static and dynamic efficiency

Question 1

perfect competition assumptions

Answer 1

• homogenous product
• freely mobile resources
• large number of buyers and sellers
• perfect information
• well defined property rights

Question 2

static efficiency

Answer 2

time is not important

occurs when net benefits from the use of a resource are maximized

Question 3

demand curve shifting

Answer 3

change in demand

caused by anything other than price

Question 4

shift along demand curve

Answer 4

change in quantity demanded

caused by change in price

Question 5

supply curve shifting

Answer 5

change in supply

Question 6

shift along supply curve

Answer 6

change in quantity supplied

Question 7

condition for DE

Answer 7

present value of marginal net benefits from the last unit consumes in each time period are equal
net benefits = 0 at point of efficiency

Question 8

Pareto optimal

Answer 8

an allocation such that no rearrangement of the allocation would benefit some people without hurting at least one other person

Question 9

compounding formula

Answer 9

FV = PV(1+r)^n
r = interest rates
n = number of period

Question 10

formula for a series

Answer 10

PV = P0 + P1(1/1+r)^1 + P2(1/1+r)^2….

Question 11

discount rate

Answer 11

indicates you value present consumption more relative to future consumption
higher the DR, the more you value present consumption
lower the DR, the less you value present consumption

Question 12

difference between static and dynamic efficiency

Answer 12

in DE, marginal net benefits do not equal zero

Question 13

quantity is less than the efficient amount equation

Answer 13

PV(MNB0)=PV(WTP-MOC)

Question 14

marginal user cost

Answer 14

when resources are scarce, greater current use diminishes future opportunities
P - MEC
(MEC = MOC)

Question 15

scarcity rent

Answer 15

not actually paid but is a cost

part of producer surplus