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micro economics > up learn stuff > Flashcards

up learn stuff Flashcards

1
Q

what is market failure

A

when the pice mechanism leads to a misallocation of resources

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2
Q

what are the 4 types of market failure

A

postive externalities
negative externalities
information gaps
public goods

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3
Q

what are negative externalities

A

costs which affect third parties outside the price mechanism

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4
Q

how do you properly define welfare loss

A

how much welfare the society loses in total as a result of positive/ negative externalities

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5
Q

what is the point called where MSB = MSC

A

socially efficient equilibrium

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6
Q

what does the effectiveness of indirect tax on externalities depend on

A

it depends on the cost of the tax, if it achieves the socially eficient equilibrium(P* and Q*)

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7
Q

what does the CAP and TRADE mean(word by word)

A

CAP: how much pollution is allowed per year
TRADE:

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8
Q

how are tradeable pollution permits handed down and what is done with the rest

A

tradeable pollution permits are handed out based on the firm’s size. the government will do this until there is only 10% of permits left. these permiits are then auctioned

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9
Q

what is the benefit of tradeable pollution to the government

A

the government is able to raise revenue from selling the permits on the market.

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10
Q

what is the purpose of minimum prices

A

inceases the prices, which causes a contraction in demand

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11
Q

what are the 3 main purposes of regulation

A
  • ban goods completely
  • set environmental standards
  • set legal age restrictions
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12
Q

what are positive externalities

A

benefits which affect third parties outside the price mechanism

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13
Q

what is another phrase for positive externalities

A

external benefits

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14
Q

what does the supply curve tell us

A

the lowest price that suppliers are willing to sell for

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15
Q

where to draw the potential welfare gain in the positive consumption externalities diagram

A

between the underconsumption gap (Q-Q*)

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16
Q

what is a subsidy and what is its purpose

A

a money grant given by the government to firms, which encourages firms to increase production

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17
Q

what is the purpose of maximum prices

A

to create excess demand, encourage the consumption of goods

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18
Q

what are the determinants of elasticity of labour demand(3)

A
  • substitutes
  • % of total costs
  • time
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19
Q

what does it mean if wages make up a large % of total costs

A

wage increases have a big impact, firm is responsive so elastic demand

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20
Q

what happens if wages increase in the short run(elasticity demand for labour)

A

demand will be inelastic because there is not enough time to find substitutes

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21
Q

what are the 3 factors that affect the elasticity supply of labour

A
  • skills and qualifications
  • unemployment levels
  • time
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22
Q

what happens to wages when the supply of labour is elastic

A

the wages are lower

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23
Q

what is the elasticity of supply of labour when unemployment is low

A

inelastic

24
Q

what happens to the elasticity supply of labour in the short run if wages increase

A

labour dont have enough time to train or apply for the job meaning it will be unresponsive so inelastic

25
Q

what happens to wages in the short run when supply is inelastic

A

wages will be higher(less quantity)

26
Q

how does unemployment affect the elasticity of labour supply

A

the higher the unemployment, the more people there are looking for work, so workers will be responsive, so elasticity is high.

27
Q

what does derived demand mean

A

the demand for labour is derived from demand for a good/service

28
Q

what are both sides for increases in productivity

A
  • demand for labour will increase as they become more productive
  • demand for labour may decrease as less labour will be needed to produce the same amount of goods
29
Q

what is the correlation between capital costs and demand for labour

A

as capital costs decrease the demand for labour decreases

30
Q

how does migration into the country affect the labour diagram

A

supply curve shifts to the right

31
Q

what is an evaluation point for increased income tax

A

workers may need to work more hours in order to pay for things like mortgages, which may in turn increase the supply of labour.

32
Q

what are some examples of non-monetary benefits

A
  • private healthcare
  • company cars
  • free gym memberships
33
Q

what is the correlation between non-monetary benefits and wages

A
  • the higher the non-monetary benefits the lower the wages(supply curve shifts to the right)
34
Q

what is the effect of training and education on the labour diagram

A
  • supply will increase since labour has more skills
  • demand can increase as labour is more productive
  • demand can decrease as less labour is needed to produce the same amount of goods/services
35
Q

what are 2 examples of sunk costs

A
  • advertising
  • R and D
36
Q

4 features of an oligopolistic market structure

A
  • a few large sellers
  • high barriers to entry /exit
  • differentiated goods(coca cola and pepsi)
  • interdependence
37
Q

what happens to revenue when PED is inelastic and price is increased/ decreased

A
  • when price is increased = TR increases
  • when price is decreased = TR decreases
38
Q

what are the 3 types of price competition

A
  • price wars
  • predatory pricing
  • limit pricing
39
Q

what is predatory pricing

A

firms decrease pricing below their SR shutdown point in order to steal customers, and cause firms to leave the market(AVC = AR)

40
Q

what is limit pricing

A

when an incumbant firm sets prices low enough to limit new competition from entering the market

41
Q

how do firms benefit in the LR from limit pricing

A
  • firms will have E of S compared to other firms
42
Q

4 main types of non-price competition

A
  • advertising
  • loyalty cards
  • branding
  • quality
43
Q

what are risk bearing economies

A
  • when firms use LR supernormal profits to diversify into new areas, reducing the cost of failure in one sector
44
Q

what is a real world example of risk diversification

A

richard brandson expanding Vrigin Group into:
- virgin atlantic(commercial planes company)
- virgin games(gaming)
- virgin Active(health and fitness)

45
Q

what are the 3 types of internal diseconomies of scale

A
  • Alienation(loss of motivation -> decreased productivity -> increase in LRAC)
  • Bureaucracy (increase in legal paperwork and amount of staff required to deal with this -> increase in LRAC)
  • Communication (longer to share ideas across the firm -> decreasing productivity -> raising LRAC)
46
Q

whart is the MES point

A

the quantity where the firm first reaches its lowest LRAC

47
Q

what are internal economies of scale

A

reduction in the firm’s LRAC, as a firm’s size increases

48
Q

what are external economies of scale

A

when an industry’s size increases which leads to lower LRAC

49
Q

what is an example of external economies of scale

A

knowledge was shared in hollywood as the fil industry increased, introducing a new idea (GREEn SCREEN), reducing the costs of having to travel to places to film specific sceneries

50
Q

what is the difference between variable and fixed costs

A
  • fixed costs do not change with output
  • variables costs chnage with output
51
Q

DMR : inm the SR as more FOP are employed …

A

the margial returns from these FOP will eventually decrease

52
Q

what are the 2 types external economies of scale

A
  • knowledge transfers
  • recruitment costs
53
Q

what is the coeffiecient of XED if a good is complementary

A

negative

54
Q

what is the coefficient of XED if a good is a substitute

A

positive

55
Q

what is the XED is a good is unrelated

A

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micro economics (18 decks)

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