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ECON 202 > Final Review > Flashcards

Final Review Flashcards

1
Q

For public goods, you always want to add

A

vertically think pubv

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2
Q

For private goods, you always want to add

A

horizontally

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3
Q

WTP =

A

xG - xcertain

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4
Q

Risk Premium =

A

WTP - Eclaim

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5
Q

What is a moral hazard

A

Occurs if you cannot easily determine if A is in P’s best interest (i.e. driving recklessly on insurance) Mitigate with deductible (you pay first), co-insurance, etc.

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6
Q

What is adverse selection

A

When you don’t know certain traits (i.e. used cars might be lemons if you’re not careful, health insurers don’t know if a patient gets sick a lot or not) can be solved with test, drive, warranty, or third party reporting orgs, transcripts, etc

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7
Q

Draw a positive externality graph and label DWL

A

see paper

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8
Q

Draw a negative externality graph and label DWL

A

see paper

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9
Q

Draw a tax graph and label DWL

A

see paper

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10
Q

Draw a subsidy graph and label DWL

A

see paper

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11
Q

What’s the annuity shortcut

A

PV = X (1/r - 1/r(1+r)^t)

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12
Q

Draw a LRAC chart

A

see paper

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13
Q

What is a piguovian Tax formula

A

T = MEC[Qsoc]

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14
Q

What happens to the monopolistic competition graph when advertisement is used

A

Increase FC and ATC but not AVC, demand becomes more elastic

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15
Q

What happens in a monopolistic competitive graph when new competitors come in

A

Demand shifts left and slopes even further downward (more elastic)

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16
Q

What do you set to find equilibrium for 3DPD

A

MC = ATC

17
Q

What do you set to find equilibrium for 1DPD

A

MC = WTP

18
Q

What do you do for first best price

A

P = MC

19
Q

What do you do for second best price

A

P = ATC

20
Q

Draw how to find CS, PS, and DWL in an unregulated monopoly

A

See paper

21
Q

What are traits of an oligopoly

A

few firms, price setting, sort of easy entry, primarily run by strategic behavior and game theory

22
Q

What are traits of a competitive monopoly

A

many firms, variety of goods and services, some price setting, easy entry, differentiate through ads and innovation

23
Q

What are traits of a natural monopoly

A

1 firm, price setting, no easy entry, constrained by demand

24
Q

When D is tangent to ATC

A

profit = 0

25
Q

What are some common entry barriers to a monopoly

A

Large fixed cost - CTA , control of key input - diamond example, unique geographical location - Panama Canal, intellectual property, positive network externalities - think FB, customer loyalty - frequent flyer miles

26
Q

We use MC to

A

choose output (MR = MC for equilibrium quantity)

27
Q

We use AVC to

A

figure out whether to shut down or not

28
Q

We use ATC

A

calculate profit profit = pq - qATC[Q]

29
Q

We use LRAC to

A

justify exit or entry in long run (if P>= Min LRAC) -> enter/stay in, if P < min LRAC stay out

30
Q

What are structural entry barriers

A

customer loyalty, network effects, kept input or location, capital investment

31
Q

What are legal entry barriers

A

government mandated monopolies and intellectual property

32
Q

What are strategic entry barriers

A

deterrence by incumbents (learn by doing, product proliferation)

33
Q

What is an allocative inefficiency

A

In a monopoly Qmin < Qpc which results in DWL

34
Q

What is productive inefficiency

A

Q is never going to be at both min LRAC as well as min ATC

35
Q

What is technological inefficiency

A

Due to the rate of technology, the ATC curve might not lower as fast as we want it to

36
Q

What is X inefficiency or managerial inefficiency

A

management gets lazy and works on pet projects, raising ATC

37
Q

What is rent seeking

A

lobbying for monopoly presence erodes into profits

38
Q

What’s bertrand price competition

A

Two duopolist, same product, sometimes different or same ATC and multiple consumers

39
Q

What’s the difference between chapter 7 and chapter 11 bankruptcy

A

Chapter 7 -> firm is dead, Chapter 11 -> how to pay back and restore from to original state

ECON 202 (1 decks)

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