Ch 6 - Markets, Maximizers, and Efficiency Flashcards
What is economic profit?
The difference between total revenue and total cost.
What is net benefit in the economic context?
The total benefit of the activity minus the opportunity cost.
The amount by which an additional unit of an activity increases its total benefit is…
The marginal benefit
The marginal cost is…
The amount by which an additional unit of activity increases its total cost.
What is the marginal decision rule?
I’f the marginal benefit of an additional unit of activity exceeds the marginal cost, the quantity of the activity should be increased. The opposite is true of marginal benefit is less than marginal cost.
What is a constraint
A boundary that limits the range of choices that can be made.
What is a deadweight loss?
The loss in net benefits resulting from a failure to carry out an activity at the efficient level.
When the net benefits of all economic activities are maximized, economists say the allocation of resources is…
Efficient.
A set if rules that specify the ways on which an owner can use a resource is an example of…
Property rights.
What is an exclusive property right?
One that allows its owner to preent others from using the resource.
What is a transferable property right?
One that allows the owner of a resource to sell or lease it to somebody else.
A competitive market with well-defined and transferable property rights satisfies the…
Efficiency condition
