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BECO 4310 > Post Course > Flashcards

Post Course Flashcards

1
Q

Five Forces of Framework

A

Threat to entry: patents, trademarks, copyrights
Buyer bargaining power: can lower prices
Supplier bargaining power: is there only one supplier?
Substitution: more substitutes, more elastic
Rivalry among competitors: price wars

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2
Q

Accounting cost

A

explicit costs

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3
Q

Economic cost

A

opportunity (implicit) costs + explicit costs

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4
Q

Normal good

A

If income increase, demand for that good will increase

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5
Q

Inferior good

A

If income increases, demand for that good will decrease

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6
Q

Subsitutes

A

If the price of good x increases, demand for good y increases

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7
Q

Complements

A

If the price of good x increase, demand for good y decreases

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8
Q

Excise tax

A

collected from supplier that decreases supply of a good, based on a per unit
increases equilibrium prices
EX: gasoline tax

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9
Q

Ad Valorem tax

A

rotates supply curve, based on a percentage
increases equilibrium prices
EX: sales tax

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10
Q

Price ceilings

A

market can’t go above set price, which is set below the equilibrium
This is in response to a surplus in the market, and unfair scarcity exists
creates a shortage
EX: rent controls

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11
Q

Price floors

A

market can’t go below set price, which is set above the equilibrium
In response to shortage, and creates a surplus
EX: minimum wage

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12
Q

If demand increases and supply stays constant?

A

Price and quantity increase

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13
Q

If demand decreases and supply stays constant?

A

Price and quantity decrease

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14
Q

If supply increases and demand stays constant?

A

price decreases and quantity increases

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15
Q

If supply decreases and demand stays constant?

A

price increases and quantity decreases

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16
Q

Simultaneous shifts in demand and supply

A

demand increases, supply increases: quantity increase
demand increases, supply decreases: price increases
demand decreases, supply increases: price decreases
demand decreases, supply decreases: quantity decrease

17
Q

linear demand curve vs. log linear demand curve

A

linear: constant slope, not elasticity

log linear: constant elasticity, not slope

18
Q

Inelastic and total revenue

A

when prices increase, total revenue increases

19
Q

Elastic and total revenue

A

when prices increase, total revenue decreases

20
Q

Consumer equilibrium

A

marginal rate of substitution (slope of indifference curve) = market rate of substitution (slope of budget line)

21
Q

Economies of scale

A

in the LRAC decreases as output increases

22
Q

Economies of scope

A

the cost of producing two types of output together is less than the cost of producing each one separately

23
Q

Cost complementary

A

the marginal cost of one good decreases as output of another good increases
EX: donut holes

24
Q

Spot exchange

A

firm has one time deal
no protection against opportunism and hold-ups
pro: firm gets to specialize
con: no protection

25
Q

Contract

A

agreed upon pricing and amount purchased

pro: firm gets to specialize
con: not complete protection, and can not count for all contingencies possible

26
Q

Vertical Integration

A

Firms start to produce their own inputs

pro: don’t have to deal with suppliers
con: no more specialization and much incur input costs

27
Q

Principal agent problem

A

Solutions:
profit sharing: based on profitability, like shares
revenue sharing: based on revenue, like commission
piece rates: based on how much output
time clocks and spot checks:

28
Q

Site specificity
Physical assets specificity
dedicated assets
human capital

A

Firms locate near suppliers
firms good only works in specific model
new segments created for specific buyers: government
trained skills only usable for current job

29
Q

Factors affecting own price elasiticity

A

available substitutes: the more substitutes, the more elastic
time: the more time, the more elastic
expenditure share: smaller the share, the more inelastic

30
Q

Demand shifters

A 
change in income: M
change in other good: Py
change in # of consumers
change in price of good: Px
consumer tastes and preferences
expected price of good in future
31
Q

Quantity demand shifter

A

change in price, moves along the demand curve

32
Q

Own price of elasticity for linear demand curves

A

%change in quantity / %change in price or

beta(Px/Qx)

33
Q

Own price of elasticity for log linear demand curves

A

the coefficient of Px in the equation

34
Q

Income elasticity for linear demand curves

A

%change in quantity / %change in income or

beta(M/Qx)

35
Q

Income elasticity for log linear demand curves

A

the coefficient for M in the equation

36
Q

Cross-price elasticity for linear demand curves

A

%change in quantity of x / %change in price of y or

beta(Py/Qx)

37
Q

Cross-price elasticity for log linear demand curves

A

the coefficient for the other good

BECO 4310 (3 decks)

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