ECON 2310 Chapter Notes - Chapter 15: Production Quota, Marginal Cost

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Specific tax- a fixed dollar amount that must be paid on each unit bought or sold. Ad valorem tax- a tax that is stated as a percentage of the good"s price. Incidence- the incidence of a tax indicates how much of the tax burden is borne by various market participants. Deadweight loss of taxation- the lost aggregate surplus due to a tax. Subsidy- a payment that reduces the amount that buyers pay for a good or increases the amount that the sellers receive. Price floors- the minimum price that sellers can charge. Price support- raises the market price by making purchases of the good, thereby increasing demand. Production quota- imposes limits on the quantity that individual firms can produce. Quota rent- the difference between the marginal cost of production at the quota amount and the price that results from the imposition of the quota. Voluntary production reduction- offers firms inducements to reduce their production voluntarily.

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