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ECON 101 > modules post midterm > Flashcards

modules post midterm Flashcards

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1
Q

fixed costs

A

constant costs (rent, insurance)

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2
Q

variable costs

A

costs that fluctuate month-to month

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3
Q

explicit costs

A

spending money/actively transferring funds

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4
Q

implicit costs

A

costs that are not direct monetary outlay: time, lost interest from savings account

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5
Q

accounting profit vs economic profit

A

accounting profit does not factor implicit costs

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6
Q

marginal product

A

the increase in output from one more unit of input

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7
Q

law of diminishing marginal product of labour

A

when number of workers increases and all other inputs remain fixed, the marginal product of labour diminishes progressively

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8
Q

marginal cost

A

the change in total cost because of prodcution of one more unit

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9
Q

where is ATC minimized

A

where the MC curve intersects it

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10
Q

how does the long-run ATC curve compare to short-run

A

equal to or slighty below

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11
Q

economies of scale

A

ATC decreases as quantity increases (more efficient)

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12
Q

diseconomies of scale

A

ATC rising as quantity increases, very high levels of production, cooordination problems

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13
Q

competitive market

A

many buyers/sellers of similar goods, free entry/exit, price takers

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14
Q

price in a competitive market

A

equal to marginal revenue

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15
Q

when should a competitive business increase production

A

if marginal revenue > marginal costs

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16
Q

when should a business shut down

A

when total revenue is less than variable costs, or price is less than AVC

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17
Q

when should a competitive business leave the market

A

when total revenue is less than total costs (MC above LRATC)

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18
Q

why might a business shut down

A

to eliminate the variable costs

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19
Q

what is a sunk cost

A

already paid, non-recoverable things (ignore sunk costs when considering shutdown)

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20
Q

why might a business enter the market

A

when existing businesses are earning profit, shifts supply right

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21
Q

why would a business exit a market

A

when existing businesses are incurring losses

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22
Q

long-run equillibrium

A

busineses are earning zero economic profit, price = ATC

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23
Q

perfect monopoly

A

one seller dominates an entire market

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24
Q

monopolistic competition

A

many sellers of differentiated products, businesses are price makers

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25
Q

oligopoly

A

few sellers of similar products, businesses are price makers

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26
Q

concentration ratio

A

% of the total market supplied by the four largest businesses (over 50 is an oligopoly)

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27
Q

resource monopoly

A

often for natural resources, owning all of the supply creates a monopoly

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28
Q

government created monopolies

A

government giving exclusive rights to a good through patents/copyright

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29
Q

natural monopolies

A

a single business dominates the market because of significant economies of scale, comon with club goods

30
Q

technological superiority

A

often allows a business to establish, but not maintain a monopoly

31
Q

network externality monopoly

A

a product that gains value as more people use it (facebook)

32
Q

why do governments create mono/oligopolies?

A

as a byproduct of preventing market failures (overproduction), and to encourage innovation

33
Q

patent trolling/hoarding

A

abusing patents to deter entry into a certain market

34
Q

why are monopolies harmful to society

A

monopoly profit-max quantity is lower than socially efficient quantity (deadweight loss)

35
Q

public policy on monopolies

A

competition laws to prevent monopolies, regulating monopolies to keep prices reasonable, converting private monopolies to public crown corps

36
Q

how do monopolies determine prices

A

find quantity where mr=mc, use demand curve to set price for that quantity

37
Q

output effect

A

higher quantity sold raises revenue

38
Q

price effect

A

higher output requires lower prices (revenue loss?)

39
Q

how does a competitive business determine pricign

A

price = marginal revenue = marginal cost

40
Q

how do monopolistically competitive businesses set prices

A

quantity from where mc = mr, use that quantity to price

41
Q

what happens to profits when more business enter the market

A

profits are lowered (lower wantity, prices drop)

42
Q

what are monopolistically competitive business most similar to?

A

monopolies in the short run, competitive in the long run

43
Q

what market is advertising most effective in?

A

monopolistically competitive

44
Q

what does advertising do

A

learn about products, create repeat buyers, create artificial markups

45
Q

categories for product differentiation

A

style, quality, taste, location

46
Q

excess capacity

A

if businesses could increase production to decrease ATC, but don’t because then they would have to lower their prices

47
Q

first degree/perfect price discrimination

A

charging every customer their personal WTP

48
Q

2nd degree price discrimination

A

volume discounts, lower price if you buy more

49
Q

3rd degree price discrimination

A

different prices for different groups, senior/student discounts ect

50
Q

arbitrage

A

buying something in a lower priced market and reselling it at a markup

51
Q

how does price discrimination increase total surplus

A

by opening the market to different groups, without sacrificing profit in higher income groups

52
Q

oligopoly

A

a market with limited sellers of similar products

53
Q

why are oligopolies interesting

A

sellers are interdependent, there is a constant tension between cooperation and self interest

54
Q

collusion

A

companies in an oligopoly collaborating to determine price/quantity soly

55
Q

cartels

A

oligopolies colluding to reach monopoly-like profits

56
Q

nash equilibrium

A

the point where if the other person kept their choice the same, you would too

57
Q

dominant strategy

A

the best choice, whichever way the opponent chooses

58
Q

is cooperation good or bad

A

often good for companies, bad for consumers/could lead to overexploitation

59
Q

how to encourage cooperation

A

frequent/repeated gameplay

60
Q

benefits of monopolies

A

funding research/development, spurring innovation, creating new markets, increasing product variety

61
Q

synergies

A

lowered costs resulting from a natural monopoly

62
Q

welfare costs of monopolistic competition

A

deadweight loss from monopoly pricing

63
Q

product-variety externality

A

additional consumer surplus from a new product

64
Q

business-stealing externality

A

existing businesses lose buyers/profits to new businesses in a market

65
Q

derived demands

A

demands that are dependent in amount of supply in a different market

66
Q

supply of labour/cost of labour

A

households, wages

67
Q

what shifts the labour demand curve

A

output price, technology, changes in capital/land

68
Q

what is the cost of leisure

A

the opportunity cost of working that time

69
Q

labour equilibrium

A

wage adjustments until labour demanded matches labour supplied

70
Q

rental price

A

price to use a capital faactor for a set amount of time

ECON 101 (2 decks)

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