Econ exam 3

Question 1

what is a maximum price control law?

Answer 1

a price ceiling, prohibits from trading above a maximum
Qs is larger than Qd

Question 2

what is a minimum price control law?

Answer 2

a price floor, prohibits from trading below a minimum
Qd is larger than Qs

Question 3

what is a price control law?

Answer 3

laws that mandate what prices buyers and sellers must trade at

Question 4

what is an effective price control law?

Answer 4

a price control law that keeps the price above or below the market clearing price

Question 5

rent control laws :

Answer 5

max price control on housing

Question 6

what is a rationing law?

Answer 6

laws that restrict peoples consumption of certain goods

Question 7

what is price gouging?

Answer 7

charging a price that is “too high”

Question 8

what is a price gouging law? (or an anti price gouging law)

Answer 8

a max price control on necessities during an emergency , set at a pre-emergency price

Question 9

what is minimum wage law?

Answer 9

a minimum price control law on workers wages

Question 10

what is a wage?

Answer 10

a price of labor

Question 11

what is the unemployment rate?

Answer 11

the percentage of people that are actively looking for work but have no job

Question 12

what is specialization?

Answer 12

do what we do best, and trade the rest
also division of labor

Question 13

what is the theory of absolute advantage?

Answer 13

the theory that a person will specialize in producing the good for which they have the lowest resource cost

Question 14

why is the theroy of absolute advantage wrong?

Answer 14

• you can have no gains from trade
• lowest resource cost doesnt matter

Question 15

what is the theory of comparative advantage?

Answer 15

the theory that a person will specialize in producing the good for which they have the lowest opportunity cost

Question 16

how do you find comparative advantage?

Answer 16

divide numbers together, whichever is lowest is opp cost.

EVERYONE HAS COMPARATIVE ADV

Question 17

what is an export?

Answer 17

to sell something to a buyer in another country

Question 18

what is an import?

Answer 18

to buy something from a seller in another country

Question 19

what is free trade?

Answer 19

no restrictions on trade like government intervention or special tax.

Question 20

what are the effects of exports?

Answer 20

-harms american consumers
-benefits american producers
- more harm than good

Question 21

what are the effects of imports?

Answer 21

• harms american producers
• benefits american consumers
• more good than harm

Question 22

what is a trade barrier?

Answer 22

government action that restricts trade internationally

Question 23

what is perfectionism?

Answer 23

support for trade barriers

Question 24

what is a tariff?

Answer 24

a tax on imports

Question 25

what is the price of a good?

Answer 25

the amount of money the buyer must spend to buy it from a seller

Question 26

what is the cost of a good?

Answer 26

the amount of money the seller must spend to produce it (cost of production)

Question 27

what is the total cost (TC) ?

Answer 27

the cost of producing a certain quantity of a good

Question 28

what is a fixed cost? (FC)

Answer 28

costs that do not vary with the quantity of units produced - building, etc

Question 29

what is a variable cost? (VC)

Answer 29

costs that vary with the quantity of units produced - labor, etc

Question 30

what is marginal product?

Answer 30

the additional output produced when one or more unit of variable input is added

Question 31

what is the phase of increasing marginal returns?

Answer 31

the range of input usage of which marginal product increases

Question 32

what is the phase of diminishing marginal returns?

Answer 32

the range of input usage of which marginal product decreases

Question 33

what is the average total cost? (ATC)

Answer 33

total cost / quantity of units produced

Question 34

what is the average fixed cost? (AFC)

Answer 34

total fixed cost / quantity of units produced

Question 35

what is the average variable cost? (AVC)

Answer 35

total variable cost / quantity of units produced

Question 36

when the marginal is below the average…

Answer 36

the average is decreasing

Question 37

when the marginal is above the average…

Answer 37

the average is increasing

Question 38

what is economies of scale?

Answer 38

range where long run average total cost decreases as output increases

Question 39

what is diseconomies of scale?

Answer 39

range where long run average total cost increases as output increases

Question 40

what is constant return to scale?

Answer 40

range where long run average total cost stays constant as output increases

Question 41

what is total revenue?

Answer 41

amount of money seller receives in return for their products

Question 42

what is marginal revenue?

Answer 42

additional revenue a seller receives from selling one more unit

Question 43

what is profit?

Answer 43

total revenue - total cost

Question 44

what is accounting profit?

Answer 44

total revenue - explicit costs

Question 45

what is explicit costs?

Answer 45

the amount of money spent on all inputs on production process

Question 46

what is implicit costs?

Answer 46

the opportunity cost of money spent on all inputs of production process

Question 47

what is economic profit?

Answer 47

total revenue - explicit cost - implicit cost

Question 48

what is a transaction cost?