Exchange and Opportunity Cost Flashcards

1
Q

Consumer’s Surplus

A

A measure of the gains from trade to consumer. Different between what you’re willing to pay and what you have to pay

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2
Q

Seller/Producer Surplus

A

Seller’s surplus is the profit of the seller.

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3
Q

Theorem of Exchange

A

all gains of trade are exhausted at the margin (maximized –> efficiency)

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4
Q

Efficiency

A

Efficiency means producing the maximum amount of output with minimum inputs (resources such as labor, capital, and raw materials)

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5
Q

Pareto Optimality

A

Situation can’t be changed without making someone worse off

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6
Q

Pareto Improvement

A

At least 1 person is made better off, no one is worse off

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7
Q

Market Demand

A

Market demand describes the demand for a given product and who wants to purchase it (downward sloping)

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8
Q

Market Supply

A

Market supply refers to the total quantity of a good or service that all producers in a market are willing and able to sell at a given price. (upward sloping)

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9
Q

Equilibrium Price & Quantity

A

quantity demanded = quantity supplied

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10
Q

Deadweight Loss

A

when supply and demand are out of equilibrium

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11
Q

Opportunity Cost

A

the value of the highest forsaken alternative

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12
Q

Broken Window Fallacy

A

when a window breaks and someone spends money to repair it, he or she has created new economic activity that would not have otherwise taken place

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13
Q

Profits (losses)

A

benefits - costs = P

Profits are maximized when you choose the most valuable option

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14
Q

Sunk Costs

A

Costs than can’t be recovered (lecture seats at SFU)

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15
Q

Avoidable Costs

A

Opportunity costs that aren’t sunk; they can be recovered or avoided

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16
Q

Transaction Costs

A

Cost that arises when you try to cheat one another in an exchange (shoplifting)

17
Q

Fixed Costs

A

Costs that don’t change without output (independent)

18
Q

Variable Costs

A

Changes when output changes

19
Q

Absolute Advantage

A

You are more productive in all activities

20
Q

Comparative Advantage

A

You are the least cost producer

21
Q

Marginal Cost Curve

A

supply curve of producers

22
Q

Production Possibility Curve shows us

A

The max amount of both goods this little economy can produce

23
Q

Marginal cost curves upward sloping

A

Because individuals have different costs of production

24
Q

Area under marginal cost curve

A

total costs

25
Rent
Seller's surplus : revenue cost. An amount that could be taken away from the producer and the same output would still be produced
26
Rent on marginal unit produced is 0, and is where production _____
stops (producers maximized surplus)