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Econ 302 - Microeconomic Theory > Midterm 3 > Flashcards

Midterm 3 Flashcards

1
Q

Profit

A

Difference between total revenue and total cost.

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2
Q

Revenue

A

Price multiplied by quantity. Revenue = P*q

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3
Q

Price Takers

A

when firms (or buyers) take the market price as given and make their selling (or buying)
decisions accordingly

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4
Q

When are firms most likely to be Price Taking Firms?

A

1) There are too many sellers
2) There is product homogeneity
3) There is free entry and exit

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5
Q

Marginal Revenue

A

The change in revenue resulting from a one-unit increase in output

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6
Q

Producer Surplus V2

A

The difference between total revenue and variable cost because PS ignores all fixed costs

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7
Q

Total Variable Cost

A

Total cost minus the fixed cost

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8
Q

Zero Profit

A

Profit is zero when price is equal to average total cost

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9
Q

Breakeven Price

A

The price at which the firm’s profit is equal to zero

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10
Q

Short Run Shutdown Price

A

The price at which the firm produces zero units in the short run

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11
Q

Free Entry

A

No barriers to entry

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12
Q

Barriers to Entry

A

Legal restrictions that prevent a firm from opening or increase the cost of opening

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13
Q

Normal Profit

A

There is zero economic profit because accounting profit in every industry is the same

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14
Q

Excess Profit

A

A situation in which the economic profit is positve

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15
Q

Constant-Cost Industry

A

If new firms can enter the market, and all new firms have the same cost functions as old firms, then the Long Run Supply Curve is perfectly elastic

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16
Q

Increasing-Cost Industry

A

If new firms can enter the market, and that drives up input prices then average total costs will increase, and the long run supply will be upward-sloping

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17
Q

Decreasing-Cost Industry

A

If new firms enter the market that leads to some economy of scale in the production of inputs which lowers average total costs and leads to a downward-sloping long run supply

18
Q

Consumer Surplus

A

Amount a consumer would have been willing to spend minus the amount they had to spend. Area under the Demand Curve but above the price line.

19
Q

Producer Surplus

A

The difference between the price and the minimum amount the producer would have sold it for. The area under the price line but above the Supply Curve.

20
Q

Gains from Trade

A

Gains to society from producing a good with a value that was greater than its cost to produce. Sum of consumer and producer surplus.

21
Q

Efficiency

A

a property of a resource allocation where gains from trade are maximized

22
Q

Deadweight Loss

A

1) Inefficiency
2) Uncaptured gains from trade which present a missed profit opportunity

23
Q

Price Ceiling

A

The max price any seller can legally charge

24
Q

Shortage

A

A situation where quantity demanded is greater than quantity supplied; due to price being below the market clearing price

25
Q

Price Floor

A

the minimum price any seller can legally charge

26
Q

Surplus

A

a situation where quantity demanded is less than quantity supplied; due to price being above the market clearing price

27
Q

Price Support

A

A minimum legal price paired with a government agreement to purchase all units that do not sell at the legal price. Essentially, the government purchases the surplus.

28
Q

Lump Sum Tax

A

a certain dollar amount that is fixed

29
Q

Ad Valorem

A

A certain percentage of the price of a good

30
Q

Specific Unit Tax

A

A certain dollar amount per unit of a good traded

31
Q

Tax Revenue

A

The dollar amount of a tax multiplied by the quantity purchased under the tax

32
Q

Tax Burden

A

Percentage of tax paid by demanders versus suppliers

33
Q

Pass-through function

A

an estimate of the percentage of a tax that will be passed along to the buyers. Es / (Es - Ed)

34
Q

Laffer Curve

A

Increasing Taxes from zero will cause tax revenue to increase up until some point after which continuing to raise taxes will cause revenue to fall

35
Q

Autarky

A

No trade with other nations. Self-sufficient

36
Q

World Price

A

Price of a good that prevails in the world market for a good

37
Q

Tariff

A

Special additional tax on goods produced abroad and sold domestically. A tax on imports.

38
Q

Absolute Advantage

A

When a person or group can produce more output with a given amount of resources

39
Q

Comparative Advantage

A

When a person or group can produce a unit of a good at a lower opportunity cost

40
Q

Import Quota

A

A limitation on the number of units that can be imported

Econ 302 - Microeconomic Theory (3 decks)

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