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102 Cards in this Set
- Front
- Back
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what are the factors of production?
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-land
-labor -capital -entrepreneurial ability |
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what is the production possibilities curve
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a curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed
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what is the law of increasing opportunity?
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if the production of a particular good increases, the opportunity cost of producing an additional unit rises
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what is positive economics
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focuses on the facts and cause-and-effect relationships. "what is"
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what is normative economics
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incorporates value judgements about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal. "what ought to be"
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what is microeconomics
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part of economics concerned with individual units such as a person, a household, firm, or an industry
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what is macroeconomics
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examines the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sectors.
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what is the law of supply
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as prices rises, the quantity supplied rises; as price falls, the quantity supplied falls.
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what are determinants of supply
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-resource prices
-technology -taxes and subsidies -prices of other goods -producer expectations -number of sellers |
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what is the law of demand
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the principle that, other things equal, an increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price
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what are the factors of production?
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-land
-labor -capital -entrepreneurial ability |
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what is the production possibilities curve
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a curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed
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what is the law of increasing opportunity?
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if the production of a particular good increases, the opportunity cost of producing an additional unit rises
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what is positive economics
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focuses on the facts and cause-and-effect relationships. "what is"
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what is normative economics
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incorporates value judgements about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal. "what ought to be"
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what is microeconomics
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part of economics concerned with individual units such as a person, a household, firm, or an industry
|
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what is macroeconomics
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examines the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sectors.
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what is the law of supply
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as prices rises, the quantity supplied rises; as price falls, the quantity supplied falls.
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what are determinants of supply
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-resource prices
-technology -taxes and subsidies -prices of other goods -producer expectations -number of sellers |
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what is the law of demand
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the principle that, other things equal, an increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price
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what are the types of businesses
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-sole proprietorship (owned and operated by one person)
-partnership (two or more persons) -corporation |
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what is the price elasticity of demand
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-the responsiveness of consumers to a price change
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how do you calculate elasticity
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percentage change in quantity demanded/percentage change in price of product
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how do you calculate total revenue
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TR = (Product Price) x (Quantity Sold)
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what are the determinants of price elasticity of demand
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-substitutability
-proportion of income -luxuries vs. necessities -time |
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how to you calculate cross elasticity of demand
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percentage change in quantity demanded for product x/percentage change in price of product y
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what is an externality
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when some of the costs or the benefits of a good 'spill over' to someone other than the immediate buyer or seller
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what is a negative externality
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a cost imposed without compensation on third parties by the production or consumption of sellers or buyers
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what is a positive externality
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a benefit obtained without compensation by third parties from the production or consumption of sellers or buyers
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what is the law of diminishing marginal utility
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added satisfaction declines as a consumer acquires additional units of a given product
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what is utility
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the want-satisfying power
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what is marginal utility
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the extra satisfaction a consumer realizes from an additional unit of that product
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as more of a product is consumed, total utility increases at a _________
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diminishing rate
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when marginal utility is zero, total utility is:
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neither rising or falling
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what is a pure monopoly
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-a market structure in which one firm sells a unique product, into which entry is blocked, in which the single firm has considerable control over product price, and in which non-price competition may or may not be found.
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what is a monopolistic competition
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-a market structure in which many firms sell a differentiated product, into which entry is relatively easy, in which the firm has some control over its product price, and in which there is considerable non-price competition.
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what is an oligopoly?
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a market structure in which a few firms sell either a standardized or differentiated product, into which entry is difficult, in which the firm has limited control over product price because of mutual interdependence, and in which there is typically non-price competition
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what is marginal revenue
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the change in total revenue that results from selling one more unit of output
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in pure competition _____ and _____ are equal
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-marginal revenue and price
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what are the barriers to entry in a monopoly
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-economies of sale
-patent ownership and research -ownership or control of essential resources -pricing and other strategic behavior |
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what is the economic perspective?
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includes three elements
-scarcity and choice -purposeful behavior -marginal analysis making rational decisions based on comparisons of marginal costs and marginal benefits |
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The optimal point on the production possibilities curve is when
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the marginal benefit equals its marginal cost
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what is a market system
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-when private individuals own most resources, and markets coordinate most economic activity
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what is a command system
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-when the government owns most resources and central planners coordinate most economic activity
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what is demand
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-a schedule or curve representing the willingness of buyers in a specific period to purchase a particular product at each of various prices
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what are the determinants of demand
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-consumer tastes
-the number of buyers in the market -the money incomes of consumers -the prices of related goods -consumer expectations |
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what makes the market demand shift and why
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-a shift to the right is an increase in market demand, a shift to the left is a decrease
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what are the determinants of supply
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-resource prices
-production techniques -taxes or subsidies -the prices of other goods -producer expectations -number of sellers in the market |
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what makes the supply curve shift and why
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-a shift to the right is an increase in supply, a shift to the left is a decrease
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the equilibrium of price and quantity are supplied at the intersection of
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the supply and demand curves
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what is a price ceiling
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-maximum price set by government designed to help consumers
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what is a price floor
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-minimum price set by government and is designed to aid producers
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what is sole proprietorships?
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-firms owned and usually operated by single individuals
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what is a partnership?
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-firms owned and usually operated by just a handful of individuals
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what is a corporation?
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-the dominant form of business
-legal entities, distinct and separate from the individuals who own them |
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what is a stock
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-ownership shares of a corporation
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what is a bond
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-promises to repay a loan, usually at a set rate of interest
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how is perfectly inelastic and elastic demand graphed?
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-inelastic is graphed as a line parallel to the vertical axis
-elastic is shown by a line above and parallel to the horizontal axis |
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it total revenue changes in the opposite direction from prices than
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demand is elastic
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if price and total revenue change in the same direction than
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demand is inelastic
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what is consumer surplus
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-the difference between the maximum price that a consumer is willing to pay for a product and the lower price actually paid.
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what is producer surplus
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-the difference between the minimum price that a producer is willing to accept for a product and the higher price actually received
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average fixed cost declines continuously as:
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output increases bc a fixed sum is being spread over a larger and larger number of units of production
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a graph of average variable cost is what shape?
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-U-shaped.
-reflects the law of diminishing returns |
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graphically, the marginal-cost curve intersects:
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the ATC and AVC curves at their minimum points
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what shifts cost curves downward and upward?
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-lower resource prices
-higher input prices |
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in a competitive industry, the firms demand curve is
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-perfectly elastic and price equals marginal revenue
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short run profit maximization in a competitive firm maximizes its profit by:
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-producing the output at which the TR is greater than TC by the biggest amount
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in the long run, the market price of a product will:
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-equal the minimum average total cost of production
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the long run supply curve is ____ for a constant cost industry, ____ for an increasing-cost industry, and _____ for a decreasing-cost industry
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-horizontal,
-up sloping -downsloping |
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what is the difference between a monopolist's demand curve and a competitive firm's curve
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-the monopolists demand curve is down sloping, causing the marginal revenue curve to lie below the demand curve
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what are the distinguishing features of a monopolistic competition
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-there are enough firms in the industry to ensure that each firm has only limited control over the price, collusion is nearly impossible
-products are characterized by a real or perceived differences so that economic rivalry entails both price and non-price competition -entry to the industry is relatively easy |
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what does the four-firm concentration meassure?
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-the percentage of total industry output accounted for by the largest four firms
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under the monopolistic competition, price _____
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exceeds marginal cost
-consumers do not get the product at the lowest price |
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oligopolistic industries are characterized by:
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-the presence of few firms
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resource prices help:
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-determine money incomes, and they simultaneously ration resources to various industries and firms
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the firm's demand curve for a resource slopes
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-downward bc the marginal product of additional units declines in accordance with the law of diminishing returns
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the demand curve for a resource will shift as the result of:
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-change in the demand for, and therefore the price of, the product the resource is producing
-changes in the productivity of a resource -changes in the prices of other resources |
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oligopolistic industries are characterized by:
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-the presence of few firms
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resource prices help:
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-determine money incomes, and they simultaneously ration resources to various industries and firms
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the firm's demand curve for a resource slopes
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-downward bc the marginal product of additional units declines in accordance with the law of diminishing returns
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the demand curve for a resource will shift as the result of:
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-change in the demand for, and therefore the price of, the product the resource is producing
-changes in the productivity of a resource -changes in the prices of other resources |
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graphically, the marginal-cost curve intersects:
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the ATC and AVC curves at their minimum points
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what shifts cost curves downward and upward?
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-lower resource prices
-higher input prices |
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in a competitive industry, the firms demand curve is
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-perfectly elastic and price equals marginal revenue
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short run profit maximization in a competitive firm maximizes its profit by:
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-producing the output at which the TR is greater than TC by the biggest amount
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in the long run, the market price of a product will:
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-equal the minimum average total cost of production
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the long run supply curve is ____ for a constant cost industry, ____ for an increasing-cost industry, and _____ for a decreasing-cost industry
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-horizontal,
-up sloping -downsloping |
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what is the difference between a monopolist's demand curve and a competitive firm's curve
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-the monopolists demand curve is down sloping, causing the marginal revenue curve to lie below the demand curve
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what are the distinguishing features of a monopolistic competition
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-there are enough firms in the industry to ensure that each firm has only limited control over the price, collusion is nearly impossible
-products are characterized by a real or perceived differences so that economic rivalry entails both price and non-price competition -entry to the industry is relatively easy |
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what does the four-firm concentration meassure?
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-the percentage of total industry output accounted for by the largest four firms
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under the monopolistic competition, price _____
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exceeds marginal cost
-consumers do not get the product at the lowest price |
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what is a corporation?
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-the dominant form of business
-legal entities, distinct and separate from the individuals who own them |
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what is a stock
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-ownership shares of a corporation
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what is a bond
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-promises to repay a loan, usually at a set rate of interest
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how is perfectly inelastic and elastic demand graphed?
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-inelastic is graphed as a line parallel to the vertical axis
-elastic is shown by a line above and parallel to the horizontal axis |
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it total revenue changes in the opposite direction from prices than
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demand is elastic
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if price and total revenue change in the same direction than
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demand is inelastic
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what is consumer surplus
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-the difference between the maximum price that a consumer is willing to pay for a product and the lower price actually paid.
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what is producer surplus
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-the difference between the minimum price that a producer is willing to accept for a product and the higher price actually received
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average fixed cost declines continuously as:
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output increases bc a fixed sum is being spread over a larger and larger number of units of production
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a graph of average variable cost is what shape?
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-U-shaped.
-reflects the law of diminishing returns |
