AP®︎ Microeconomics: Topic 6.1 Flashcards

The additional benefit to society from consuming one more unit, including external benefits.

The additional cost to society from producing one more unit, including external costs.

Benefits and costs received or paid by direct consumers and producers, excluding third-party effects.

A situation where the market equilibrium quantity is not socially efficient.

Too little output occurs when MSB exceeds MSC; too much occurs when MSC exceeds MSB.

The lost total surplus caused when output differs from the socially efficient quantity.

The ability of a firm to influence price, output, or other market conditions.

Imperfect market structures where firms have pricing power and output may be below the efficient level.

A spillover benefit to third parties from production or consumption not captured by the market.

A spillover cost to third parties from production or consumption not reflected in market prices.

A market condition where one side has better information than the other.

Goods that are nonrival and nonexcludable, often produced in insufficient amounts by markets.

A policy method comparing total social benefits and total social costs of alternative actions.

The efficient output occurs where marginal social benefit equals marginal social cost.

Competitive markets reach efficient output, while imperfectly competitive markets create deadweight loss.

Policies create efficiency by making private decision-makers face all social costs and benefits.

The sum of consumer surplus and producer surplus, maximized at efficient output.

Efficiency occurs when the last unit’s marginal benefit equals its marginal cost.