Micro 2

Front 1

causes of market failure

Back 1

public goods, market power, externalities, inequities

Front 2

public good

Back 2

good or service that everyone can use, nonexclusive

Front 3

how does gov fix inequities

Back 3

income redistribution with progressive tax system and transfer payments and provides merit goods

Front 4

transfer payments

Back 4

payments of cash with no exchange of goods or services

Front 5

gov failure

Back 5

gov intervention fails to move us toward economic goals

Front 6

ballot box economics

Back 6

voting can substitute for the market mechanism in allocating resources to the public sector and deciding how to use them

Front 7

public choice theory

Back 7

theory of public sector behavior emphasizing rational self interest of decision makers and voters

Front 8

income tax

Back 8

progressive, largest source of income for gov

Front 9

social security tax

Back 9

regressive

Front 10

corporate tax

Back 10

usually passed on to the customer in higher prices

Front 11

excise tax

Back 11

imposed on a specific good or service, sometimes to discourage consumption or production

Front 12

property tax

Back 12

major source of local taxes, regressive

Front 13

sales tax

Back 13

regressive

Front 14

regressive tax

Back 14

takes more of people's incomes as their incomes get lower

Front 15

progressive tax

Back 15

takes more of peoples incomes as incomes get higher

Front 16

proportional tax

Back 16

takes the same amount of peoples income no matter how big

Front 17

production function

Back 17

max amount of a good that can be produced from varying factor inputs

Front 18

marginal physical product

Back 18

the measure of added output as labor increases

Front 19

marginal physical product equation

Back 19

change in total output/change in input quantity

Front 20

law of diminishing returns

Back 20

as more labor is hired, less production is achieved

Front 21

marginal cost

Back 21

increase in total cost associated with one unit increase in production

Front 22

marginal cost equation

Back 22

change in total cost/change in output

Front 23

what happens to marginal cost when marginal physical product decreases

Back 23

mc increases

Front 24

total cost

Back 24

market value of all resources used to produce a good or service

Front 25

fixed costs

Back 25

costs of production that dont change when rate of output changes

Front 26

variable costs

Back 26

costs of production that do change when rate of output changes

Front 27

total cost equation

Back 27

tc=fc+vc

Front 28

average total cost equation

Back 28

tc/q

Front 29

average fixed costs equation

Back 29

fc/q

Front 30

average variable costs equation

Back 30

vc/q

Front 31

economic costs

Back 31

value of all resources used

Front 32

explicit costs

Back 32

payment made for use of a resource

Front 33

implicit costs

Back 33

value of all resources used

Front 34

accounting cost

Back 34

explicit costs only

Front 35

long run costs

Back 35

no fixed costs

Front 36

short run

Back 36

characterized by fixed costs

Front 37

economies of scale

Back 37

reductions in min average costs that come about through increases in size of plant and equipment

Front 38

profit motive

Back 38

incentive to produce, firms want profits not revenue. causes markets to adapt to changing economic conditions or consumer preferences

Front 39

monopolistic competition

Back 39

many firms, all small

Front 40

oligopoly

Back 40

a few firms

Front 41

duopoly

Back 41

2 firms

Front 42

monopoly

Back 42

1 firm

Front 43

perfect competition

Back 43

many firms, identical products, low barriers to entry, price takers

Front 44

firm's demand curve is horizontal because

Back 44

it's a price taker

Front 45

total revenue equation

Back 45

price x quantity

Front 46

marginal revenue

Back 46

change in total revenue that results from one unit increase in quantity sold

Front 47

marginal revenue equation

Back 47

change in total revenue/change in output

Front 48

mc>p

Back 48

total profits will decline if you produce one more unit and business contracts

Front 49

mc<p

Back 49

one extra unit brings in more revenue and business expands

Front 50

mc=p

Back 50

profits maximized

Front 51

shutdown decision

Back 51

firm should shut down if losses exceed fixed costs. point on graph where price=min avc. short run response

Front 52

investment decision

Back 52

long run, decision to build, buy, or lease plants and equipment to enter or exit the industry (fixed costs)

Front 53

determinants of supply

Back 53

price of factor inputs, technology, expectations, taxes/subsidies

Front 54

property taxes

Back 54

raise them and fixed costs and total costs increase but marginal cost doesnt. no change in production decision

Front 55

payroll taxes

Back 55

raise them and variable costs and total costs and marginal costs rise. marginal cost curve shifts up and to the left and production output goes down

Front 56

profit taxes

Back 56

fixed costs and variable costs dont change, owners may reduce investment

Front 57

determinants of market supply curve

Back 57

technology, cost of factor inputs, taxes/ subsidies, expectations, # of firms

Front 58

p>atc

Back 58

economic profits, expand firm

Front 59

p<atc

Back 59

economic loss, contract firm

Front 60

p=atc

Back 60

maintain firm

Front 61

personal income

Back 61

amount earned before taxes

Front 62

in-kind income

Back 62

goods and services provided directly to households

Front 63

vertical equity

Back 63

people with higher incomes should pay more taxes

Front 64

horizontal equity

Back 64

people with equal incomes should pay equal taxes

Front 65

nominal tax rate equation

Back 65

taxes paid/taxable income

Front 66

effective tax rate equation

Back 66

taxes paid/total income

Front 67

tax revenue equation

Back 67

average tax rate x tax base

Front 68

tax incidence

Back 68

where the burden of a tax really falls