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LSU 2014 ECON 2000 > LSU - ECON 2000 Glossary 2 > Flashcards

LSU - ECON 2000 Glossary 2 Flashcards

1
Q

maximin strategy

A

In game theory, a strategy chosen to maximize the minimum gain that can be earned. p. 303

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2
Q

mechanism design

A

A contract or an institution that aligns the interests of two parties in a transaction. A piece rate, for example, creates incentives for a worker to work hard, just as his or her superior wants. A co-pay in the health care industry encourages more careful use of health care, just as the insurance company wants. p. 363

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3
Q

Medicaid and Medicare

A

In-kind government transfer programs that provide health and hospitalization benefits. Medicare to the aged and their survivors and to certain of the disabled, regardless of income, and Medicaid to people with low incomes. p. 384

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4
Q

Microeconomics

A

The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units-that is, firms and households. p. 4

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5
Q

Midpoint formula

A

A more precise way of calculating percentages using the value halfway between PI and P2 for the base in calculating the percentage change in price and the value halfway between QI and Q2 as the base for calculating the percentage change in quantity demanded. p. 102

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6
Q

minimum efficient scale (MES)

A

The smallest size at which long-run average cost is at its minimum. p.197

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7
Q

minimum wage

A

A price floor set for the price of labor; the lowest wage that firms are permitted to pay workers. p. 86 p. 368

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8
Q

model

A

A formal statement of a theory, usually a mathematical statement of a presumed relationship between two or more variables. p. 8

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9
Q

money

A

income The measure of income used by the Census Bureau. Because money income excludes noncash transfer payments and capital gains income, it is less inclusive than economic income. p. 371

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10
Q

monopolistic competition

A

A common form of industry (market) structure characterized by a large number of firms, no barriers to entry, and product differentiation. p.314

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11
Q

moral hazard

A

Arises when one party to a contract changes behavior in response to that contract and thus passes on the costs of that behavior change to the other party. p. 362

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12
Q

movement along a demand curve

A

The change in quantity demanded brought about by a change in price. p.57

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13
Q

movement along a supply curve

A

The change in quantity supplied brought about by a change in price. p.63

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14
Q

Nash equilibrium

A

In game theory, the result of all players’ playing their best strategy given what their competitors are doing. p. 303

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15
Q

natural experiment

A

Selection of a control versus experimental group in testing the outcome of an intervention is made as a result of an exogenous event outside the experiment itself and unrelated to it. p. 444

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16
Q

natural monopoly

A

An industry that realizes such large economies of scale that single-firm production of that good or service is most efficient. p. 278

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17
Q

network externalities

A

The value of a product to a consumer increases with the number of that product being sold or used in the market. p. 280

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18
Q

nonexcludable

A

A characteristic of public goods. Once a good is produced, no one can be excluded from enjoying its benefits. p.341

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19
Q

nonrival in consumption

A

A characteristic of public goods. One person’s enjoyment of the benefits of a public good does not interfere with another’s consumption of it. p. 341

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20
Q

normal goods

A

Goods for which demand goes up when income is higher and for which demand goes down when income is lower. p. 54

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21
Q

normal rate of return

A

A rate of return on capital that is just sufficient to keep owners and investors satisfied. For relatively risk-free firms, it should be nearly the same as the interest rate on risk-free government bonds. p. 149

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22
Q

normative economics

A

An approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of of action. Also called ?policy economics?. p. 8

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23
Q

North American Free Trade Agreement (NAFTA)

A

An agreement signed by the United States, Mexico, and Canada in which the three countries agreed to establish all North America as a free-trade zone. p. 422

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24
Q

Ockham’s razor

A

The principle that irrelevant detail should be cut away. p. 8

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25
Q

Oligopoly

A

A form of industry (market) structure characterized by a few dominant firms. Products may be homogeneous or differentiated. p. 293

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26
Q

opportunity cost

A

The best alternative that we forgo, or give up, when we make a choice or a decision. p. 2 p. 27

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27
Q

optimal level of provision for public goods

A

The level at which society’s total willingness to pay per unit is equal to the marginal cost of producing the good. p.343

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28
Q

optimal method of production

A

The production method that minimizes cost for a given level of output. p. 152

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29
Q

optimal scale of plant

A

The scale of plant that minimizes long-run average cost. p.200

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30
Q

output effect of a factor

A

price increase (decrease) When a firm decreases (increases) its output in response to a factor price increase (decrease), this decreases (increases) its demand for all factors. p. 223

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31
Q

outputs

A

Goods and services of value to households. p.26

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32
Q

Pareto efficiency or Pareto optimality

A

A condition in which no change is possible that will make some members of society better off without making some other members of society worse off. p.256

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33
Q

partial equilibrium analysis

A

The process of examining the equilibrium conditions in individual markets and for households and firms separately. p. 254

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34
Q

patent

A

A barrier to entry that grants exclusive use of the patented product or process to the inventor. p. 280

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35
Q

payoff

A

The amount that comes from a possible outcome or result. p. 354

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36
Q

perfect competition

A

An industry structure in which there are many firms, each small relative to the industry, producing identical products and in which no firm is large enough to have any control over prices. In perfectly competitive industries, new competitors can freely enter the market and old firms can exit. p. 119 p. 178

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37
Q

perfect knowledge

A

The assumption that households possess a knowledge of the qualities and prices of everything available in the market and that firms have all available information concerning wage rates, capital costs, technology, and output prices. p. 119

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38
Q

perfect price discrimination

A

Occurs when a firm charges the maximum amount that buyers are willing to pay for each unit. p. 283

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39
Q

perfect substitutes

A

Identical products. p. 55

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40
Q

perfectly elastic demand

A

Demand in which quantity drops to zero at the slightest increase in price. p.99

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41
Q

perfectly inelastic demand

A

Demand in which quantity demanded does not respond at all to a change in price. p. 99

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42
Q

physical, or tangible, capital

A

Material things used as inputs in the production of future goods and services. The major categories of physical capital are nonresidential structures, durable equipment, residential structures, and inventories. p. 234

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43
Q

point elasticity

A

A measure of elasticity that uses the slope measurement. p. 102

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44
Q

positive economics

A

An approach to economics that seeks to understand behavior and the operation of systems without making judgments. It describes what exists and how it works. p. 8

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45
Q

post hoc, ergo propter hoc

A

Literally, “after this (in time), therefore because of this;’ A common error made in thinking about causation. If Event A happens before Event B, it is not necessarily true that A caused B. p. 10

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46
Q

poverty line

A

The officially established income level that distinguishes the poor from the nonpoor. It is set at three times the cost of the Department of Agriculture’s minimum food budget. p. 376

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47
Q

price ceiling

A

A maximum price that sellers may charge for a good, usually set by government. p. 83

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48
Q

price discrimination

A

Charging different prices to different buyers for identical products. p. 283

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49
Q

price elasticity of demand

A

The ratio of the percentage of change in quantity demanded to the percentage of change in price; measures the responsiveness of quantity demanded to changes in price. p. 99

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50
Q

price floor

A

A minimum price below which exchange is not permitted. p. 86

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51
Q

price leadership

A

A form of oligopoly in which one dominant firm sets prices and all the smaller firms in the industry follow its pricing policy. p. 298

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52
Q

price rationing

A

The process by which the market system allocates goods and services to consumers when quantity demanded exceeds quantity supplied. p. 79

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53
Q

principle of neutrality

A

All else equal, taxes that are neutral with respect to economic decisions (that is, taxes that do not distort economic decisions) are generally preferable to taxes that distort economic decisions. Taxes that are not neutral impose excess burdens. p. 402

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54
Q

principle of second best

A

The fact that a tax distorts an economic decision does not always imply that such a tax imposes an excess burden. If there are previously existing distortions, such a tax may actuallyimprove efficiency. p. 405

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55
Q

prisoners’dilemma

A

A game in which the players are prevented from cooperating and in which each has a dominant strategy that leaves them both worse off than if they could cooperate. p. 302

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56
Q

producer surplus

A

The difference between the current market price and the cost of production for the firm. p. 90

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57
Q

product differentiation

A

A strategy that firms use to achieve market power. Accomplished by producing goods that differ from others in the market. p. 315

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58
Q

product or output markets

A

The markets in which goods and services are exchanged. p. 48

59
Q

production

A

The process that transforms scarce resources into useful goods and services; the process by which inputs are combined, transformed, and turned into outputs. p. 26 p. 147

60
Q

production function or total product function

A

A numerical or mathematical expression of a relationship between inputs and outputs. It shows units of total product as a function of units of inputs. p. 152

61
Q

production possibility frontier (ppf)

A

A graph that shows all the combinations of goods and services that can be produced if all of society’s resources are used efficiently. p. 32

62
Q

production technology

A

The quantitative relationship between inputs and outputs. p. 152

63
Q

productivity of an input

A

The amount of output produced per unit of that input. p.216

64
Q

profit

A

The difference between revenues and costs; the difference between total revenue and total cost. p.60 p. 148

65
Q

progressive tax

A

A tax whose burden, expressed as a percentage of income, increases as income increases. p.391

66
Q

property income

A

Income from the ownership of real property and financial holdings. It takes the form of profits, interest, dividends, and rents. p. 369

67
Q

proportional tax

A

A tax whose burden is the same proportion of income for all households. p.391

68
Q

protection

A

The practice of shielding a sector of the economy from foreign competition. p. 419

69
Q

public assistance, or welfare

A

Government transfer programs that provide cash benefits to: (l) families with dependent children whose incomes and assets fall below a very low level and (2) the very poor regardless of whether they have children. p. 383

70
Q

public choice theory

A

An economic theory that the public officials who set economic policies and regulate the players act in their own self-interest, just as firms do. p. 283

71
Q

public goods (social or collective goods)

A

Goods that are nonrival in consumption and/or their benefits are nonexcludable. p. 341

72
Q

public goods, or social goods

A

Goods and services that bestow collective benefits on members of society. Generally, no one can be excluded from enjoying their benefits. The classic example is national defense. p. 262

73
Q

pure monopoly

A

An industry with a single firm that produces a product for which there are no close substitutes and in which significant barriers to entry prevent other firms from entering the industry to compete for profits. p. 270

74
Q

pure rent

A

The return to any factor of production that is in fixed supply. p. 224

75
Q

quantity demanded

A

The amount (number of units) of a product that a household would buy in a given period if it could buy all it wanted at the current market price. p. 50

76
Q

quantity supplied

A

The amount of a particular product that a firm would be willing and able to offer for sale at a particular price during a given time period. p. 61

77
Q

queuing

A

Waiting in line as a means of distributing goods and services - a nonprice rationing mechanism. p. 83

78
Q

quota

A

A limit on the quantity of imports. p. 420

79
Q

random

A

experiment (Sometimes referred to as a randomized experiment.) A technique in which outcomes of specific interventions are determined by using the intervention in a randomly selected subset of a sample and then comparing outcomes from the exposed and control group. p. 443

80
Q

ration coupons

A

Tickets or coupons that entitle individuals to purchase a certain amount of a given product per month. p. 84

81
Q

Rawlsian justice

A

A theory of distributional justice that concludes that the social contract emerging from the “original position” would call for an income distribution that would maximize the well-being of the worst-off member of society. p. 380

82
Q

real income

A

The set of opportunities to purchase real goods and services available to a household as determined by prices and money income. p. 124

83
Q

regressive tax

A

A tax whose burden, expressed as a percentage of income, falls as income increases. p.391

84
Q

rent-seeking behavior

A

Actions taken by households or firms to preserve economic profits. p. 283

85
Q

risk-averse

A

Refers to a person’s preference of a certain payoff over an uncertain one with the same expected value. p. 356

86
Q

risk-loving

A

Refers to a person’s preference for an uncertain deal over a certain deal with an equal expected value. p. 356

87
Q

risk-neutral

A

Refers to a person’s willingness to take a bet with an expected value of zero. p. 356

88
Q

rule of reason

A

The criterion introduced by the Supreme Court in 1911 to determine whether a particular action was illegal (“unreasonable”) or legal (“reasonable”) within the terms of the Sherman Act. p.286

89
Q

scarce

A

Limited. p. 2 Glossary 459

90
Q

shift of a demand curve

A

The change that takes place in a demand curve corresponding to a new relationship between quantity demanded of a good and price of that good. The shift is brought about by a change in the original conditions. p. 57

91
Q

shift of a supply curve

A

The change that takes place in a supply curve corresponding to a new relationship between quantity supplied of a good and the price of that good. The shift is brought about by a change in the original conditions. p. 63

92
Q

shock therapy

A

The approach to transition from socialism to market capitalism that advocates rapid deregulation of prices, liberalization of trade, and privatization. p. 450

93
Q

short run

A

The period of time for which two conditions hold: The firm is operating under a fixed scale (fixed factor) of production, and firms can neither enter nor exit an industry. p. 151

94
Q

short-run industry supply curve

A

The sum of the marginal cost curves (above AVC) of all the firms in an industry. p. 194

95
Q

shutdown point

A

The lowest point on the average variable cost curve. When price falls below the minimum point on AVC, total revenue is insufficient to cover variable costs and the firm will shut down and bear losses equal to fixed costs. p. 193

96
Q

Smoot-Hawley tariff

A

The U.S. tariff law of the 1930s, which set the highest tariffs in U.S. history (60 percent). It set off an international trade war and caused the decline in trade that is often considered one of the causes of the worldwide depression of the 1930s. p. 420

97
Q

social capital, or infrastructure

A

Capital that provides services to the public. Most social capital takes the form of public works (roads and bridges) and public services (police and fire protection). p.234

98
Q

social choice

A

The problem of deciding what society wants. The process of adding up individual preferences to make a choice for society as a whole. p. 345

99
Q

social overhead capital

A

Basic infrastructure projects such as roads, power generation, and irrigation systems. p. 438

100
Q

Social Security system

A

The federal system of social insurance programs. It includes three separate programs that are financed through separate funds -the Old Age and Survivors Insurance (OASI) program, the Disability Insurance (DI) program, and the Health Insurance (HI), or Medicare program. p. 382

101
Q

sources side/uses side

A

The impact of a tax may be felt on one or the other or on both sides of the income equation. A tax may cause net income to fall (damage on the sources side), or it may cause prices of goods and services to rise so that income buys less (damage on the uses side). p.396

102
Q

spreading overhead

A

The process of dividing total fixed costs by more units of output. Average fixed cost declines as quantity rises. p. 169

103
Q

stability

A

A condition in which national output is growing steadily, with low inflation and full employment of resources. p. 12

104
Q

substitutes

A

Goods that can serve as replacements for one another; when the price of one increases, demand for the other increases. p. 55

105
Q

supply curve

A

A graph illustrating how much of a product a firm will sell at different prices. p. 61

106
Q

supply schedule

A

Shows how much of a product firms will sell at alternative prices. p. 61

107
Q

tacit collusion

A

Collusion occurs when price- and quantity-fixing agreements among producers are explicit. Tacit collusion occurs when such agreements are implicit. p. 297

108
Q

tariff

A

A tax on imports. p. 419

109
Q

tax base

A

The measure or value upon which a tax is levied. p. 389

110
Q

tax incidence

A

The ultimate distribution of a tax burden. p. 396

111
Q

tax rate structure

A

The percentage of a tax base that must be paid in taxes-25 percent of income, for example. p. 389

112
Q

tax shifting

A

Occurs when households can alter their behavior and do something to avoid paying a tax. p.397

113
Q

technological change

A

The introduction of new methods of production or new products intended to increase the productivity of existing inputs or to raise marginal products. p. 228

114
Q

terms of trade

A

The ratio at which a country can trade domestic products for imported products. p.415

115
Q

theory of comparative advantage

A

Ricardo’s theory that specialization and free trade will benefit all trading partners (real wages will rise), even those that may be absolutely less efficient producers. p. 28 p. 411

116
Q

Tiebout hypothesis

A

An efficient mix of public goods is produced when local land/housing prices and taxes come to reflect consumer preferences just as they do in the market for private goods. p. 345

117
Q

tit-for-tat strategy

A

A repeated game strategy in which a player responds in kind to an opponent’s play. p.304

118
Q

total cost

A

The total of (1) out-of-pocket costs and (2) opportunity cost of all factors of production. p. 149

119
Q

total cost (TC)

A

Total fixed costs plus total variable costs. p. 168

120
Q

total fixed costs (TFC

A

) or overhead The total of all costs that do not change with output even if output is zero. p.169

121
Q

total revenue

A

The amount received from the sale of the product (q X P). p.149

122
Q

total revenue (TR)

A

The total amount that a firm takes in from the sale of its product - the price per unit times the quantity of output the firm decides to produce (P X q). p. 180

123
Q

total utility

A

The total amount of satisfaction obtained from consumption of a good or service. p. 126

124
Q

total variable cost (TVC)

A

The total of all costs that vary with output in the short run. p. 170

125
Q

total variable cost curve

A

A graph that shows the relationship between total variable cost and the level of a firm’s output. p. 170

126
Q

trade deficit

A

The situation when a country imports more than it exports. p. 410

127
Q

trade surplus

A

The situation when a country exports more than it imports. p. 410

128
Q

tragedy of commons

A

The idea that collective ownership may not provide the proper private incentives for efficiency because individuals do not bear the full costs of their own decisions but do enjoy the full benefits. p. 448

129
Q

transfer payments

A

Payments by government to people who do not supply goods or services in exchange. p.370

130
Q

u.S.-Canadian Free Trade Agreement

A

An agreement in which the United States and Canada agreed to eliminate all barriers to trade between the two countries by 1998. p. 422

131
Q

unemployment compensation

A

A state government transfer program that pays cash benefits for a certain period of time to laid-off workers who have worked for a specified period of time for a covered employer. p. 384

132
Q

unitary elasticity

A

A demand relationship in which the percentage change in quantity of a product demanded is the same as the percentage change in price in absolute value (a demand elasticity of 1). p. 100

133
Q

utilitarian justice

A

The idea that “a dollar in the hand of a rich person is worth less than a dollar in the hand of a poor person”. If the marginal utility of income declines with income, transferring income from the rich to the poor will increase total utility. p. 380

134
Q

utility

A

The satisfaction a product yields. p. 126

135
Q

utility possibilities frontier

A

A graphic representation of a two-person world that shows all points at which l’s utility can be increased only if J’s utility is decreased. p. 377

136
Q

utility-maximizing rule

A

Equating the ratio of the marginal utility of a good to its price for all goods. p. 129

137
Q

variable

A

A measure that can change from time to time or from observation to observation. p. 8

138
Q

variable cost

A

A cost that depends on the level of production chosen. p. 168

139
Q

vertical differentiation

A

A product difference that, from everyone’s perspective, makes a product better than rival products. p.317

140
Q

vicious-circle-of-poverty hypothesis

A

Suggests that poverty is self-perpetuating because poor nations are unable to save and invest enough to accumulate the capital stock that would help them grow. p. 435

141
Q

voting paradox

A

A simple demonstration of how majority-rule voting can lead to seemingly contradictory and inconsistent results. A commonly cited illustration of the kind of inconsistency described in the impossibility theorem. p. 346

142
Q

wealth or net worth

A

The total value of what a household owns minus what it owes. It is a stock measure. p. 54

143
Q

World Bank

A

An international agency that lends money to individual countries for projects that promotes economic development. p. 439

144
Q

World Trade Organization (WTO)

A

A negotiating forum dealing with rules of trade across nations. p. 421

LSU 2014 ECON 2000 (3 decks)

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