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Economics > test 2 terms > Flashcards

test 2 terms Flashcards

1
Q

public goods

A

goods that are neither excludable or rival in consumption

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2
Q

common resources

A

goods that are rival in consumption but not excludable

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3
Q

externality

A

the uncompensated impact of one person’s actions on the well-being of a bystander BUT neither pays nor receives compensation for that effect

the market equilibrium is not efficient when there are externalities

government can create policies/taxes for externatilities

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4
Q

firms and competitive markets

A

CM: a market with many buyers and sellers trading identical products so that each buyer and seller is a prize taker

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5
Q

monopoly

A

a firm that is the sole seller of a product without any close substitutes

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6
Q

ex. of negative externalities

A

pollution

social cost exceeds private cost

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7
Q

externality from production causes..

A

supply curve to shift

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8
Q

externality from consumption causes..

A

demand curve to shift

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9
Q

long run decision

A

enter/exit the market

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10
Q

exit when…

A

P < ATC

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11
Q

enter when…

A

P > ATC

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12
Q

short run decision

A

operate/shut down

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13
Q

shut down when….

A

P < AVC

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14
Q

operate when….

A

P > AVC

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15
Q

how can the externality be internalized?

A

by altering incentives so that people take into account the external effects of their actions

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16
Q

what do command-and-control policies do?

A

regular behavior directly by requiring or forbiding certain behaviors

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17
Q

what is market-based policy 1?

A

corrective taxes and subsidies

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18
Q

corrective taxes

A

taxes enacted to deal with the effects of negative externalities

ex. pigovran taxes)

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19
Q

what is market-based policy 2?

A

tradable pollution permits

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20
Q

types of private solutions

A

charities + contracts

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21
Q

coase theorem

A

if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own

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22
Q

transaction costs

A

the costs that parties incur in the process of agreeing to and following through on a bargain

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23
Q

free rider

A

person who receives the benefit of a good but does not pay for it

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24
Q

cost benefit analysis

A

a study that compares the costs + benefits to society of providing a public good

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25
Q

tragedy of the commons

A

when private decision makers use the common resource too much

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26
Q

ex. of private goods

A

congested toll road
clothing
tv
goods for sale

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27
Q

ex. of club goods

A

non-congested toll road
fire department
cable tv
netflix

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28
Q

ex. of common resources

A

congested free road
wild life (fish in a pond)
parks
traffic jam*

negative externality?: toxic waste in a river

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29
Q

ex. of public goods

A 
non-congested free road
national defense
street signs
government providing
old military road
anyone!

POSITIVE EXTERNALITY: you are benefiting from police and military and not paying for it

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30
Q

are private goods excludable? rival?

A

yes; yes

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31
Q

are club goods excludable? rival?

A

yes; no

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32
Q

are common resources excludable? rival?

A

no; yes

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33
Q

are public goods excludable? rival?

A

no; no

34
Q

rival

A

if you consume it, does it keep someone else from consuming it?

35
Q

excludable

A

you have to pay for it

36
Q

total revenue

A

the amount a firm receives for the sale of an output

37
Q

profit

A

P= TR- TC

38
Q

total cost

A

the market value of the inputs a form uses in production

39
Q

explicit costs

A

what you have to give money to recieve

input costs that require an outlay of money by the firm

40
Q

implicit costs

A

dealing w/ opportunity cost

input costs that do NOT require an outlay of money by the firm

ex. having an engineering degree but wanting to open a bakery

41
Q

____ measure both explicit and implicit costs

A

economists

42
Q

______ measure only explicit costs

A

accountants

43
Q

economic profit

A

total revenue - total cost - operational cost
TR-TC- op. costs

including both explicit and implicit costs

44
Q

accounting profit

A

TR- TC

^ total explicit costs

45
Q

production function

A

the relationship between the relationship of production and the output of a good

the relationship between the quantity of inputs used to make a good and the quantity of output of that good

46
Q

marginal product

A

the increase of production from the input*

the increase in output that arises from an additional unit of input

47
Q

fixed costs

A

costs that do not vary with quantity of output

48
Q

average total cost (ATC) formula

A

ATC= TC/Q

49
Q

average fixed cost (AFC) formula

A

AFC= FC/Q

50
Q

average variable cost (AVC) formula

A

AVC= VC/Q

51
Q

marginal cost

A 
MC= *delta*TC/Q
MC= change in costs/ change in quantity

increase in total cost from extra unit

52
Q

average revenue

A

AR= TR/Q

53
Q

marginal revenue

A

change in total revenue from an additional unit firm maximize profit by producing the quantity at which MC=MR

54
Q

if marginal revenue is greater than marginal cost, the firm should _____ its output

A

increase

55
Q

if marginal cost is greater than marginal revenue, the firm should _____ its output

A

decrease

56
Q

at the profit maximizing level of output, marginal revenue and marginal cost are ________

A

exactly equal

57
Q

profit formula

A

P= TR-TC …….(ch. 12)

P= (P-ATC) * Q

58
Q

in the long run, ______ make zero profit

A

competitive markets

59
Q

what is a monopolists profit-maximizing quantity of output determined by?

A

the intersection of the marginal revenue curve and the marginal cost curve

60
Q

price discrimination

A

the business practice of selling the same good at different prices to different customers

61
Q

monopolists _____. when they do it perfectly, _________ and ________ become profit

A

price discriminate;

consumer surplus and profit

62
Q

true or false:

government can regulate prices if need be

A

true

63
Q

true or false:

government cannot promote competition with trusts

A

false

64
Q

public ownership

A

government owned and operated

65
Q

marginal cost formula

A

MC= P > MR

66
Q

sunk cost

A

cost that cannot be recovered

67
Q

contingent valuation

A

how much is something worth to you?

willingness to pay + willingness to accept

68
Q

another symbol for profit is ___

A

the “pie” sign

69
Q

in non profit organizations, people are paid but ____

A

the firm doesn’t gain

70
Q

on graphs, demand=

A

private benefit

71
Q

on graphs, supply=

A

private cost

72
Q

monopolies are ____

A

price makers

73
Q

monopolies determine the price that they want to sell at using…

A

P > MC = MR

74
Q

what is a subsidy?

A

a sum of money granted by the government to assist an industry or business so that the price of a commodity or service may remain low or competitive

75
Q

cost of production/production costs

A

costs incurred by a business when manufacturing a good or providing a service

ex. includes labor, raw materials, consumable manufacturing supplies, and general overhead

76
Q

how to find the cost of production per unit

A

the cost of production/ the number of units produced

77
Q

Qmax on a monopoly graph

A

what the monopoly will produce; where MR = MC

78
Q

deadweight loss on monopoly graphs

A

the difference between the monopoly and the market area

79
Q

in a perfectly competitive market, MR=

A

P (price)

80
Q

on the U graphs, the left U is the area where..

A

there are economics of scale (aka. when youre decreasing cost)

81
Q

on the U graphs, the middle/big U is the area where..

A

constant returns to scale

82
Q

on the U graphs, the right U is the area where..

A

there are diseconomies of scale

Economics (4 decks)

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