Econ Exam 2 Flashcards

1
Q

Positive Economics

A

Words/Statements that are objective and verifiable –> “what is”

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2
Q

Normative Statements

A

Involves a value judgement –> “what ought to be”

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3
Q

Efficient Outcome

A

The outcome that yields the largest possible economic surplus

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4
Q

Consumer Surplus

A

The difference between how much you are willing to pay for something and how much you actually pay for something

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5
Q

Willingness to Pay

A

The maximum price at which a consumer would buy a good

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6
Q

Deadweight Loss

A

Measures how far economic surplus falls below the efficient outcome

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7
Q

Rational Rule for Markets

A

To increase economic surplus, produce more of an item if the marginal benefit of one more is greater than, or equal to, its marginal cost

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8
Q

Market Failure

A

When the forces of supply and demand lead to an inefficient outcome

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9
Q

Absolute Advantage

A

The ability to carry out a task more efficiently than other people

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10
Q

Comparative Advantage

A

The ability to carry out a task at a lower opportunity cost than other tasks

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11
Q

Opportunity Cost of a Task

A

How much of an alternative good you can produce if you don’t do this task

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12
Q

Trade Costs

A

The extra costs that are incurred as a result of buying or selling overseas rather than domestically

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13
Q

Relative Abundance

A

Sell what you have a lot of, buy what you don’t have much of

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14
Q

Specialized Skills

A

Even when land, labor, and capital are all similar, better production techniques will lower your opportunity costs –> “learn by doing”

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15
Q

World Supply

A

Total quantity of a good supplied by all manufacturers around the world, at each price

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16
Q

World Demand

A

Total quantity of a good demanded by all buyers around the world, at each price

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17
Q

Domestic Demand Curve

A

The quantity of goods that all domestic buyers plan to buy at each price

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18
Q

Domestic Supply Curve

A

illustrates the quantity of goods that domestic producers plan to sell at each price

19
Q

Externality

A

The benefit or cost received by someone not directly involved in production or consumption of a good

20
Q

Positive Externalites

A

side effect that benefits bystanders

21
Q

Negative Externalites

A

side effect that harms bystanders

22
Q

Private Marginal Cost

A

The cost to the producer of an additional unit

23
Q

Private Marginal Benefit

A

The benefit to the consumer from an additional unit

24
Q

External Marginal Cost

A

The cost of an additional unit that is imposed on people other than the producer

25
External Marginal Benefit
The benefit of an additional unit that is imposed on people other than the consumer
26
Marginal Social Cost
All marginal costs, no matter who pays them
27
Marginal Social Benefit
All marginal benefits, no matter who gets them
28
Socially Optimal Quantity
The quantity that is most efficient for society as a whole
29
Rational Rule for Society
Produce more of an item as long as its marginal social benefit is at least as large as the marginal social cost
30
Nonrival Good
A good where consumption by one person does not diminish the amount available for someone else
31
Nonexcludable Good
A good people cannot easily be prevented from consuming, even if they did not pay for it
32
Public Goods
Goods that are both nonrival and nonexcludable
33
Club Good
A good that is excludable but nonrival in consumption
34
Perfect Competition
Lots of sellers with standardized products No market power
35
Monopoly
Only one seller, raising prices won't lose customers Most market power
36
Monopolistic Competition
Differentiated Products, only one seller of a certain style of product
37
Oligopoly
A few large sellers of similar products
38
Market Power
The ability to raise prices without losing many sales to competing sellers
39
Firm Demand
The quantity demanded from individual firms
40
Market Demand
Quantity demanded from all firms
41
Rational Rule for Sellers with Market Power
Sell one more of an item if marginal revenue is greater than or equal to marginal cost
42
Cartel
Cooperation among firms to increase profit relative to non-cooperative eqilibrium
43
Collusion
An agreement to limit competition
44
Natural Monopoly
A market in which it is cheapest for a single business to service the market