Final

Question 1

externality

Answer 1

when a person engages in an activity that influences the well-being of bystander but neither pays nor receives compensation for effect

Question 2

positive externality example

Answer 2

restoration of historic buildings, research new technologies

Question 3

negative externality example

Answer 3

pollution from cars, noise from barking dogs

Question 4

internalise an externality

Answer 4

altering incentives so people take into account external effects of actions

Question 5

effect of subsidies on externaity

Answer 5

internalises externality

Question 6

patent protection

Answer 6

protect rights of inventors by giving them exclusive use of invention for period

Question 7

excludability

Answer 7

can you prevent people from using good

Question 8

rivalrous

Answer 8

does one person’s use of a good affect another’s ability to use

Question 9

private goods

Answer 9

excludable, rivalrous - ice cream

Question 10

club goods

Answer 10

excludable, non-rivalrous - fire protection

Question 11

common resources

Answer 11

not excludable, rivalrous - fish in ocean

Question 12

public goods

Answer 12

not-excludable, non-rivalrous - national defense

Question 13

free rider

Answer 13

reaps benefit without paying

Question 14

cost-benefit analysis

Answer 14

study that compares costs/benefits to society of providing public good

Question 15

goal of firm

Answer 15

maximise profits

Question 16

total revenue

Answer 16

amount firm receives for sale of output

Question 17

total cost

Answer 17

market value of inputs a firm uses in production

Question 18

opportunity cost

Answer 18

all those things that must be forgone to acquire that item

Question 19

cost of production

Answer 19

includes opportunity costs (implicit costs)

Question 20

explicit costs

Answer 20

input costs that require outlay of money by firm

Question 21

implicit costs

Answer 21

input costs that do not require outlay of money by firm

Question 22

economic profit

Answer 22

TR-(explicit+implicit costs)

Question 23

accounting profit

Answer 23

TR-explicit costs

Question 24

production function

Answer 24

relationship between Q inputs and Q outputs

Question 25

marginal product

Answer 25

increased output that arises from additional unit of input

Question 26

diminishing marginal product

Answer 26

as number of workers increases, MP declines because too crowded, etc.

Question 27

MC

Answer 27

deltaTC/deltaQ

Question 28

fixed costs

Answer 28

costs that do not vary with Q outputs and incurred even if firm sells nothing

Question 29

variable costs

Answer 29

costs that vary with Q output

Question 30

AC

Answer 30

TC/Q

Question 31

AFC

Answer 31

FC/Q

Question 32

AVC

Answer 32

VC/Q

Question 33

ATC

Answer 33

TC/Q

Question 34

MR

Answer 34

deltaTR/deltaQ

Question 35

profit max when MR>MC

Answer 35

increasing Q raises profit

Question 36

profit max when MR

Answer 36

decreasing Q raises profit

Question 37

profit max

Answer 37

MC=MR

Question 38

exit

Answer 38

LR decision to leave market, no costs

Question 39

sunk cost

Answer 39

committed+cannot be recovered, irrelevant to decision, e.g. FC

Question 40

profit in competitive market

Answer 40

(P-ATC)*Q

Question 41

why do firms stay open if no profit?

Answer 41

covers implicit costs

Question 42

natural monopoly

Answer 42

single firm can produce at lower costs than large number of firms e.g. electricity

Question 43

price discrimination

Answer 43

selling same good at different prices to different buyers

Question 44

negative externality graph

Answer 44

Question 45

positive externality graph

Answer 45

Question 46

graph showing effect of subsidy on externality

Answer 46