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67 Cards in this Set
- Front
- Back
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Big Tradeoff |
The trade-off between efficiency and fairness |
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Command System |
A method of allocating resources by the order (command) of someone in authority. In a firm a managerial hierarchy organizes production |
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Consumer Surplus |
The excess of the benefit received from a good over the amount paid for it. It is calculated as he marginal benefit of a good minus its price, summed over the quantity bought |
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Deadweight Loss |
A measure of inefficiency. It is equal to the decrease in total surplus that results from an inefficient level of production |
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Market Failure |
A situation in which a market delivers an inefficient outcome |
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Producer Surplus |
The excess of the amount received from the sale of a good or service over the cost of producing. It is calculates as the price of a good minus the marginal cost ( or minimum supply-price), summed over the quantity sold |
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Symmetry Principle |
A requirement that people in similar situation be treated similarly |
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Total Surplus |
The sum of consumer surplus and producer surplus |
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Transaction costs |
The opportunity costs of making trades in a market. The costs that arise from finding someone with whom to do business, of reaching an agreement about the price and other aspects of the exchange, and of ensuring that the terms of the agreement are fulfilled.
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Utilitarianism |
A principle that states that we should strive to achieve "the greatest happiness for the greatest number" |
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Behavioural Economics |
A study of the ways in which limits on the human brain's ability to compute and implement rational decisions influences economic behavior - both the decisions that people make and the consequences of those decisions for the way markets work |
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Budget Line |
The limit to a household's consumption choices. It marks the boundary between those combinations of goods and services that a household can afford to buy and those that it cannot. |
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Consumer Equilibrium |
A situation in which a consumer has allocated all his or her available income in the way that, given the prices of gods and services, maximizes his or her total utility. |
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Diminishing marginal Utility |
The tendency for marginal utility to decrease as the quantity consumed of a good increases |
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Marginal Utility |
The change in total utility resulting from a one-unit increase in the quantity of a good consumed |
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Marginal utility per dollar |
The marginal utility from a goof that results from spending one more dollar on it. It is calculated as the marginal utility from the good, divided by its price |
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Neuroeconomics |
The study of the activity of the human brain when a person makes an economic decision |
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Total Utility |
The total benefit that a person gets from the consumption of all the different goods and services |
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Utility |
The benefit or satisfaction that a person gets from the consumption of goods and services |
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Budget Line |
The limit to a household's consumption choices. It marks the boundary between those combination of goods and services that a household can afford to buy and those that it cannot afford. |
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Diminishing Marginal Rate of substitution |
The general tendency for a person to be willing to give up less of a good y to get one more nit of good x, while at the same time remaining indifferent as the quantity of good x increases |
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Income Effect |
The effect of a change in income on buying plans, other things remaining the same |
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Indifference curve |
A ling that shown combinations of goods amoung which a consumer is indifferent |
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Marginal Rate of Substitution |
The rate at which a person will give up good y to get an additional unit of good x while at the same time remaining indifferent as the quantity of x increases |
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Price effect |
The effect of a change in the price of a good on the quantity of the good consumed, other things remaining the same |
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Real Income |
A household;s income expressed as a quantity of goods that the household can afford to buy |
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Relative price |
The ration of the price of one good or service to the price of another good or service. A relative price is an opportunity cost |
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Substitution effect |
The effect of a change in price of a good or service |
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Economic Depreciation |
The fall in the market value of a firm's capital over a given period |
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Economic Efficiency |
A situation that occurs when the firm produces a given output at the least cost |
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Economic Profit |
A firm's total revenue minus it's total cost, with total cost measures as the opportunity cost of production |
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Economies of scale |
Features of a firm's technology that make average total cost fall as output increases - the LRAC curve slopes downward |
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Economies of scope |
Decreases in average total cost that occur when a firm uses specialized resources to produce a range of goods and services |
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Firm |
An economic unit that hires factors of production and organizes hose factors to produce and sell goods and services |
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Four Firm Concentration ratio |
A measure of the market power that is calculated as the percentage of the value of sales accounted for the four largest firms in an industry |
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Herfindahl Hirschman Index |
A measure of market power that is calculated as the square of the market share of each firm summed over the largest 50 firms in a market |
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Implicit rental rate |
The firm's opportunity cost of using its own capital |
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Incentive system |
A method of organizing production that uses a market-like mechanism inside the firm |
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Monpolistic competition |
A market structure in which a large umber of firms make similar but slightly different products and compete on product quality, price, and marketing, and firms are free to enter or exit the market |
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Monopoly |
A market structure in which there is n firm, which produces a good or service that has no close substitutes and in which the firm is protected from competition by a barrier preventing the entry of new firms |
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Norman (Normal ;) ) Profit |
A good for which demand increases as income increases |
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Oligopoly |
A market structure in which a small number of firms compete |
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Perfect competition |
A market in which there are many firms each selling an identical product, there are many buyers, there are no restrictions on entry into the industry, firms in the industry have no advantage over potential new entrants, and firms and buyers are well informed about the price on each firm's product |
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Principle agent problem |
The problem of devising compensation rules that induce an agent to act in the best interest of a principle |
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Product Differentiation |
Making a product slightly different from the product of a competing firm |
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Technological efficiency |
A situation that occurs when the firm produces a given output by using the lease amount of inputs |
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Technology |
Any method of producing a good or service |
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Transaction costs |
The opportunity costs of making trades in a market. The costs that arise from finding someone with whole to do business, of reaching an agreement about the principle and other aspects of the exchange, and of ensuring that the terms of the agreement are fulfilled |
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Average Fixed cost |
Total fixed cost per unit of output |
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Average Product |
The average product or a factor of production. It equals total product divided by the quantity of the factor employed |
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Average Total Cost |
Total cost per unit of output |
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Constant returns to scale |
A situation in which a consumer has allocated all available income in the way that, given the prices of goods and services, maximized his or her total utility |
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Diminishing marginal returns |
The tendency for the marginal product of an additional unit of a factor or production to be less than the marginal product of the previous unit of the factor |
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Diseconomies of scale |
Features of a firm's technology that make average total cost rise as output increases - the LRAC curve slopes upward |
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Economies of scale |
Features of a firm's technology that make average total cost fall as output increases - the LRAC curve slopes downward |
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Law of diminishing returns |
As a firm uses more of a variable factor of production with a given quantity of the fixed factor of production, the marginal product of the variable factor of production eventually diminishes |
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Long Run |
The tie frame in which the quantities of all factors of production can be varied |
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Long Run average cost curve |
The relationship between the lowest attainable average total cost and output when the firm can change both the plant it uses and the quantity of labor it employs |
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Marginal cost |
The opportunity cost of producing one more unit of a good or service. It is the best alternative forgone. It is calculated as the increase in total cost divided bu the increase in output |
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Marginal Product |
The increase in total product that results from a one-unit increase in the variable input, with all other inputs remaining the same. It is calculated as the increase in total product divided bu the increase in the variable input employed, when the quantities of all other inputs remain the same |
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Minimum efficient scale |
The smallest quantity of output at which the long-run average cost reaches its lowest level` |
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Short Run |
The time frame in which the quantity of at least one factor of production is fixed and the quantities of the other factors can be varied. The fixed factor is usually capital, that is the firm uses a given plan. |
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Sunk Costs |
The past expenditure on a plan that has no resale value |
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Total Cost |
The cost of all the productive resources that a firm uses |
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Total Fixed Cost |
The cost of the firm's fixed outputs |
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Total Product |
The maximum output that a given quantity of labor can produce
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Total Variable cost |
The cost of all the firm's variable inputs |
