Lecture 10, 11 Equilibrium

Question 1

accounting profits

Answer 1

revenues minus explicit costs

Question 2

economic profits

Answer 2

revenues minus explicit and implicit costs

Question 3

Normal Rate of Return

Answer 3

rate of interest that one can obtain on an essentially risk free investment

Question 4

production possibilities frontier

Answer 4

shows the maximum specified production level of one commodity that results given the production level of the other for a specified period of time and production technology.

Question 5

Pareto Efficiency

Answer 5

Occurs when all possible gains from trade have been exhausted

Question 6

Kaldor-Hicks Criterion

Answer 6

A change that imposes a loss on some may still be Pareto optimal if gainers would be willing to compensate the losers so that there would still be a net gain in welfare

Question 7

Absolute Convergence

Answer 7

gap between rich and poor countries disappear over time

Question 8

Conditional Convergence

Answer 8

gap between countries with similar endowments disappears over time

Question 9

legal incidence

Answer 9

who is legally responsible for paying money

Question 10

Economic incidence

Answer 10

whose wages or labor costs change as a result of a policy