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test 2 terms Flashcards

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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
tragedy of the commons
when private decision makers use the common resource too much
26
ex. of private goods
congested toll road clothing tv goods for sale
27
ex. of club goods
non-congested toll road fire department cable tv netflix
28
ex. of common resources
congested free road wild life (fish in a pond) parks traffic jam* *negative externality*?: toxic waste in a river
29
ex. of public goods
``` 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
30
are private goods excludable? rival?
yes; yes
31
are club goods excludable? rival?
yes; no
32
are common resources excludable? rival?
no; yes
33
are public goods excludable? rival?
no; no
34
rival
if you consume it, does it keep someone else from consuming it?
35
excludable
you have to pay for it
36
total revenue
the amount a firm receives for the sale of an output
37
profit
P= TR- TC
38
total cost
the market value of the inputs a form uses in production
39
explicit costs
what you have to give money to recieve input costs that require an outlay of money by the firm
40
implicit costs
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
____ measure both explicit and implicit costs
economists
42
______ measure only explicit costs
accountants
43
economic profit
total revenue - total cost - operational cost TR-TC- op. costs including both explicit and implicit costs
44
accounting profit
TR- TC | ^ total explicit costs
45
production function
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
marginal product
the increase of production from the input* the increase in output that arises from an additional unit of input
47
fixed costs
costs that do not vary with quantity of output
48
average total cost (ATC) formula
ATC= TC/Q
49
average fixed cost (AFC) formula
AFC= FC/Q
50
average variable cost (AVC) formula
AVC= VC/Q
51
marginal cost
``` MC= *delta*TC/Q MC= change in costs/ change in quantity ``` increase in total cost from extra unit
52
average revenue
AR= TR/Q
53
marginal revenue
change in total revenue from an additional unit firm maximize profit by producing the quantity at which MC=MR
54
if marginal revenue is greater than marginal cost, the firm should _____ its output
increase
55
if marginal cost is greater than marginal revenue, the firm should _____ its output
decrease
56
at the profit maximizing level of output, marginal revenue and marginal cost are ________
exactly equal
57
profit formula
P= TR-TC .......(ch. 12) P= (P-ATC) * Q
58
in the long run, ______ make zero profit
competitive markets
59
what is a monopolists profit-maximizing quantity of output determined by?
the intersection of the marginal revenue curve and the marginal cost curve
60
price discrimination
the business practice of selling the same good at different prices to different customers
61
monopolists _____. when they do it perfectly, _________ and ________ become profit
price discriminate; consumer surplus and profit
62
true or false: | government can regulate prices if need be
true
63
true or false: government cannot promote competition with trusts
false
64
public ownership
government owned and operated
65
marginal cost formula
MC= P > MR
66
sunk cost
cost that cannot be recovered
67
contingent valuation
how much is something worth to you? | willingness to pay + willingness to accept
68
another symbol for profit is ___
the "pie" sign
69
in non profit organizations, people are paid but ____
the firm doesn't gain
70
on graphs, demand=
private benefit
71
on graphs, supply=
private cost
72
monopolies are ____
price makers
73
monopolies determine the price that they want to sell at using...
P > MC = MR
74
what is a subsidy?
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
cost of production/production costs
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
how to find the cost of production per unit
the cost of production/ the number of units produced
77
Qmax on a monopoly graph
what the monopoly will produce; where MR = MC
78
deadweight loss on monopoly graphs
the difference between the monopoly and the market area
79
in a perfectly competitive market, MR=
P (price)
80
on the U graphs, the left U is the area where..
there are economics of scale (aka. when youre decreasing cost)
81
on the U graphs, the middle/big U is the area where..
constant returns to scale
82
on the U graphs, the right U is the area where..
there are diseconomies of scale

Economics (4 decks)

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