Micro Flashcards

1
Q

Tax effect with relatively inelastic supply

A

tax incidence falls on seller

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2
Q

long run-supply curves v. short-run supply curves

A

long-run supply curves are MORE ELASTIC and FLATTER than short-run supply curves

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3
Q

law of demand

A

as price decreases, quantity demanded increases

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4
Q

law of supply

A

as price increases, quantity supplied increases

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5
Q

change in quantity demanded or supplied

A

movement along the demand or supply curve when equilibrium price changes (change in price)

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6
Q

increases or decreases in supply or demand

A

shift of the supply or demand curve, due to change in one of the independent variables other than price

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7
Q

excess supply

A

price is above its equilibrium level

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8
Q

excess demand

A

price is below equilibrium level

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9
Q

consumer surplus

A

excess of the total value to consumers of the units they purchase above the total amount paid

difference between price paid and marginal benefit

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10
Q

producer surplus

A

excess of the amount producers receive for the units they sell above their total cost of production

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11
Q

marginal cost

A

supply curve (when no external costs or benefits associated with production and consumption of good)

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12
Q

marginal benefit

A

demand curve (when no external costs or benefits associated with production and consumption of good)

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13
Q

underproduction

A

producing at a quantity less than equilibrium.
consumers are willing to pay more than the cost to supply
MB > MC

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14
Q

overproduction

A

producing at a quantity greater than equilibrium
consumers are willing to pay less than the cost to supply
MB < MC

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15
Q

deadweight loss

A

decrease in total surplus that results from an inefficient level of production

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16
Q

tax on suppliers

A

equilibrium Price increases, equilibrium quantity decreases

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17
Q

actual incidence of tax given inelastic demand

A

buyers suffer the greater burden

18
Q

actual incidence of tax given inelastic supply

A

sellers suffer the greatest burden

19
Q

subsidies

A

lead to overproduction

20
Q

external costs of production

A

when not borne by suppliers, result in a deadweight loss from overproduction

21
Q

external benefits of consumption

A

when not realized by consumers, they consume less than efficient quantity of good, resulting in deadweight loss

22
Q

price ceiling

A

results in underproduction and excess demand, non-price allocation to consumers, and deterioration of the quality of the good

23
Q

price floor on wages

A

excess supply of unskilled labor and increased unemployment, non-wage worker benefits will be reduced, and producers will substitute other factors of production, including capital equipment and skilled labor, for unskilled labor

24
Q

price elasticity of demand

A

ratio of the percent change in quantity demanded to the percent change in price

25
income elasticity of demand
ratio of the percent change in quantity demanded to the percent change in income
26
cross price elasticity of demand
ratio of the percentage change in quantity demanded to the percent change in the price of a related good. positive for substitute negative for complement
27
marginal revenue
increase in total revenue from selling one or more unit of a good or service
28
production function
quantity of output that a firm can produce is a function of the amounts of capital and labor employed
29
total fixed cost
cost of inputs that do not vary with the quantity of output and cannot be avoided over the period of analysis: PP&E, normal profit, fixed interest costs on debt financing, etc.
30
total variable cost
cost of all inputs that vary with output over the period of analysis: wages, raw materials
31
total cost
total fixed cost + total variable cost
32
marginal cost
addition to total cost of producing one more unit curve declines initially and then increases intersects AVC and ATC at minimum points above the AVC, represents the short-run supply curve in a perfectly competitive market
33
average fixed cost (AFC) curve
downward sloping | = distance between Ave total cost and ave var cost curves
34
average total cost (ATC) curve
U-shaped minimum point represents lowest cost per unit a firm should shut down in the long-run if Price < ATC
35
average variable cost (AVC) curve
u-shaped | as long as Price > AVC, a firm should continue to operate in the short-run
36
marginal revenue product
additional revenue from employing one or more unit for each productive unit
37
perfect competition
``` many firms, small relative to market low barriers to entry homogenous products and perfect substitution no advertising or branding no pricing power ``` P = MR = MC perfectly inelastic firm demand curve zero economic profit in equilibrium
38
monopolistic competition
``` many firms low barriers to entry differentiated products heavy advertising and high marketing expenditure some pricing power ``` P > MR, MR = MC downward sloping firm demand curve zero economic profit in long-run
39
oligopoly
few sellers high barriers to entry homogenous products or differentiated by branding and advertising significant pricing power P > MR, MR = MC downward sloping demand curve may have positive economic profit in long run tends toward zero economic profit over time
40
monopoly
single firm comprises the whole market very high barriers to entry advertising used to compete with substitute products significant pricing power P > MR, MR = MC downward sloping demand curve may have positive economic profit in long run profits may be zero due to expenses to preserve monopoly
41
Herfindahl-Hirschman Index (HHI)
measure of market concentration that is sensitive to M&A sum of squares of the market shares of the largest firms in the market