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

LSU - ECON 2000 Glossary CVS Flashcards

1
Q

ability-to-pay principle

A

A theory of taxation holding that citizens should bear tax burdens in line with their ability to pay taxes. p. 393

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2
Q

absolute advantage

A

A producer has an absolute advantage over another in the production of a good or service if he or she can produce that product using fewer resources (a lower absolute cost per unit); the advantage in the production of a good enjoyed by one country over another when it uses fewer resources to produce that good than the other country does. p. 29 p. 411

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3
Q

adverse selection

A

A situation in which asymmetric information results in high-quality goods or high-quality consumers being squeezed out of transactions because they cannot demonstrate their quality. p. 358

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4
Q

asymmetric information

A

One of the parties to a transaction has information relevant to the transaction that the other party does not have. p. 357

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5
Q

average fixed cost (AFC)

A

Total fixed cost divided by the number of units of output; a per-unit measure of fixed costs. p. 169

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6
Q

average product

A

The average amount produced by each unit of a variable factor of production. p. 154

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7
Q

average tax rate

A

Total amount of tax paid divided by total income. p. 391

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8
Q

average total cost (ATC)

A

Total cost divided by the number of units of output. p. 175

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9
Q

average variable cost (AVC)

A

Total variable cost divided by the number of units of output. p. 173

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10
Q

barriers to entry

A

Factors that prevent new firms from entering and competing in imperfectly competitive industries. p. 278

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11
Q

behavioral economics

A

A branch of economics that uses the insights of psychology and economics to investigate decision making. p. 317

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12
Q

benefits-received principle

A

A theory of fairness holding that taxpayers should contribute to government (in the form of taxes) in proportion to the benefits they receive from public expenditures. p. 393

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13
Q

black market

A

A market in which illegal trading takes place at market-determined prices. p. 84

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14
Q

bond

A

A contract between a borrower and a lender, in which the borrower agrees to pay the loan at some time in the future. Some bonds also make regular, constant payments once or twice a year. p.237

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15
Q

brain drain

A

The tendency for talented people from developing countries to become educated in a developed country and remain there after graduation. P.436

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16
Q

breaking even

A

The situation in which a firm is earning exactly a normal rate of return. p. 190

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17
Q

budget constraint

A

The limits imposed on household choices by income, wealth, and product prices. p. 122

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18
Q

capital

A

Things that are produced and then used in the production of other goods and services; Those goods produced by the economic system that are used as inputs to produce other goods and services in the future. p. 26 p. 233

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19
Q

capital flight

A

The tendency for both human capital and financial capital to leave developing countries in search of higher expected rates of return elsewhere with less risk. p. 436

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20
Q

capital income

A

Income earned on savings that have been put to use through financial capital markets. p. 238

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21
Q

capital market

A

The input/factor market in which households supply their savings, for interest or for claims to future profits, to firms that demand funds to buy capital goods; The market in which households supply their savings to firms that demand funds to buy capital goods. p. 49 p. 236

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22
Q

capital stock

A

For a single firm, the current market value of the firm?s plant, equipment, inventories, and intangible assets. p. 235

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23
Q

capital-intensive technology

A

Technology that relies heavily on capital instead of human labor. p. 152

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24
Q

cartel

A

A group of firms that gets together and makes joint price and output decisions to maximize joint profits. p. 297

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25
Q

Celler-Kefauver Act

A

Extended the government’s authority to control mergers. p. 307

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26
Q

ceteris paribus, or all else equal

A

A device used to analyze the relationship between two variables while the values of other variables are held unchanged. p. 9

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27
Q

choice set or opportunity set

A

The set of options that is defined and limited by a budget constraint. p. 123

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28
Q

Clayton Act

A

Passed by Congress in 1914 to strengthen the Sherman Act and clarify the rule of reason, the act outlawed specific monopolistic behaviors such as tying contracts, price discrimination, and unlimited mergers. p. 287

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29
Q

Coase theorem

A

Under certain conditions, when externalities are present, private parties can arrive at the efficient solution without government involvement. p. 334

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30
Q

command economy

A

An economy in which a central government either directly or indirectly sets output targets, incomes, and prices. p. 39

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31
Q

commitment device

A

Actions that individuals take in one period to try to control their behavior in a future period. p. 319

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32
Q

common stock

A

A share of stock is an ownership claim on a firm, entitling its owner to a profit share. p. 239

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33
Q

comparative advantage

A

A producer has a comparative advantage over another in the production of a good or service if he or she can produce that product at a lower opportunity cost; the advantage in the production of a good enjoyed by one country over another when that good can be produced at lower cost in terms of other goods than it could be in the other country. p. 29 p. 411

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34
Q

compensating differentials

A

Differences in wages that result from differences in working conditions. Risky jobs usually pay higher wages; highly desirable jobs usually pay lower wages. p. 368

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35
Q

complements, complementary goods

A

Goods that “go together”; a decrease in the price of one results in an increase in demand for the other and vice versa. P. 55

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36
Q

concentration ratio

A

The share of industry output in sales or employment accounted for by the top firms. p. 295

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37
Q

constant returns to scale

A

An increase in a fIrm’s scale of production has no effect on costs per unit produced. p. 195

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38
Q

consumer goods

A

Goods produced for present consumption. p. 31

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39
Q

consumer sovereignty

A

The idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase). p.40

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40
Q

consumer surplus

A

The difference between the maximum amount a person is willing to pay for a good and its current market price. p. 89

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41
Q

contestable markets

A

Markets in which entry and exit are easy enough to hold prices to a competitive level even if no entry actually occurs. p. 296

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42
Q

Corn Laws

A

The tariffs, subsidies, and restrictions enacted by the British Parliament in the early nineteenth century to discourage imports and encourage exports of grain. p. 411

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43
Q

cross-price elasticity of demand

A

A measure of the response of the quantity of one good demanded to a change in the price of another good. p. 111

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44
Q

deadweight loss

A

The total loss of producer and consumer surplus from underproduction or overproduction. p. 92

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45
Q

decreasing returns to scale, or diseconomies of scale

A

An increase in a firm?s scale of production leads to higher costs per unit produced. p. 195

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46
Q

demand curve

A

A graph illustrating how much of a given product a household would be willing to buy at different prices. p. 51

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47
Q

demand schedule

A

Shows how much of a given product a household would be willing to buy at different prices for a given time period. p. 51

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48
Q

demand-determined price

A

The price of a good that is in fixed supply; it is determined exclusively by what households and firms are willing to pay for the good. p.224

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49
Q

depreciation

A

The decline in an asset’s economic value over time. p. 236

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50
Q

derived demand

A

The demand for resources (inputs)that is dependent on the demand for the outputs those resources can be used to produce. p. 215

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51
Q

diamond/water paradox

A

A paradox stating that (1) the things with the greatest value in use frequently have little or no value in exchange and (2) the things with the greatest value in exchange frequently have little or no value in use. p. 129

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52
Q

diminishing marginal utility

A

The more of anyone good consumed io a given period, the less incremental satisfaction is generated by consuming a marginal or incremental unit of the same good. p. 354

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53
Q

dividend

A

Payment made to shareholders of a corporation. p. 239

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54
Q

Doha Development Agenda

A

An initiative of the World Trade Organization focused on issues of trade and development. p. 421

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55
Q

dominant strategy

A

In game theory, a strategy that is best no matter what the opposition does. p. 301

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56
Q

drop-in-the-bucket problem

A

A problem intrinsic to public goods. The good or service is usually so costly that its provision generally does not depend on whether any single person pays. p. 342

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57
Q

dumping

A

A firm’s or an industry’s sale of products on the world market at prices below its own cost of production. p.419

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58
Q

duopoly

A

A two-firm oligopoly. p.299

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59
Q

economic growth

A

An increase in the total output of an economy. Growth occurs when a society acquires new resources or when it learns to produce more using existing resources. p. 12 p. 36

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60
Q

economic income

A

The amount of money a household can spend during a given period without increasing or decreasing its net assets. Wages, salaries, dividends, interest income, transfer payments, rents, and so on are sources of economic income. p. 370

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61
Q

economic integration

A

Occurs when two or more nations join to form a free-trade zone. p.422

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62
Q

economic profit

A

Profit that accounts for both explicit costs and opportunity costs. p. 149

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63
Q

economics

A

The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. p. 2

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64
Q

efficiency In economics, allocative efficienc

A

. An efficient economy is one that produces what people want at the least possible cost; The condition in which the economy is producing what people want at least possible cost. p. 11 p. 254

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65
Q

efficient market

A

A market in which profit opportunities are eliminated almost instantaneously. p. 3

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66
Q

elastic demand

A

A demand relationship in which the percentage change in quantity demanded is larger than the percentage change in price in absolute value (a demand elasticity with an absolute value greater than 1). p. 100

67
Q

elasticity

A

A general concept used to quantify the response in one variable when another variable changes. p. 97

68
Q

elasticity of labor supply

A

A measure of the response of labor supplied to a change in the price of labor. p. 111

69
Q

elasticity of supply

A

A measure of the response of quantity of a good supplied to a change in price of that good. Likely to be positive in output markets. p. 111

70
Q

empirical economics

A

The collection and use of data to test economic theories. p. 10

71
Q

entrepreneur

A

A person who organizes, manages, and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business. p. 48

72
Q

equilibrium

A

The condition that exists when quantity supplied and quantity demanded are equal. At equilibrium, there is no tendency for price to change. p. 65

73
Q

equity

A

Fairness. p. 12 p. 367

74
Q

estate

A

The property that a person owns at the time of his or her death. p. 396

75
Q

estate tax

A

A tax on the total value of a person’s estate. p. 396

76
Q

European Union (EU)

A

The European trading bloc composed of 27 countries (of the 27 countries in the EU, 17 have the same currency - the euro). p. 422

77
Q

excess burden

A

The amount by which the burden of a tax exceeds the total revenue collected. Also called deadweight loss. p. 402

78
Q

excess demand or shortage

A

The condition that exists when quantity demanded exceeds quantity supplied at the current price. p. 66

79
Q

excess supply or surplus

A

The condition that exists when quantity supplied exceeds quantity demanded at the current price. p. 67

80
Q

exchange rate

A

The price of one currency in terms of another. p.416

81
Q

expected rate of return

A

The annual rate of return that a firm expects to obtain through a capital investment. p. 243

82
Q

expected utility

A

The sum of the utilities coming from all possible outcomes of a deal, weighted by the probability of each occurring. p. 355

83
Q

expected value

A

The sum of the payoffs associated with each possible outcome of a situation weighted by its probability of occurring. p. 354

84
Q

export promotion

A

A trade policy designed to encourage exports. p. 440

85
Q

export subsidies

A

Government payments made to domestic firms to encourage exports. p. 419

86
Q

externality

A

A cost or benefit imposed or bestowed on an individual or a group that is outside, or external to, the transaction. p. 263 p. 329

87
Q

factor endowments

A

The quantity and quality of labor, land, and natural resources of a country. p.418

88
Q

factor substitution effect

A

The tendency of firms to substitute away from a factor whose price has risen and toward a factor whose price has fallen. p. 223

89
Q

factors of production

A

The inputs into the production process. Land, labor, and capital are the three key factors of production. p. 49

90
Q

factors of production (or factors)

A

The inputs into the process of production. Another term for resources. p. 26

91
Q

fair game or fair bet

A

A game whose expected value is zero. p. 354

92
Q

fallacy of composition

A

The erroneous belief that what is true for a part is necessarily true for the whole. p. 10

93
Q

favored customers

A

Those who receive special treatment from dealers during situations of excess demand. p. 84

94
Q

Federal Trade Commission (FTC)

A

A federal regulatory group created by Congress in 1914 to investigate the structure and behavior of firms engaging in interstate commerce, to determine what constitutes unlawful “unfair” behavior, and to issue cease-and-desist orders to those found in violation of antitrust law. p. 287

95
Q

financial capital market

A

The complex set of institutions in which suppliers of capital (households that save) and the demand for capital (firms wanting to invest) interact; the part of the capital market in which savers and investors interact through intermediaries. p. 137 p. 238

96
Q

firm

A

An organization that transforms resources (inputs) into products (outputs). Firms are the primary producing units in a market economy; an organization that comes into being when a person or a group of people decides to produce a good or service to meet a perceived demand. p. 48 p. 148

97
Q

Five Forces model

A

A model developed by Michael Porter that helps us understand the five competitive forces that determine the level of competition and profitability in an industry. p. 294

98
Q

fixed cost

A

Any cost that does not depend on the firms’ level of output. These costs are incurred even if the firm is producing nothing. There are no fixed costs in the long run. p. 168

99
Q

free enterprise

A

The freedom of individuals to start and operate private businesses in search of profits. p. 40

100
Q

free-rider problem A problem intrinsic to public goods

A

Because people can enjoy the benefits of public goods whether or not they pay for them, they are usually unwilling to pay for them. p. 341

101
Q

game theory

A

Analyzes the choices made by rival firms, people, and even governments when they are trying to maximize their own well-being while anticipating and reacting to the actions of others in their environment. p.301

102
Q

General Agreement on Tariffs and Trade (GATT)

A

An international agreement signed by the United States and 22 other countries in 1947 to promote the liberalization of foreign trade. p. 421

103
Q

general equilibrium

A

The condition that exists when all markets in an economy are in simultaneous equilibrium. p. 254

104
Q

Gini coefficient

A

A commonly used measure of the degree of inequality of income derived from a Lorenz curve. It can range from 0 to a maximum of 1. p. 372

105
Q

government failure

A

Occurs when the government becomes the tool of the rent seeker and the allocation of resources is made even less efficient by the intervention of government. p. 283

106
Q

Heckscher-Ohlin theorem

A

A theory that explains the existence of a country’s comparative advantage by its factor endowments; A country has a comparative advantage in the production of a product if that country is relatively well endowed with inputs used intensively in the production of that product. p.418

107
Q

Herfindahl-Hirschman Index (HHI)

A

An index of market concentration found by summing the square of percentage shares of firms in the market. p. 307

108
Q

homogeneous products

A

Undifferentiated outputs; products that are identical to or indistinguishable from one another. p. 119 p. 178

109
Q

horizontal differentiation

A

Products differ in ways that make them better for some people and worse for others. p. 316

110
Q

households

A

The consuming units in an economy. p. 48

111
Q

human capital

A

A form of intangible capital that includes the skills and other knowledge that workers have or acquire through education and training and that yields valuable services to a firm over time; the stock of knowledge, skills, and talents that people possess; it can be inborn or acquired through education and training. p. 234 p. 368

112
Q

imperfect information

A

The absence of full knowledge concerning product characteristics, available prices, and so on. p. 263

113
Q

imperfectly competitive industry

A

An industry in which individual firms have some control over the price of their output. p. 269

114
Q

import substitution

A

An industrial trade strategy that favors developing local industries that can manufacture goods to replace imports. p. 440

115
Q

impossibility theorem

A

A proposition demonstrated by Kenneth Arrow showing that no system of aggregating individual preferences into social decisions will always yield consistent, nonarbitrary results. p. 346

116
Q

income

A

The sum of all a household’s wages, salaries, profits, interest payments, rents, and other forms of earnings in a given period of time. It is a flow measure. p. 54

117
Q

income elasticity of demand

A

A measure of the responsiveness of demand to changes in income. p. 110

118
Q

increasing returns to scale, or economies of scale

A

An increase in a firm’s scale of production leads to lower costs per unit produced. p. 195

119
Q

industrial policy

A

A policy in which governments actively pick industries to support as a base for economic development. p. 439

120
Q

Industrial Revolution

A

The period in England during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities. p. 3

121
Q

inelastic demand

A

Demand that responds somewhat, but not a great deal, to changes in price. Inelastic demand always has a numerical value between zero and 1. p. 100

122
Q

infant industry

A

A young industry that may need temporary protection from competition from the established industries of other countries to develop an acquired comparative advantage. p. 427

123
Q

inferior goods

A

Goods for which demand tends to fall when income rises. p. 54

124
Q

injunction

A

A court order forbidding the continuation of behavior that leads to damages. p. 336

125
Q

input or factor markets

A

The markets in which the resources used to produce goods and services are exchanged. p. 48

126
Q

inputs or resources

A

Anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants. p. 26

127
Q

intangible capital

A

Nonmaterial things that contribute to the output of future goods and services. p. 234

128
Q

interest

A

The payments made for the use of money. p. 238

129
Q

interest rate

A

Interest payments expressed as a percentage of the loan. p. 238

130
Q

International Monetary Fund (IMF)

A

An international agency whose primary goals are to stabilize international exchange rates and to lend money to countries that have problems financing their international transactions. p. 438

131
Q

Investment

A

The process of using resources to produce new capital; new capital additions to a firm’s capital stock. Although capital is measured at a given point in time (a stock), investment is measured over a period of time (a flow). The flow of investment increases the capital stock. p. 32 p. 235

132
Q

labor market

A

The input/factor market in which households supply work for wages to firms that demand labor p.49

133
Q

labor supply curve

A

A curve that shows the quantity of labor supplied at different wage rates. Its shape depends on how households react to changes in the wage rate. p. 135

134
Q

labor theory of value

A

Stated most simply, the theory that the value of a commodity depends only on the amount of labor required to produce it. p. 380

135
Q

labor-intensive technology

A

Technology that relies heavily on human labor instead of capital. p. 152

136
Q

laissez-faire economy

A

Literally from the French “allow [them] to do’. An economy in which individual people and firms pursue their own self-interest without any central direction or regulation. p. 40

137
Q

land market

A

The input/factor market in which households supply land or other real property in exchange for rent. p. 49

138
Q

law of demand

A

The negative relationship between price and quantity demanded Ceteris paribus, as price rises, quantity demanded decreases; as price falls, quantity demanded increases. p. 52

139
Q

law of diminishing marginal utility

A

The more of anyone good consumed in a given period, the less satisfaction (utility) generated by consuming each additional (marginal) unit of the same good. p. 126

140
Q

law of diminishing returns

A

When additional units of a variable input are added to fixed inputs, after a certain point, the marginal product of the variable input declines. p. 153

141
Q

law of supply

A

The positive relationship between price and quantity of a good supplied An increase in market price will lead to an increase in quantity supplied, and a decrease in market price will lead to a decrease in quantity supplied. p. 61

142
Q

liability rules

A

Laws that require A to compensate B for damages that A imposed on B. p. 336

143
Q

logrolling

A

Occurs when Congressional representatives trade votes, agreeing to help each other get certain pieces of legislation passed. p. 346

144
Q

long run

A

That period of time for which there are no fixed factors of production Firms can increase or decrease the scale of operation, and new firms can enter and/or existing firms can exit the industry. p. 151

145
Q

long-run average cost curve (LRAC)

A

The “envelope” of a series of short-run cost curves. p. 197

146
Q

long-run competitive equilibrium

A

When P = SRMC = SRAC = LRAC and profits are zero. p. 204 Glossary 457

147
Q

Lorenz curve

A

A widely used graph of the distribution of income, with cumulative percentage of households plotted along the horizontal axis and cumulative percentage of income plotted along the vertical axis. p. 372

148
Q

Macroeconomics

A

The branch of economics that examines the economic behavior of aggregates income, employment, output, and so on-on a national scale. p. 5

149
Q

marginal cost (MC)

A

The increase in total cost that results from producing 1 more unit of output. Marginal costs reflect changes in variable costs. p. 171

150
Q

marginal damage cost (MDC)

A

The additional harm done by increasing the level of an externality producing activity by 1 unit. If producing product X pollutes the water in a river, MDC is the additional cost imposed by the added pollution that results from increasing output by 1 unit of X per period. p. 334

151
Q

marginal private cost (MPC)

A

The amount that a consumer pays to consume an additional unit of a particular good. p. 333

152
Q

marginal product

A

The additional output that can be produced by adding one more unit of a specific input, ceteris paribus. p. 153

153
Q

marginal product of labor (MPL)

A

The additional output produced by 1 additional unit of labor. p. 216

154
Q

marginal rate of transformation (MRT)

A

The slope of the production possibility frontier (ppf). p. 33

155
Q

marginal revenue (MR)

A

The additional revenue that a firm takes in when it increases output by one additional unit. In perfect competition, P = MR. p.180 marginal revenue product (MRP) The additional revenue a firm earns by employing 1 additional unit of an input, ceteris paribus. p.217

156
Q

marginal social cost (MSC)

A

The total cost to society of producing an additional unit of a good or service. MSC is equal to the sum of the marginal costs of producing the product and the correctly measured damage costs involved in the process of production. p. 330

157
Q

marginal tax rate

A

The tax rate paid on the next dollar earned. p.391

158
Q

marginal utility (MU)

A

The additional satisfaction gained by the consumption or use of one more unit of a good or service. p. 126

159
Q

marginalism

A

The process of analyzing the additional or incremental costs or benefits arising from a choice or decision. p. 2

160
Q

market

A

The institution through which buyers and sellers interact and engage in exchange. p. 40

161
Q

market demand

A

The sum of all the quantities of a good or service demanded per period by all the households buying in the market for that good or service. p. 59

162
Q

market failure

A

Occurs when resources are misallocated, or allocated inefficiently. The result is waste or lost surplus. p. 262

163
Q

market power

A

An imperfectly competitive firm’s ability to raise price without losing all of the quantity demanded for its product. p. 270

LSU 2014 ECON 2000 (3 decks)

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