final

Question 1

behavioral economics

Answer 1

a field of economics that draws on insights from psychology to expand models of individual decision making

Question 2

people can hold two inconsistent sets of preferences. what are they?

Answer 2

• what we would like to want in the future

- what we will want in the future

Question 3

time inconsistency

Answer 3

when we change our minds about what we want simply because of the timing of the decision

Question 4

cognitive biases

Answer 4

systematic patterns in how we behave that lead to consistently erroneous decisions

Question 5

sunk cost

Answer 5

a cost that has already been incurred and cannot be refunded or recovered

Question 6

“the battle of two selves”

Answer 6

• time-consistent individual is being neither irrational nor rational
• future-oriented and present-oriented selves within the individual are each rationally pursuing their own objectives

Question 7

commitment device

Answer 7

an arrangement entered into by an individual with the aim of helping fulfill a plan for future behavior that would otherwise be difficult

Question 8

people are especially prone to ______ opportunity costs when they are non-monetary

Answer 8

undervaluing

Question 9

fungible

Answer 9

easily exchangeable or substitutable

Question 10

implicit cost of ownership

Answer 10

people value things more when they own them

by continuing to own an item, you incur an opportunity cost equal to what someone would be willing to pay for it

Question 11

people who have recently gained some money are _____ likely to spend it recklessly

Answer 11

more

Question 12

total revenue

Answer 12

the amount that a firm receives from the sale of goods and services; calculated as the quantity sold multiplied by the price paid for each unit

quantity x price = total revenue

Question 13

total cost

Answer 13

the amount that a firm pays for all of the inputs that go into producing goods and services

Question 14

profit

Answer 14

the difference between total revenue and total cost

Question 15

fixed costs

Answer 15

costs that do not depend on the quantity of output produced

Question 16

variable costs

Answer 16

costs that depend on the quantity of output produced

Question 17

explicit costs

Answer 17

costs that require a firm to spend money

Question 18

implicit costs

Answer 18

costs that represent forgone opportunities

Question 19

accounting profit

Answer 19

total revenue minus explicit costs

Question 20

economic profit

Answer 20

total revenue minus all opportunity costs (both explicit and implicit)

Question 21

production function

Answer 21

the relationship between quantity of inputs and the resulting quantity of outputs

Question 22

marginal product

Answer 22

the increase in output that is generated by an additional unit of input

Question 23

diminishing marginal product

Answer 23

a principle stating that the marginal product of an input decreases as the quantity of the input increases

Question 24

total costs

Answer 24

fixed costs + variable costs

Question 25

average fixed cost
definition?
curve trend?

Answer 25

fixed cost divided by the quantity of output

curve trends downward

Question 26

average variable cost
definition?
curve trend?

Answer 26

variable cost divided by the quantity of output

u-shaped cost curve

Question 27

average total cost
def?
curve?

Answer 27

total cost divided by quantity of output

u-curved, but not as noticeably as the AVC curve

Question 28

marginal cost
def?
curve?

Answer 28

the additional cost incurred by a firm when it produces one additional unit of output

curve is u shaped

Question 29

marginal cost curve is ___ of marginal product curve

Answer 29

inverse

Question 30

economies of scale

Answer 30

returns that occur when an increase in the quantity of output decreases average total cost

Question 31

diseconomies of scale

Answer 31

returns that occur when an increase in the quantity of output increases average total cost

Question 32

constant returns to scale

Answer 32

returns that occur when average total cost does not depend on the quantity of output

Question 33

monopoly

Answer 33

a firm that is the only producer or service with no close substitutes

Question 34

barriers to entry

Answer 34

• scare resources
• economies of scale
• government intervention
• aggressive business tactics on the part of market-leading firms

Question 35

natural monopoly

Answer 35

a market in which a single firm can produce, at a lower cost than multiple firms, the entire quantity of output demanded

Question 36

quantity effect

Answer 36

total revenue increases due to the money brought in by the sale of an additional unit

Question 37

price effect

Answer 37

total revenue decreases because all units sold now bring in lower price than they did before

Question 38

to maximize profit, the monopolist will always produce that quantity which _____

Answer 38

marginal cost equals marginal revenue

Question 39

at quantities ___ than the intersection of supply and demand, total surplus is ____ because consumer surplus is ___ than the decrease in producer surplus

Answer 39

• higher
• reduced
• less

Question 40

price discrimination

Answer 40

the practice of charging customers different prices for the same good

Question 41

production possibilities frontier (PPF)

Answer 41

a line or curve that shows all the possible combinations of two outputs that can be produced using all available resources

Question 42

what does PPF represent?

Answer 42

restraints on production

Question 43

the opportunity cost of producing an additional unit of a good ____ increases as more of each resource is allocated to it

Answer 43

increases

Question 44

main factors that drive change in US production possibilities

Answer 44

• more workers

- technological advances

Question 45

absolute advantage

Answer 45

the ability to produce more of a good or service than others with a given amount of resources

Question 46

comparative advantage

Answer 46

the ability to produce a good or service at a lower opportunity cost than others

Question 47

specialization

Answer 47

spending all of your time producing a particular good

Question 48

gains from trade

Answer 48

the improvement in outcomes that occurs when producers specialize and exchange goods and services

Question 49

revenue allows governments to____

Answer 49

provide goods and services to citizens

Question 50

a tax creates ______

Answer 50

inefficiency (decreases total surplus

Question 51

lump-sum (head) tax

Answer 51

a tax that charges the same amount to each taxpayer, regardless of their economic behavior or circumstances

Question 52

administrative burden

Answer 52

the logistical costs associated with implementing a tax

Question 53

tax revenue = ?

Answer 53

tax per unit * number of units

Question 54

proportional/flat tax

Answer 54

a tax that takes the same percentage of income from all taxpayers

Question 55

progressive tax

Answer 55

a tax that charges low-income people a smaller percentage of their income than high-income people

Question 56

regressive tax

Answer 56

a tax that charges low-income people a larger percentage of their income than it charges high-income people

Question 57

a person is risk averse if he or she___

Answer 57

prefers a less risky income, holding fixed its expected value

Question 58

explicit costs_____

Answer 58

require an outlay of money by the firm