Econ exam 3 Flashcards
what is a maximum price control law?
a price ceiling, prohibits from trading above a maximum
Qs is larger than Qd
what is a minimum price control law?
a price floor, prohibits from trading below a minimum
Qd is larger than Qs
what is a price control law?
laws that mandate what prices buyers and sellers must trade at
what is an effective price control law?
a price control law that keeps the price above or below the market clearing price
rent control laws :
max price control on housing
what is a rationing law?
laws that restrict peoples consumption of certain goods
what is price gouging?
charging a price that is “too high”
what is a price gouging law? (or an anti price gouging law)
a max price control on necessities during an emergency , set at a pre-emergency price
what is minimum wage law?
a minimum price control law on workers wages
what is a wage?
a price of labor
what is the unemployment rate?
the percentage of people that are actively looking for work but have no job
what is specialization?
do what we do best, and trade the rest
also division of labor
what is the theory of absolute advantage?
the theory that a person will specialize in producing the good for which they have the lowest resource cost
why is the theroy of absolute advantage wrong?
- you can have no gains from trade
- lowest resource cost doesnt matter
what is the theory of comparative advantage?
the theory that a person will specialize in producing the good for which they have the lowest opportunity cost
how do you find comparative advantage?
divide numbers together, whichever is lowest is opp cost.
EVERYONE HAS COMPARATIVE ADV
what is an export?
to sell something to a buyer in another country
what is an import?
to buy something from a seller in another country
what is free trade?
no restrictions on trade like government intervention or special tax.
what are the effects of exports?
-harms american consumers
-benefits american producers
- more harm than good
what are the effects of imports?
- harms american producers
- benefits american consumers
- more good than harm
what is a trade barrier?
government action that restricts trade internationally
what is perfectionism?
support for trade barriers
what is a tariff?
a tax on imports
what is the price of a good?
the amount of money the buyer must spend to buy it from a seller
what is the cost of a good?
the amount of money the seller must spend to produce it
(cost of production)
what is the total cost (TC) ?
the cost of producing a certain quantity of a good
what is a fixed cost? (FC)
costs that do not vary with the quantity of units produced
- building, etc
what is a variable cost? (VC)
costs that vary with the quantity of units produced
- labor, etc
what is marginal product?
the additional output produced when one or more unit of variable input is added
what is the phase of increasing marginal returns?
the range of input usage of which marginal product increases
what is the phase of diminishing marginal returns?
the range of input usage of which marginal product decreases
what is the average total cost? (ATC)
total cost / quantity of units produced
what is the average fixed cost?
(AFC)
total fixed cost / quantity of units produced
what is the average variable cost? (AVC)
total variable cost / quantity of units produced
when the marginal is below the average…
the average is decreasing
when the marginal is above the average…
the average is increasing
what is economies of scale?
range where long run average total cost decreases as output increases
what is diseconomies of scale?
range where long run average total cost increases as output increases
what is constant return to scale?
range where long run average total cost stays constant as output increases
what is total revenue?
amount of money seller receives in return for their products
what is marginal revenue?
additional revenue a seller receives from selling one more unit
what is profit?
total revenue - total cost
what is accounting profit?
total revenue - explicit costs
what is explicit costs?
the amount of money spent on all inputs on production process
what is implicit costs?
the opportunity cost of money spent on all inputs of production process
what is economic profit?
total revenue - explicit cost - implicit cost
what is a transaction cost?
