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37 Cards in this Set
- Front
- Back
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externality |
a third party is effected by the production or consumption of a good |
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negative externality |
third party suffers from others' production or consumption |
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positive externality |
third party benefits from others' production or consumption |
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private cost |
S1 the cost borne by the producer of a good or service |
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social cost |
S2= private and external cost the total cost of producing a good or service |
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market failure |
a situation in which the market fails to produce the efficient level of output |
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rivalry |
the situation that occurs when one person's consuming a unit of good means no one else can consume it |
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excludability |
the situation in which anyone who does not pay for a good cannot consume it |
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free riding |
benefiting from a good without paying for it |
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price elasticity of demand |
quantity demanded and price are inversely related & responsive to one another |
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elastic demand |
price elasticity > 1 in absolute value |
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inelastic demand |
0 < price elasticity of demand < 1 in absolute value |
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cross-price elasticity of demand |
% change in quantity demanded good 1 __________________________________________ % change in price good 2 |
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income elasticity of demand |
% change in quantity demanded __________________________________ % change in income |
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price elasticity of supply |
the responsiveness of the quantity supplied to a change in price |
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utility |
the enjoyment or satisfaction people receive from consuming goods and services |
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marginal utility |
the change in total utility a person receives from consuming 1 additional unit of a good or service |
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law of diminishing marginal utility |
consumers reach a point where they no longer get satisfaction after receiving more and more of a good or service |
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endowment effect |
when a consumers owns something, they place greater value on it then it's worth |
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sunk cost |
the amount of money that has already been paid and cannot be recovered |
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short run |
the time when at least one firm's inputs is fixed |
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long run |
the time in which a firm can vary all of its inputs: new technology, increase or decrease labor |
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total cost |
FC+VC |
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fixed cost |
cost that remains constant (machines) |
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variable costs |
costs that change as output changes (labor) |
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production function |
the relationship b/w inputs employed by a firm and the maximum output it can produce with those inputs |
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marginal product of labor |
how much more output you can produce by hiring one more worker: change in Q ______________ change in labor |
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law of diminishing returns |
at some point, hiring more workers will negatively effect a business |
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average product of labor |
the total output produced by a firm _____________________________________ the quantity of workers |
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marginal cost |
the change in a firm's total cost from producing one more unit of good/service change in TC _______________ change in Q(output) |
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average total cost |
TC _____ Q (output) |
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average fixed cost |
FC _____ Q |
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average variable cost |
VC ____ Q |
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minimum efficient scale |
the smallest quantity amount that minimizes LRAC |
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increasing returns of sale |
both workers and managers can become more specialized, and productive ^ in Q leads to decreased LRAC |
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constant returns of sale |
minimum efficient scale ^ in Q leads to unchanged LRAC |
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decreasing returns of sale |
as quantity becomes overwhelmingly large, managers have trouble operating the store ^ Q leads to increase LRAC |
