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AP Microeconomics > Vocabulary > Flashcards

Vocabulary Flashcards

1
Q

Absolute Advantage

A

The ability to produce more of a good than all other producers.

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2
Q

Absolute(or money) prices

A

The price of a good measured in units of currency

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3
Q

accounting profit

A

The difference between total revenue and total explicit cosy

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4
Q

all else equal

A

The assumption that all other variables are held constant so that we can predict how a change in one variable affects a second. Also known as the “ceteris paribus” assumption

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5
Q

allocative effiency

A

Production of the combination of goods and services

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6
Q

average fixed cost(AFC)

A

Total fixed cost divided by output

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7
Q

Average product(APL) of labor

A

Total product divided by the labor employed

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8
Q

Average tax rate

A

The proportion of total income paid to taxes

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9
Q

Average total cost(ATC)

A

Total cost divided by output

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10
Q

Average variable cost(AVC)

A

Total variable cost divided by output

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11
Q

Capitalist market system(capitalism)

A

An economic system based upon the fundamentals of private property, freedom, self-interest, and prices

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12
Q

Cartel

A

Firms that agree to maximize their joint profits rather than compete

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13
Q

Circular flow of economic activity(or circular of goods and services)

A

A model that shows how households and firms circulate resources, goods, and incomes through the economy. This basic model is expanded to include the government and the foreign sector.

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14
Q

collusive oligopoly

A

Models where firms agree to work together to mutually improve their situation

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15
Q

comparative advantage

A

The ability to produce a good at lower opportunity cost than all other producers

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16
Q

complementary goods

A

Two goods that provide more utility when consumed together than when consumed separately

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17
Q

constant returns to scale

A

The horizontal range of long-run average total cost where LRAC is constant over a variety of plant sizes

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18
Q

constrained utility maximization

A

Given prices and income, a consumer stops consuming a good when the price paid for the next unit is equal to the marginal utility recieved

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19
Q

consumer surplus

A

The difference between a buyer’s willingness to pay and the price actually paid.

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20
Q

cross-price elasticity of demand

A

a measure of how sensitive the consumption of good X is to a change in the price of good Y

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21
Q

deadweight loss

A

The lost net benefit to society caused by a movement from the competitive market equilibrium.

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22
Q

demand curve

A

Shows the quantity of a good demanded at all prices

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23
Q

demand for labor

A

Shows the quantity of labor demanded at all wages. Labor demand for a firm hiring in a competitive labor market is MRPL.

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24
Q

demand schedule

A

A table showing quantity demanded for a good at all prices

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25
Q

derived demand

A

Demand for a resource arising from the demand for the goods produced by the resources

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26
Q

determinants of demand

A

the external factors that shift demand to the left or right

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27
Q

determinants of supply

A

the external factors that influence supply. When these variables change, the entire supply curve shifts to the left or right

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28
Q

disequilibruim

A

Any price where the quantity demanded does not equal the quantity suppiled

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29
Q

diseconomies of scale

A

The upward part of the long-run average total cost curve where LRAC rises as plant size rises

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30
Q

domestic price

A

The equilibrium price of a good in a nation without trade

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31
Q

dominant strategy

A

A strategy that is always the best strategy to pursue, regardless of what a rival is doing

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32
Q

economic costs

A

The sum of explicit and implicit costs of production

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33
Q

economic growth

A

The increase in an economy’s PPF over time

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34
Q

economic profit

A

The difference between total revenue and total economic cost

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35
Q

economics

A

The study of how society allocates scarce resources

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36
Q

economies of scale

A

The downward part of the long-run average total cost curve where LRAC falls as plant size rises

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37
Q

egalitarianism

A

The philosophy that all citizens should receive an equal share of the economic resources

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38
Q

elasticity

A

Measures the sensitivity, or responsiveness, of a choice to a change in an external factor

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39
Q

elasticity along the demand curve

A

At the midpoint of a linear demand curve, Ed=1. Above the midpoint demand is elastic, and below the midpoint demand is inelastic

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40
Q

excess capacity

A

The difference between the long run output in monopolistic competition and the output at minimum average total cost

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41
Q

excess demand

A

The difference between quantity supplied and quantity demanded. A shortage

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42
Q

excess supply

A

The difference between quantity supplied and quantity demanded. A surplus

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43
Q

excise tax

A

A per unit tax on a specific good or service

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44
Q

explicit costs

A

Direct, purchased, out-of-pocket costs, paid to resource suppliers outside the firm. Also referred to as accounting costs

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45
Q

exports

A

Goods and services produced domestically but sold abroad

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46
Q

factors of production

A

Inputs or resources that go into the production function to produce goods and services

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47
Q

firm

A

An organization that employs factors of production to produce a good or service that it hopes to profitably sell

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48
Q

fixed inputs

A

Production inputs that cannot be changed in the short run

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49
Q

four-firm concentration ratio

A

The sum of the market share of the four largest firms in the industry

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50
Q

free rider

A

An individual who receives the benefit of a good without incurring any cost for the good

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51
Q

free rider problem

A

The lack of private funding for a public good due to the presence of free riders

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52
Q

game theory

A

An approach for modeling the strategic interactions of firms in oligopoly markets

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53
Q

Gini ratio

A

A measure of income inequality. As the Gini ratio gets closer to zero, the more equally the income is distributed. As the Gini ratio gets closer to one, the more unequally the income is distributed.

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54
Q

human capital

A

The amount of knowledge and skills that labor can apply to the work that they do

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55
Q

implicit costs

A

Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur

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56
Q

imports

A

Goods produced abroad but consumed domestically

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57
Q

incidence of tax

A

The division of a tax between consumers and producers

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58
Q

income effect

A

Due to the higher price, the change in quantity demanded that results from a change in the consumer’s purchasing power(or real income)

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59
Q

income elasticity

A

A measure of how sensitive consumption of a good is to a change in consumers’ income

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60
Q

inferior goods

A

A good for which demand decreases with an increase in consumer income

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61
Q

law of demand

A

All else equal, when the price of a good rises, the quantity demanded of that good falls

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62
Q

law of diminishing marginal returns

A

As successive units of a variable input are added to a fixed input, beyond some point the marginal product declines

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63
Q

law of diminishing marginal utility

A

In a given time period, as consumption of an item increases, the marginal(additional) utility from that item falls

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64
Q

law of increasing costs

A

As more of a good is produced, the greater is its opportunity(or marginal) cost

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65
Q

law of increasing marginal utility

A

In a given time period, as consumption of an item increases, the marginal(additional) utility from that item falls

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66
Q

law of supply

A

All else equal, when the price of a good rises, the quantity supplied of that good rises

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67
Q

least-cost rule

A

The combination of labor and capital that minimizes total costs for a given production rate is where MP1/PL=MPK/PK

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68
Q

long run

A

A period of time long enough for the firm to alter all production inputs, including the plant size

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69
Q

Lorenz curve

A

A graphical device that shows how a nation’s income is distributed across the nation’s households

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70
Q

luxury

A

A good for which the proportional increase in consumption exceeds the proportional increase in income

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71
Q

marginal

A

The next unit, or increment of, an action

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72
Q

marginal analysis

A

Making decisions based upon weighting the marginal benefits and costs of that action. The rational decision maker chooses an action if the MB is greater than or equal to MC.

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73
Q

marginal benefit(MB)

A

…The additional benefit received from the consumption of the next unit of a good or service

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74
Q

Marginal cost(MC)

A

The additional cost of producing one more unit of output

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75
Q

marginal productivity theory

A

The theory that a citizen’s share of economic resources is proportional to the marginal revenue product of his or her labor

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76
Q

marginal product(MPL) of labor

A

The change in total product in resulting from a change in the labor unit

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77
Q

marginal resource cost(MRC)

A

The change in a firm’s total cost from the hiring of an additional unit of an input

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78
Q

marginal revenue product of labor(MPR)

A

The change in a firm’s total revenue from the hiring of an additional unit of input

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79
Q

marginal tax rate

A

The rate paid on the last dollar earned, calculated by taking the ratio of the change in the change in income

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80
Q

marginal utitility

A

The change in an individual’s total utility from the consumption of an additional unit of a good or service.

81
Q

market

A

A group with buyers and sellers of a good or service

82
Q

market economy

A

An economic system in which resources are allocated through the decentralized decisions of firms and consumers

83
Q

market equilibruim

A

Exists the only price where the quantity supplied equals the quantity demanded. Or, it is the only quantity where the price consumers are willing to pay is exactly the price producers are willing to accept

84
Q

market failure

A

The inability of the free market to allocate resources efficiently

85
Q

market power

A

The ability to set a price above the perfectly competitive level

86
Q

monopolistic competition

A

A market structure characterized by a few small firms producing a differentiated product with easy entry into the market

87
Q

monopoly

A

A market structure in which one firm is the sole producer of a good with no close substitutes in a market power i.e. wage setter

88
Q

monopsony

A

A factor market in which there is a sole firm that has market power

89
Q

natural monopoly

A

The case where economies of scale are so extensive that is less costly for one firm to supply the entire range of demand than for multiple firms to share the market

90
Q

necessity

A

A good for which the proportional increase in consumption is less than the proportional increase in income

91
Q

negative externality

A

The existence of spillover costs upon third parties from the production of a good

92
Q

noncollusive oligopoly

A

Models of industries in which firms are competitive rivals seeking to gain at the expense of their rivals

93
Q

nonrenewable resources

A

Natural resources that cannot replenish themselves

94
Q

normal goods

A

A good for which demand increases with an increase

95
Q

normal profit

A

The opportunity cost of the entrepreneur’s talents. Another way of saying the firm is earning zero economic profit

96
Q

oligopoly

A

A very diverse market structure characterized by a small number of interdependent large firms, producing either a standardized or differentiated product in a market with a barrier to entry.

97
Q

opportunity cost

A

The value of the sacrifice made to pursue a course of action

98
Q

perfectly elastic

A

In this special case, the demand curve is horizontal, meaning consumers have an instantaneous and infinite response to a change in price

99
Q

perfectly inelastic

A

In this special case, the demand curve is vertical and there is absolutely no response to a change in price.

100
Q

positive externality

A

The existence of spillover benefits upon third parties from the production of a good.

101
Q

price ceiling

A

A legal maximum price above which a product can’t be sold

102
Q

price discrimination

A

The sale of the same product to different groups of consumers at different prices

103
Q

price elasticity of demand

A

Measures the sensitivity of consumers’ quantity demanded for good X when the price of good X changes

104
Q

price elasticity of supply

A

Measures the sensitivity of producers’ quantity supplied for good X when the price of good X changes.

105
Q

price floor

A

A legal minimum price below which the product cannot be sold

106
Q

prisoner’s dilemma

A

A game where the two rivals achieve a less desirable outcome because they are unable to coordinate their strategies

107
Q

private goods

A

Goods that are both rival and excludable

108
Q

producer surplus

A

The difference between the price received and the marginal cost of producing the good

109
Q

productive effiency

A

Production of maximum output for a given level of technology, into finished goods and services

110
Q

production function

A

The mechanism for combining production resources, with existing technology, into finished goods and services

111
Q

production possibilities

A

The different quantities of goods that am economy can produce with a given amount of scarce resources

112
Q

production possibility curve

A

A graphical device that shows the combination of two goods that a nation can efficiently produce with available resources and technology

113
Q

productivity

A

The quantity of output that can be produced per worker in a given amount of time

114
Q

profit maximizing resource employment

A

The firm hires a resource up to the point where MRP=MRC

115
Q

progressive tax

A

A tax where the proportion of income paid in taxes rises as income rises

116
Q

proportional tax

A

A tax where the proportion of income paid in taxes is constant no matter the level of income

117
Q

protective tariff

A

An excise tax levied on an imported good that is produced in the domestic market so that it may be protected from foreign competition

118
Q

public goods

A

Goods that are both nonrival and nonexcludable

119
Q

quintiles

A

When you rank household income from lowest to highest, each quintile represents 20 percent of all households

120
Q

quota

A

A maximum amount of a good that can be imported into the domestic market

121
Q

regressive tax

A

A tax where the proportion of income paid in taxes decreases as income rises.

122
Q

relative prices

A

The price of one unit of good X measured not in currency, but in the number of units of good Y that must be sacrificed to acquire good X

123
Q

renewable resources

A

Natural resources that can replenish themselves if they are not over harvested

124
Q

resources

A

Also called factors of production, these are commonly grouped into the four categories of labor, physical capital, land or natural resources, and entrepreneurial ability.

125
Q

revenue tariff

A

An excise tax levied on goods that are not produced in the domestic market.

126
Q

scarcity

A

The imbalance between limited productive resources and unlimited human wants

127
Q

shortage

A

A situation in which, at the market price, the quantity demanded exceeds the quantity supplied

128
Q

short run

A

A period of time too short to change the size of the plant, but many other, more variable resources can be adjusted to meet demand.

129
Q

specialization

A

Production of goods, or performance of tasks, based upon comparative advantage

130
Q

spillover benefits

A

Additional benefits to society, not captured by the market demand curve from the production of a good.

131
Q

spillover costs

A

Additional benefits to society, not captured by the market demand curve from the production of a good

132
Q

subsidy

A

A government transfer, either to consumers or producers, on the consumption or production of a good

133
Q

substitute goods

A

Two goods are consumer substitutes if they provide essentially the same utility to the consumer

134
Q

substitution effect

A

The change in quantity demanded resulting from a change in the price of good relative to the price of other goods

135
Q

supply curve

A

Shows the quantity of a good supplied at all prices

136
Q

supply schedule

A

A table showing quantity supplied for a good at various prices

137
Q

surplus

A

A situation in which, at the going market price, the quantity supplied exceeds the quantity demanded

138
Q

tax bracket

A

A range of income on which a given marginal tax rate is applied

139
Q

technology

A

A nation’s knowledge of how to produce goods in the best possible way

140
Q

total cost(TC)

A

The sum of total fixed and total variable costs at any level level of output

141
Q

total fixed costs(TFC)

A

Production costs that do not vary with the level of output

142
Q

total product(TPL) of labor

A

The total quantity of output produced for a given quantity of labor employed

143
Q

total revenue

A

The price of a good multiplied by the quantity of that good sold

144
Q

total revenue test

A

Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic

145
Q

total utility

A

The total happiness received from consumption of a number of units of a good

146
Q

total variable costs(TVC)

A

production costs that change with the level of output

147
Q

total welfare

A

The sum of consumer surplus and producer surplus

148
Q

trade-offs

A

The reality of scarce resources implies that individuals, firms, and governments are constantly faced with difficult choices that involve benefits and costs

149
Q

unit elastic demand

A

Ed=1. The percentage change in price is equal to percentage change in quantity demanded.

150
Q

utility

A

Happiness, or benefit or satisfaction, or enjoyment gained from consumption of goods or services

151
Q

utility maximizing rule

A

The consumer chooses amounts of goods X and Y, with their limited income, so that the marginal utility per dollar spent is equal for both goods.

152
Q

utils

A

A hypothetical unit of measurement often used to quantify utility; aka “happy points”

153
Q

variable inputs

A

Production inputs that the firm can adjust in the short run to meet changes in demand for the firm’s output.

154
Q

world price

A

The global equilibrium price of a good when nations engage in trade

155
Q

Absolute Advantage

A

The ability to produce more of a good than all other producers.

156
Q

Absolute(or money) prices

A

The price of a good measured in units of currency

157
Q

accounting profit

A

The difference between total revenue and total explicit cosy

158
Q

all else equal

A

The assumption that all other variables are held constant so that we can predict how a change in one variable affects a second. Also known as the “ceteris paribus” assumption

159
Q

allocative effiency

A

Production of the combination of goods and services

160
Q

average fixed cost(AFC)

A

Total fixed cost divided by output

161
Q

Average product(APL) of labor

A

Total product divided by the labor employed

162
Q

Average tax rate

A

The proportion of total income paid to taxes

163
Q

Average total cost(ATC)

A

Total cost divided by output

164
Q

Average variable cost(AVC)

A

Total variable cost divided by output

165
Q

Capitalist market system(capitalism)

A

An economic system based upon the fundamentals of private property, freedom, self-interest, and prices

166
Q

Cartel

A

Firms that agree to maximize their joint profits rather than compete

167
Q

Circular flow of economic activity(or circular of goods and services)

A

A model that shows how households and firms circulate resources, goods, and incomes through the economy. This basic model is expanded to include the government and the foreign sector.

168
Q

collusive oligopoly

A

Models where firms agree to work together to mutually improve their situation

169
Q

comparative advantage

A

The ability to produce a good at lower opportunity cost than all other producers

170
Q

complementary goods

A

Two goods that provide more utility when consumed together than when consumed separately

171
Q

constant returns to scale

A

The horizontal range of long-run average total cost where LRAC is constant over a variety of plant sizes

172
Q

constrained utility maximization

A

Given prices and income, a consumer stops consuming a good when the price paid for the next unit is equal to the marginal utility recieved

173
Q

consumer surplus

A

The difference between a buyer’s willingness to pay and the price actually paid.

174
Q

cross-price elasticity of demand

A

a measure of how sensitive the consumption of good X is to a change in the price of good Y

175
Q

deadweight loss

A

The lost net benefit to society caused by a movement from the competitive market equilibrium.

176
Q

demand curve

A

Shows the quantity of a good demanded at all prices

177
Q

demand for labor

A

Shows the quantity of labor demanded at all wages. Labor demand for a firm hiring in a competitive labor market is MRPL.

178
Q

demand schedule

A

A table showing quantity demanded for a good at all prices

179
Q

derived demand

A

Demand for a resource arising from the demand for the goods produced by the resources

180
Q

determinants of demand

A

the external factors that shift demand to the left or right

181
Q

determinants of supply

A

the external factors that influence supply. When these variables change, the entire supply curve shifts to the left or right

182
Q

disequilibruim

A

Any price where the quantity demanded does not equal the quantity suppiled

183
Q

diseconomies of scale

A

The upward part of the long-run average total cost curve where LRAC rises as plant size rises

184
Q

domestic price

A

The equilibrium price of a good in a nation without trade

185
Q

dominant strategy

A

A strategy that is always the best strategy to pursue, regardless of what a rival is doing

186
Q

economic costs

A

The sum of explicit and implicit costs of production

187
Q

economic growth

A

The increase in an economy’s PPF over time

188
Q

economic profit

A

The difference between total revenue and total economic cost

189
Q

economics

A

The study of how society allocates scarce resources

190
Q

economies of scale

A

The downward part of the long-run average total cost curve where LRAC falls as plant size rises

191
Q

egalitarianism

A

The philosophy that all citizens should receive an equal share of the economic resources

192
Q

elasticity

A

Measures the sensitivity, or responsiveness, of a choice to a change in an external factor

193
Q

elasticity along the demand curve

A

At the midpoint of a linear demand curve, Ed=1. Above the midpoint demand is elastic, and below the midpoint demand is inelastic

194
Q

excess capacity

A

The difference between the long run output in monopolistic competition and the output at minimum average total cost

195
Q

excess demand

A

The difference between quantity supplied and quantity demanded. A shortage

196
Q

excess supply

A

The difference between quantity supplied and quantity demanded. A surplus

197
Q

excise tax

A

A per unit tax on a specific good or service

198
Q

explicit costs

A

Direct, purchased, out-of-pocket costs, paid to resource suppliers outside the firm. Also referred to as accounting costs

AP Microeconomics (4 decks)

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