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103 Cards in this Set

  • Front
  • Back
Absolute advantage is found by
comparing the productivity of one nation to that of another.
The Circular flow diagram is
a visual model of how the economy is organized.
A leftward shift in supply
is a decrease in supply.
Microeconomics is the study of
how individual households & firms make decisions.
If there is a shortage of laborers, we would expect the
wages of farm laborers to increase.
Another term for factors of production is
goods
Imports are
goods produced abroad & sold domestically.
Economics is the study of
how society manages its scarce resources.
A movement along the supply curve might be caused by
the price of the good or service.
The forces that make market economies work are
demand and supply.
The primary determinant of a counties standard of living is
its ability to produce goods and services.
What you give up to obtain an item is called
opportunity cost
An economy's scarce resources are allocated by
price for resources
When goods that are produced in the United States are sold to China, the goods are
exported by the united states and imported by china.
A country has a comparative advantage in a product if the world price is
higher than its domestic price.
An example of a complementary good is
lawnmowers and automobiles
Economies deals primarily with the concept of
scarcity.
What are the 2 basic reasons why economist often appear to give conflicting advice to policymakers are differences in?
scientific judgement and values.
The country with the comparative advantage in a product
None of them are correct.
Trade based on absolute advantage is
NOT correct
When a country allows trade and becomes an exporter of a good, which of the following would NOT be true?
The losses of domestic consumer exceeds the gains of domestic producers.
If the demand for a product increases, we would expect equilibrium price
and equilibrium quantity to both increase.
Letters that are not on the Demand curve
CANNOT produce.
Economist use model in order to
learn how the economy works.
When economist are trying to help improve the world they are
policy advisors.
Technology is NOT
a determinant of demand
Suppose there is an increase in input prices. We would expect supply
to decrease.
Common Stock
Equity
Preferred Stock
No Equity
DJIA
Top 30 industrial companies, price per share.
Law of Demand
inverse relationship between price and quantity demanded.
Normative Economics
What should be.
Restrictions on Trade
Jobs, National Security, Infant Industries, Unfair competition, Protection as a barganship
Why do some countries like restrictions on trade?
Some countries are socialist economies and dont encourage competition.
Change in Quantity Demanded
Single Curve
Change in Demand
Two curves
If DEMAND is MORE than SUPPLY
Shortage (-)
If supply is MORE than DEMAND
Surplus (+)
Inferior Good
Negative income-elasticity coefficient designates inferior good.
Production Possibilities Curve
Showing different combinations of goods and services that can be produced in a fully employed economy assuming resources and technology are fixed.
Microeconomics
Study of how individual households and firms make decisions.
Resources
1. Land (Rent)
2. Labor (Wages and Salaries)
3. Capital (not money - buildings and equipment)
4. Entrepreneur (Profit)
4 Sectors
1. Household
2. Business
3. Government
4. The rest of the WORLD (imports and exports) (OPEN)
Sunk Cost
Once and for all cost that once incurred cannot be reserved.
Implicit Cost
Cost of inputs used in production but is not paid for.
Explicit Cost
Cost of inputs used and paid for.
Fixed Cost
Produced of not still paid for.
Marginal Cost
Cost of producing one more unit.
ATC short run U
Law of Diminishing Returns
Economic Profit
TR - Economic Cost
Accounting Cost
TR - Explicit Cost
Causes of Economies to Scale
1. Labor Specialization
2. Lower Raw Material
3. Better use of by products
Total Revenue
Price x Quanity
Complementary
Negative
Substitute
Positive
Normal
Positive
Inferior
Negative
Elastic
Price and TR = Opposite & More than 1
Inelastic
Price and TR = Direct & Less than 1
Consumer Surplus
(top) Demand - Market Price
Producers Surplus
(bottom) What producer gets - minimum he'll except.
Short Run
a. Fixed
b. Variable
Long Run
a. Variable = depends on production
Perfect Competition
1. Many buyer, many sellers
2. Homo
3. Easy
4. No influence
5. Regular Curve
6. Less than 50
Monopoly / Monopsony
1. One seller, many buyers
2. Homo
3. Hard
4. Seller Control
5. Steep Curve with 2nd line
6. 50-70
Oligopoly
1. Few sellers, many buyer
2. Hetero
3. Hard
4. Has influence
5. Kinked Curve
6. 70-100
Price discrimination
1. Price Elasticity
2. Separate Market (time, age,
3. No Resale
Monopolistic Competition
1. Many buyers & Sellers
2. Hetero
3. Easy than Oligopoly
4. Firm try to influence
Coordination of Cullsion
1. Few buyers many sellers
2. Hetero
3. Hard
4. Buys influence
Market Concentration
Market dominated by few large
Concentration Ratio
Largest 4
Causes of Market Concentration
1. Economies of Scale
2. Barrier for Entry
If TR is less than TC
its a loss
If price is above AT its
Profit
If price is between AT and AV its
Loss but will still produce
If price is below AT its
Loss and will shut down
Assuming a firm experiences decreasing marginal products of labor with the addition of each worker regardless of the current output level. AT will be
Constant
Negative externalities occur when one persons actions
adversely affects the well being of a bystander who is not party to the action.
The minimum wage was instituted in order to ensure workers
a minimally adequate standard of living.
Producer Surplus is the
amount a seller is paid less the cost of production.
Accounting Profit is
total revenue minus the explicit cost of producing goods and services.
Profit is defined as
total revenue minus total cost
Demand is said to be inelastic if
the quantity demanded changes only slightly when the price of good changes.
For a firm, the production function represents the relationship between
quantity of inputs and quantity of outputs
If the quantity supplied is the same regardless of price, then the supply curve would be
perfectly inelastic
Consumer surplus measures
the difference between the amount a consumer has to pay and the amount the consumer was willing to pay
The price elasticity of demand measures
a buyers responsiveness to change in the price of a good.
A local pizza restaurant makes great bread sticks that the consumers don not respond much to a change in the price. If the owner is only interest in increasing revenue he should
raise the price of the breadsticks
Economist compute the price elasticity of demand as the
percentage change in the quantity demanded divided by the percentage change in price.
If two goods are substitutes, their cross elasticity will be
positive
Implicit cost
do not require an outlay of money by the firm.
Economies of scale occur when
long-run average total costs fall as outputs increase.
Explicit Cost
ALL the ABOVE
Demand is inelastic if elasticity is
less than 1
Demand for a good would tend to be more inelastic the
fewer the available substitutes.
In the long run
inputs that were fixed in short run become variable.
An example of an implicit cost of production would be
the income an entrepreneur could have earned working for someone else
In any market total revenue is
Price multiplied by quantity.
Uncongested roads are a good example
public good
Since almost all forms of transportation produce some type of pollution
society has to weigh the cost and benefits and decide how much pollution to allow.
Fixed cost can be defined as costs that
are incurred even if nothing is produced
A payroll tax is a
tax on the wages and firms pay their workers
In an increase in income results in the quantity demanded of a good, then the good is
an inferior good.