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Econ200 > exam 2 > Flashcards

exam 2 Flashcards

1
Q

private cost

A

a cost that falls directly on an economic decision maker

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2
Q

external cost

A

a cost imposed without compensation on someone other than the person who caused it

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3
Q

social cost

A

the entire cost of a decision, including both private costs and any external costs

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4
Q

private benefit

A

a benefit that accrues directly to the decision maker

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5
Q

external benefit

A

a benefit that accrues without compensation to someone other than the person who caused it

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6
Q

network externality

A

the effect that an additional user of a good or participant in an activity has on the value of that good or activity for others

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7
Q

Coase theorem

A

the idea that even in the presence of an externality, individuals can reach an efficient equilibrium through private trades, assuming zero transaction costs

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8
Q

Pigovian Tax

A

a tax meant to counterbalance a negative externality

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9
Q

tradable allowance

A

a production or consumption quota that can be bought and sold

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10
Q

social benefit

A

the entire benefits of a decision, including both private benefits and external benefits

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11
Q

externality

A

a cost or benefit being imposed without compensation on someone other than the person who caused it

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12
Q

excludable

A

a characteristic of a good or service that allows owners to prevent its use by people who have not paid for it

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13
Q

rival in consumption (rival)

A

the characteristic of a good for which one person’s consumption prevents or decreases others’ ability to consume it

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14
Q

private good

A

a good that is both excludable and rival

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15
Q

public good

A

a good that is neither excludable nor rival

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16
Q

common resource

A

a good that is not excludable but is rival

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17
Q

free-rider problem

A

a problem that occurs when the nonexcludability of a public good leads to undersupply

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18
Q

tragedy of the commons

A

the depletion of a common resource due to individually rational but collectively inefficient overconsumption

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19
Q

revealed preference

A

the idea that people’s preferences can be determined by observing their choices and behavior

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20
Q

bundle

A

a unique combination of goods that a person could choose to consume

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21
Q

budget constraint

A

a line that is composed of all of the possible combinations of goods and services that a consumer can buy with her or his income

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22
Q

income effect

A

the change in consumption that results from increased effective wealth due to lower prices

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23
Q

substitution effect

A

the change in consumption that results from a change in the relative price of goods

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24
Q

altruism

A

a motive for action in which a person’s utility increases simply because someone else’s utility increases

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25
Q

reciprocity

A

responding to another’s action with a similar action

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26
Q

game

A

a situation involving at least two people that requires those involved to think strategically

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27
Q

game theory

A

the study of how people behave strategically under different circumstances

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28
Q

behaving strategically

A

acting to achieve a goal by anticipating the interplay between your own and other’s decisions

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29
Q

prisoners’ dilemma

A

a game of strategy in which two people make rational choices that lead to a less-than-ideal result for both

30
Q

dominant strategy

A

a strategy that is the best one for a player to follow no matter what strategy other players choose

31
Q

Nash equilibrium

A

an equilibrium reached when all players choose the best strategy they can, given the choices of all other players

32
Q

commitment strategy

A

an agreement to submit to a penalty in the future for defecting from a given strategy

33
Q

repeated game

A

a game that is played more than once

34
Q

tit-for-tat

A

a strategy in which a player in a repeated game takes the same action that his or her opponent did in the preceding round

35
Q

backward induction

A

the process of analyzing a problem in reverse, starting with the last choice, then the second-to-last choice, and so on, to determine the optimal strategy

36
Q

first-mover advantage

A

benefit enjoyed by the player who chooses first and as a result gets a higher payoff than those who follow

37
Q

complete information

A

state of being fully informed about the choices that relevant economic actors face

38
Q

information asymmetry

A

a condition in which one person knows more than another

39
Q

adverse selection

A

a state that occurs when buyers and sellers have different information about the quality of a good or the riskiness of a situation; results in failure to complete transactions that would have been possible if both sides had the same information

40
Q

principal

A

a person who entrusts someone with a task

41
Q

agent

A

a person who carries out a task on someone else’s behalf

42
Q

moral hazard

A

the tendency for people to behave in a riskier way or to renege on contracts when they do not face the full consequences of their actions

43
Q

screening

A

taking action to reveal private information about someone else

44
Q

signaling

A

taking action to reveal one’s own private information

45
Q

statistical discrimination

A

distinguishing between choices by generalizing based on observable characteristics in order to fill in missing information

46
Q

Constant returns to scale occur when the firm’s long-run______

A

average total costs are constant as output increases

47
Q

A firm that shuts down and produces no output incurs a loss in the short run equal to _____

A

total fixed costs

48
Q

Joseph used to work as an office manager, earning $25,000 per year. He gave up that job to start a tailoring business. In calculating the economic profit of his tailoring business, the $25,000 income that he gave up is counted as part of the tailoring firm’s______

A

opportunity costs

49
Q

Which of the following is NOT a characteristic of competitive markets?

A. there are many buys and many sellers
B. Goods offered by the sellers are largely the same.
C. Each firm faces a downward sloping demand curve
D. Firms can freely exit or enter the market

A

Each firm faces a downward sloping demand curve

50
Q

If a competitive firm is currently producing a level of output at which price is less than marginal cost, then______

A

a one-unit decrease in output will increase the firm’s profit

51
Q

At the profit-maximizing level of output,______

A

marginal revenue equals marginal cost

52
Q

For a firm in a competitive market marginal revenue is _____ price.

A

equal to

53
Q

For a monopolist marginal revenue is _____ price

A

less than

54
Q

A competitive firm is a price_____

A

taker

55
Q

a monopolist is a price_____

A

maker

56
Q

assuming that implicit costs are positive, accounting profit is _____ than economic profit

A

greater

57
Q

The deadweight loss associated with a monopoly occurs because the monopolist_____

A

produces an output level less than the socially optimal level

58
Q

For a monopolist, marginal revunue_____

A

new price + (change in price x old quantity)

59
Q

Laws and government actions designed to prevent monopoly and promote competition are the focus of_____

A

antitrust policy

60
Q

The term market failure refers to_____

A

a market that fails to allocate resources efficiently

61
Q

The value of the marginal product of labor is calculated by multiplying the_____

A

price of output by the marginal product of labor

62
Q

a oligopoly is a market in which____

A

there are only a few sellers, each offering a product similar or identical to the others

63
Q

a tariff on a product_____

A

increases the domestic quantity supplied

64
Q

An externality is a _____

A

cost or benefit imposed without compensation on someone other than the person who caused it.”

65
Q

private benefits is the same as

A

willingness top pay

66
Q

private cost is the same as_____

A

willingness to cell

67
Q

Positive externalities involve____ benefits

A

external

68
Q

negative externalities involve ______

A

external costs

69
Q

future value of a sum eqn.

A

FV = PV * (1 + r)^n

70
Q

value of a loan with interest

A

X * (1 + r)

71
Q

Expected value of a sum

A

Sum of (Pn + Sn)

Econ200 (2 decks)

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