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Microeconomics > Test 2 > Flashcards

Test 2 Flashcards

1
Q

Consumer Surplus

A

willingness to pay minus the actual price

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2
Q

When the price decreases then the consumer surplus

A

increases

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3
Q

the area between demand curve and the price

A

consumer surplus

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4
Q

when producer surplus increases then sellers are

A

doing better

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5
Q

actual price - willingness to sell=

A

producer surplus

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6
Q

sellers like____prices

A

higher

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7
Q

CS + PS =

A

total surplus

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8
Q

MC=MB AT EQUILBRIUM means….

A

means total welfare=max

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9
Q

Marginal cost

A

additional cost of producing another unit for sellers

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10
Q

marginal benefit

A

additional benefit the BUYER gets

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11
Q

tax revenue

A

size of tax QT

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12
Q

Deadweight loss

A

c+e

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13
Q

more elastic, ____deadweight loss

A

more

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14
Q

more inelastic,_____ deadweight loss

A

less

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15
Q

more elastic, ________ tax revenue

A

less

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16
Q

more inelastic, _____ tax revenue

A

more

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17
Q

producers ____ price ceiling

A

dont like

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18
Q

subsidy increase…

A

quantity and product

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19
Q

Price ceiling is suppose to help___

A

consumers

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20
Q

consumer surplus ( increasing or decreasing // stay the same )

A

depends on elasticity between demand and supply

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21
Q

free trade and exports

A

domestic producers gain more than domestic consumers lose

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22
Q

no trade=

A

free trade

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23
Q

when the world price is higher than domestic, you have to

A

export…
consumers are not happy
sellers are better off

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24
Q

free trade=

A

less than free trade

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25
Q

tariffs are a

A

tax on imported goods

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26
Q

with tariffs -

A

domestic producers are protected

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27
Q

producers like tariffs, and consumers

A

dont

28
Q

tariffs mean that there are

A

fewer imports

29
Q

arguments for tariffs -

A

producers use when wanting tariffs

30
Q

infant industry arguments

A

(new business)

  • which infants should be protected
  • consumers are worse off as infants grow
  • tariffs tend to linger-(never admit to not needing a tariff anymore)
31
Q

Saving domestic jobs argument

A
  • retaliation from other countries (they’ll increase there tariffs)(domestic jobs tend to be lost in these markets)
  • tariffs/fewer imports/fewer dollars go abroad/fewer dollars to buy US exports
32
Q

national security argument

A

(oil)

With tariffs fewer barrels of oil will be purchased domestically- thus, its likely domestic reserves could be depleted

33
Q

anti dumping argument

A
  • difficulty to prove another country for dumping

- dumping is likely another way of saying a foreign country can simply produce at a really low price.

34
Q

externalities

A

a benefit or cost from consumption or production that spills over onto third parties

35
Q

the vertical difference between the two supply curves

A

external cost

36
Q

at max , total welfare –

A

all when costs of society are taken into account

37
Q

Sprivate

A

includes costs paid by the firms

- pay for: labor, machines, energy

38
Q

external costs:

A

damage to health of third parties,

39
Q

private costs + external costs = _____

A

social costs

40
Q

negative externality - market produces too much =____

A

deadweight loss

41
Q

optimal tax =

A

external cost

42
Q

when you add the tax, the private curve shifts to the social curve =

A

deadweight loss disappears

and total welfare is maximized

43
Q

taxes can increase the

A

Total wealth in society

44
Q

internalizing externalities

A

the prob of the externality is solved

45
Q

examples of positive externalities

A

vaccines, education, and landscaping

others benefit

46
Q

solutions to externalities :

A

subsidy-optimal subsidy=size external benefit
ex: out tuition is lower
regulation-ex: kids have to go to school

47
Q

coase theorem

A
  • where property rights are well defined
  • transactions costs are low
  • both things have to be true, than externalities will be internalized
48
Q

with externalities, it doesn’t matter who has the property rights

A

the same outcome results

49
Q

private good-

A

ex: hamburger or cell phone

- a good that is RIVALOURS in consumption and EXCLUDABLE

50
Q

Public goods

A
  • a good that is NON-RIVALROUS in consumption and is non excludable
  • ex: national defense, flood control, fireworks
51
Q

non-rivalrous

A

even with more people, still get it

52
Q

free rider problem

A

if a private company try to proviude national defense, people would ride off of others paying

53
Q

common good

A

a good that is RIVALROUS in consumption and NON-EXCLUDABLE

-ex: wifi

54
Q

tragedy of the commons applys with

A

common goods

55
Q

asymmetric information

A

also leads to market failure

  • when one party has more info than another party in an exchange
  • ex: seller of a used car has more info than the buyer
56
Q

asymmetric information can lead to

A

adverse selection

57
Q

adverse selection

A

a situation where an informed party benefits in an exchange by taking advantage of knowing more than the other party
-happens before the transaction

58
Q

moral hazard

A

taking additional risks because you are ensured

- happens after the transaction, applies to BOTH asymmetric info, and market failure

59
Q

signaling

A

apply to job market, more info about how good they are employee
-signals- resume, cover letter, college degree

60
Q

signaling comes from the party with more

A

information to the party with less

61
Q

total utility

A

total amount of satisfaction from the consumption of a certain number of goods.

62
Q

marginal utility

A

extra satisfaction from the consumption of an additional unit

63
Q

utils

A

unit of satisfaction

64
Q

when marginal ulitiy is zero,

A

total utility will be maximized

65
Q

when mu is negative…

A

total utility will fall

66
Q

mu>0 then

A

TU increases and Q increases

Microeconomics (5 decks)

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