes supply curve to shift
vertically upwards by the amount of the tax
-new after-tax price paid by consumers
-DOES NOT RISE BY THE FULL AMOUNT OF THE TAX
tax incidence is determined by _____________ - ✔✔the relative elasticity of demand &
supply
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
Questions and Answers 100% Pass
consumer surplus - ✔✔the sum (of each unit sold) of the difference between what the
buyer is willing to pay (given by the height of the demand curve) and the price the
buyer actually pays (market price)
how is consumer surplus calculated? - ✔✔area beneath the demand curve and above
market price for the number of units sold
1/2 base * height
producer surplus - ✔✔the difference between the price received by the seller (market
price) and the minimum price the seller is willing to accept (as given by the height of
the supply curve for all units sold)
how is producer surplus calculated? - ✔✔the area above the supply curve & below the
market price for all units sold
in an efficient market, total surplus (CS + PS) is ______________ - ✔✔maximized
total surplus - ✔✔consumer surplus + producer surplus
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
, allocative efficiency - ✔✔in the last unit sold, P=MC
price floor - ✔✔legally established minimum price in a market. Set above market price
if government decides the market price is unfairly low
persistent surplus leads to - ✔✔unemployment
deadweight loss - ✔✔lost CS & PS in a market that is not efficient (relative to what it
would be if the market was efficient)
price ceiling - ✔✔legally established maximum price in a market (set below market
price if government believes the market price is unfairly high (binding))
ceiling causes - ✔✔Qs to go down and Qd to go up which creates a persistent shortage
tax incidence - ✔✔the study of whether consumers or producers pay the greater share
of a tax on goods & services
excise - ✔✔tax per unit sold
how would a $1 per gallon tax affect the market? - ✔✔-causes supply curve to shift
vertically upwards by the amount of the tax
-new after-tax price paid by consumers
-DOES NOT RISE BY THE FULL AMOUNT OF THE TAX
tax incidence is determined by _____________ - ✔✔the relative elasticity of demand &
supply
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
