Blackstock test 2 microeconomics 202 Flashcards
formula for total costs
total fixed costs + total variable costs = total costs
total fixed costs + total variable costs = ___ ___
total costs formula
fixed costs change from period to period. TF
F
fixed costs do not change from period to period. TF
T
fixed costs include ___ ___
opportunity costs
___ ___ include opportunity costs
fixed costs
if you’re earning an economic profit, you made the ___ choice and vice versa
right
if you’re earning an ___ ___, you made the right choice and vice versa
economic profit
the ___ you produce, the ___ your variable cost
more, higher
the more you ___, the higher your ___ ___
produce, variable cost
average total cost formula
ATC = AFC + AVC
OR
TC/Q = ATC
AFC + AVC = _____
OR
TC/Q = ____
average total cost
average variable cost formula
AVC = TVC/Q
TVC/Q = ____
AVC
Average fixed cost formula
TFC/Q
TFC/Q = ___
Average fixed cost
marginal cost formula
change in total cost / change in quantity
change in total cost / change in quantity
marginal cost formula
as quantity increases, average fixed cost approaches zero. TF
T
as quantity decreases, average fixed cost approaches zero. TF
F
as quantity increases, average total cost approaches zero. TF
F
define The law of diminishing marginal production
a situation in which adding more and more of a variable input to a fixed plant results in smaller and smaller amounts of additional output produced
a situation in which adding more and more of a variable input to a fixed plant results in smaller and smaller amounts of additional output produced
The law of diminishing marginal production
average variable cost is “___” shaped because of the law of diminishing marginal production
U shaped
define monopoly
one seller of a good or service
one seller of a good or service
monopoly
define monopsony
one buyer of a good or service
one buyer of a good or service
monopsony
purely competitive market is defined by its four characteristics
1) large number of buyers and sellers
2) perfect information (everyone has the same info and it is reliable and accurate, and without any hidden agendas)
3) free entry and exit
4) homogeneous goods (where consumers can’t tell the difference
what are these characteristics of?
1) large number of buyers and sellers
2) perfect information (everyone has the same info and it is reliable and accurate, and without any hidden agendas)
3) free entry and exit
4) homogeneous goods (where consumers can’t tell the difference
purely competitive market
define demand facing the firm
how does the firm effect the overall world demand, in simple terms, it doesn’t.
-perfectly elastic
how does the firm effect the overall world demand, in simple terms, it doesn’t.
-perfectly elastic
demand facing the firm
what does “d” in the purely competitive market graph
demand facing the firm
what does “P” in the purely competitive market graph
price taker is the firm in a purely competitive market
what does “AR” in the purely competitive market graph
average revenue
what does “MR” in the purely competitive market graph
marginal revenue, we always refer to this line as marginal revenue
average total cost is tangent to marginal revenue at its ___ point
lowest
average total cost is tangent to ___ ___ at its lowest point
marginal revenue
average total cost is ___ to marginal revenue at its lowest point
tangent
___ ___ ___ is tangent to marginal revenue at its lowest point
average total cost
Marginal cost crosses ___ ___ ___ and average variable cost at their lowest points
average total cost
Marginal cost crosses average total cost and ___ ___ ___ at their lowest points
average variable cost
___ ___ crosses average total cost and average variable cost at their lowest points
marginal cost
Marginal cost crosses average total cost and average variable cost at their ___ points
lowest
the distance between average total cost and average variable cost at any given point is the ___ ___ ___
average fixed cost
the distance between average total cost and ___ ___ ___ at any given point is the average fixed cost
average variable cost
the distance between ___ ___ ___ and average variable cost at any given point is the average fixed cost
average total cost
where will every firm operate in order to maximize profits?
where marginal cost = marginal revenue
pi = …
Total revenue - total cost
in economics, pi stands for ____
profit
finish this…
a firm will hire workers
a firm will hire workers (or add inputs) as long as the last worker hired brings more money to the firm than it costs to hire him
total costs formula
total costs = total fixed costs + total variable costs
total fixed costs + total variable costs
total costs formula
when TC and TR equal each other and the economic profit is zero…
operating your business makes you no better off than had you accepted the next best alternative
operating your business makes you no better off than had you accepted the next best alternative
when TC and TR equal each other and the economic profit is zero
define zero economic profit
when ATC is tangent to MR at ATC’s lowest point
ATC is tangent to MR at ATC’s lowest point
zero economic profit
zero economic profit can get you earning a normal rate of return on your investment. TF
T
zero economic profit can get you earning a progressed rate of return on your investment. TF
F
zero economic profit can get you losing a normal rate of return on your investment. TF
F
define long run
a time period long enough that all factors of productions can be changed
a time period long enough that all factors of productions can be changed
long run
define short run
a time period short enough that at least one factor of production can’t be changed
a time period short enough that at least one factor of production can’t be changed
short run
if price lies between minimum ATC and minimum AVC, the firm will continue to operate. Long or short run?
short run
if price falls below minimum ATC, the firm will shut down. Long or short run?
both :)
the firm’s short-run supply curve is from…
where MC and AVC cross and anywhere above
…where MC and AVC cross and anywhere above.
the firm’s short-run supply curve is from…
classic monopoly def
the downward sloping marginal revenue line, making them a price searcher
the downward sloping marginal revenue line, making them a price searcher
classic monopoly
schumpeterian monopoly def
building the better product and selling it for the cheapest price, but they are transitive, so someone will eventually come along and build a better product
building the better product and selling it for the cheapest price, but they are transitive, so someone will eventually come along and build a better product
schumpeterian monopoly
tullockian monopoly def
the only way a monopoly can operate today is if the government makes the competition illegal
the only way a monopoly can operate today is if the government makes the competition illegal
tullockian monopoly
Monopolistically competitive market is defined by its 4 characteristics
- larger number of buyers and sellers
- perfect information
- free entry and exit
- Heterogeneous goods (consumers can tell the difference)
- larger number of buyers and sellers
- perfect information
- free entry and exit
- Heterogeneous goods (consumers can tell the difference)
Monopolistically competitive market is defined by its 4 characteristics
Advertising does 2 things, what are they?
- increases demand
- makes demand more inelastic
- increases demand
- makes demand more inelastic
Advertising
define oligopoly
a market structure in which only a few sellers offer similar or identical products
a market structure in which only a few sellers offer similar or identical products
oligopoly
define cartel
a group of firms who come together and ACT like a monopoly
a group of firms who come together and ACT like a monopoly
cartel
participating in a cartel is called a ___
collusion
participating in a ___ is called a collusion
cartel
a collusion is legal. TF
F
a collusion is illegal. TF
T
define Nash Equilibrium
a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen
a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen
Nash equilibrium
the ___ price is less than the ___ price, but greater than the ____ price
oligopoly, monopolistic, competitive
the oligopoly price is ___ than the monopolistic price, but ___ than the competitive price
less, greater
what’s the world’s most successful cartel?
OMEC (organization of petroleum exporting company)
-HQ is in Vienna, Austria
explain the “prisoner’s dilemma”
- both keep quiet and each do 1 year
- speak on your partner, you go free and partner does 20 years
- both confess, both go 8 years
define dominant strategy
a strategy that is best for a player in a game regardless of the strategies chosen by the other players
a strategy that is best for a player in a game regardless of the strategies chosen by the other players
dominant strategy
define benefits principle
people should be taxed based on the government services they receive
people should be taxed based on the government services they receive
benefits principle
define ability to pay
taxes should be levied on a person according to how well that person can shoulder the burden
taxes should be levied on a person according to how well that person can shoulder the burden
ability to pay
define horizontal
taxpayers with similar abilities to pay taxes should pay the same amount
taxpayers with similar abilities to pay taxes should pay the same amount
horizontal
define vertical
taxpayers with a greater ability to pay taxes should pay larger amounts
