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BECO 4310 > Test 1 > Flashcards

Test 1 Flashcards

1
Q

Five Forces

A
  1. Threat of entry
  2. Supplier bargaining power
  3. Buyer bargaining power
  4. Substitutes
  5. Rivalry among competitors
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2
Q

Buyer power

A

price power to lower prices

EX: CEMEX

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3
Q

Supplier power

A

is there a monopoly? EX: microsoft/intel

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4
Q

Substitutes

A

EX: tax prep services

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5
Q

New entrants

A

barriers to entry
entry price
incumbent advantages
government policy

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6
Q

Rivalry

A

higher competition costs
market share battles
“price wars”

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7
Q

Where are net benefits maximized?

A

When MB=MC

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8
Q

Marginal principle

A

Increase control variable to point where MB=MC

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9
Q

Accounting costs

A

explicit costs only

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10
Q

Economic costs

A

explicit + implicit (opportunity) costs

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11
Q

What happens to PV when the interest rate increases?

A

PV decreases

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12
Q

PV of a stream of future payments

A

use when future values are different

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13
Q

NPV

A

=PV-C

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14
Q

PV of a firm

A

used if profits are constant

profit growth

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15
Q

Incremental costs

A

additional costs incurred if project is taken on

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16
Q

Incremental revenues

A

additional revenues

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17
Q

Demand factors

A 
price of good : Px
consumer income: M
price of related good: Py
consumer tastes: T
expected price of good in future: Pe
#of consumers in market: N
18
Q

What affects QD

A

changes in price

19
Q

ceteris paribus

A

other things being equal/held constant

20
Q

Normal good

A

If M increases then the D for a normal good increases

21
Q

Inferior good

A

If M decreases then the D for an inferior good increases

22
Q

Substitutes

A

Increase in price of good x causes increase in demand of good y

23
Q

complements

A

increase in price of good x causes decrease in demand of good y

24
Q

Consumer expectations

A

if consumers expect prices to increase in the future then demand will increase in current period

25
Q

Substitution effect

A

when the price of a good increases, other goods can be used in its place. Opportunity cost has increased
EX: red bull price is less so people will substitute red bull for other energy sources

26
Q

Income effect

A

when the price of a good increases, consumers cannot afford everything they used to buy
EX: red bull lowers price so consumers will buy more with, “extra money”

27
Q

Supply factors

A 
price of good: Px
price of inputs: Pi
price of related good: Py
Technology: T
producer expectations: Pe
# of firms: F
28
Q

Substitutes in production

A

if price of good x increases relative to good y, then supply of good x increases and supply of good y decreases

29
Q

Complements in production

A

increase in price of good x causes producers to supply more of good y as well as good x

30
Q

Excise tax

A

collected from supplier
decrease supply of good
based on per unit

31
Q

Ad Valorem tax

A

rotates supply curve

based on a percentage

32
Q

price ceiling

A

market can’t go above the set price

EX: rent controls

33
Q

price floor

A

market can’t go below the set price

EX: minimum wage

34
Q

Subsidy

A

when there is surplus, government buys up excess and pays for it

35
Q

qualitative forecasts

A

just the direction

36
Q

quantitative forecasts

A

direction and magnitude

37
Q

Demand increase, supply is constant

A

Equilibrium price and quantity increases

38
Q

demand decreases, supply constant

A

equilibrium price and quantity decreases

39
Q

supply increases, demand constant

A

equilibrium price decreases, quantity increases

40
Q

supply decreases, demand constant

A

equilibrium price increases, quantity decreases

41
Q

Simultaneous shifts

A

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

BECO 4310 (3 decks)

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