Deck 4 (N-Z)

Question 1

Normal good

Answer 1

One where the quantity demanded increases in response to an increase in consumer incomes

Question 2

Normative statement

Answer 2

A statement involving a value judgement that is about what ought to be

Question 3

Opportunity cost

Answer 3

In decision making, it is the value of the next-best alternative forgone

Question 4

Pareto optimum

Answer 4

When no reallocation of resources can make an individual better off without making some other individual worse off

Question 5

Positive statement

Answer 5

A statement about what is, i.e. about facts

Question 6

Price elasticity of demand (PED)

Answer 6

A measure of the sensitivity of quantity demanded to a change in price of a good or service

Question 7

Price elasticity of supply (PES)

Answer 7

A measure of the sensitivity of quantity supplied of a good or service to a change in the price of that good or service

Question 8

Private cost

Answer 8

A cost incurred by an individual (firm or consumer) as part of its production or other economic activities

Question 9

Private good

Answer 9

A good that, once consumed by one person, cannot be consumed by someone else - it has excludability and is rivalrous

Question 10

Producer surplus

Answer 10

The difference between the price received by firms for a good or service and the price they would have been prepared to supply that good or service

Question 11

Production externality

Answer 11

An externality that affects the production side of a market, which may be either positive or negative

Question 12

Production possibility curve

Answer 12

A curve showing the maximum combinations of goods and services that can be produced in a set period of time given the available resources

Question 13

Productive efficiency

Answer 13

Attained when a firm operates at the lowest average total cost

Question 14

Prohibition

Answer 14

An attempt to prevent the consumption of a demerit good by declaring it illegal

Question 15

Public good

Answer 15

A good that is non-exclusive and non-rivalrous - a person cannot be excluded from consuming the good and one person’s consumption does not affect the amount available for others to consumer

Question 16

Quasi-public good

Answer 16

Goods that have some, but not all the characteristics of a public good

Question 17

Scarcity

Answer 17

A situation that arises because people have unlimited wants in the face of limited resources

Question 18

Specific tax

Answer 18

A tax of a fixed amount imposed on purchases of a commodity

Question 19

Subsidy

Answer 19

A grant given by the government to producers to encourage production of a good or service

Question 20

Substitutes

Answer 20

When goods are regarded by consumers as alternatives, demand for one good is likely to rise if the price of the alternative rises

Question 21

Sunk costs

Answer 21

Cost incurred by a firm that cannot be recovered if the firm ceases trading

Question 22

Superior good

Answer 22

One for which the income elasticity of demand is positive, and greater than 1, such that as income rises, consumers spend proportionally more on the good

Question 23

Supply curve

Answer 23

A graph showing the quantity supplied at any given price

Question 24

Technical efficiency

Answer 24

Attaining the maximum possible output from a given set of inputs

Question 25

Total cost (TC)

Answer 25

The sum of all costs that are incurred in producing a given level of output

Question 26

Variable costs

Answer 26

Costs that vary with the level of output

Question 27

Polluter pays principle

Answer 27

Any measure whereby the polluter pays explicitly for the pollution caused

Question 28

Third party

Answer 28

Those not directly involved in making a decision