Econ Test #2

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  1. Consumer surplus
    the value the consumer gets from buying a product minus its price
  2. producer surplus
    the price the producer sells a product for less the cost of producing it
  3. deadweight loss
    the loss of consumer and producer surplus from a tax
  4. welfare loss triangle
    a geometric representation of the welfare cost in terms of misallocated resources caused by a deviation from a supply/demand equilibrium
  5. excise tax
    a tax levied on a specific good
  6. price ceiling
    a government-set price below the market equilibrium price
  7. price floor
    government-set price above equilibrium price
  8. rent-seeking activities
    activities designed to transfer surplus from one group to another
  9. public choice economists
    economists who integrate on economic analysis of politics with their analysis of the economy
  10. general rule of political economy
    when small groups are helped by a government action and large group are hurt by that same action, the small group tends to lobby far more effectively than the large group; thus, policies tend to reflect the small group's interest, not the interest of the large group
  11. market failure
    a situation in which the invisible hand pushes in such a way that individual decisions do not lead to socially desirable outcomes
  12. government failures
    when the government intervention in the market to improve the market failure actually makes the situation worse
  13. externalities
    the effects of a decision on a third party that are not taken into account by the decision maker
  14. negative externalities
    when the effects of a decision not taken into account by the decision maker are detrimental to others
  15. positive externalities
    when the effects of a decision not taken into account by the decision maker are beneficial to others
  16. marginal social cost
    the marginal private costs of production plus the cost of the negative externalities associated with that production
  17. marginal social benefit
    the marginal private benefit of consuming a good plus the benefits of the positive externalities resulting from consuming that good
  18. direct regulation
    the amount of a good people are allowed to use is directly limited by the government
  19. inefficient
    achieving a goal in a more costly manner than necessary
  20. tax incentive program
    a program using a tax to create incentives
  21. effluent fees
    charges imposed by government on the level of pollution created
  22. market incentive plan
    a plan requiring market participants to certify that they have reduced total consumption--not necessarily their own individual consumption--by a specified amount
  23. free rider problem
    individuals' unwillingness to share in the cost of a public good
  24. public good
    a good that is nonexclusive (no one can be excluded from its benefit) and nonrival (consumption by one does not preclude consumption by others)
  25. adverse selection problem
    a problem that occurs when buyers and sellers have different amounts of information about the good for sale and use that information to the detriment of the other
  26. moral hazard problem
    a problem that arises when people don't have to bear the negative consequences of their action
  27. signaling
    refers to an action taken by an informed party that reveals information to an uninformed party that offsets the false signal that caused the adverse selection problem in the first place
  28. Screening
    an action taken by the uninformed party that induces the informed party to reveal information
  29. production
    transformation of factors into goods and services
  30. firm
    economic institution that transforms factors if production into goods and services
  31. profit
    total revenue - total cost
  32. total cost
    explicit payments to the factors of production plus the opportunity cost of the factors provided by the owners of the firm
  33. total revenue
    the amount a firm receives for selling its product or service plus any increase in the value of the assets owned by the firm
  34. economic profit
    (explicit and implicit revenue) - (explicit and implicit cost)
  35. long-run decision
    when a firm chooses among all possible production techniques
  36. short-run decision
    when the firm is constrained in regard to what production decisions it can make
  37. production table
    a table showing the output resulting from various combinations of factors of production or inputs
  38. marginal product
    the additional output that will be forthcoming from an additional worker, if other inputs are constant
  39. average product
    output per worker
  40. production function
    the relationship between the inputs (factors of production) and outputs
  41. law of diminishing marginal productivity
    as more and more of a variable input is added to an existing fixed input, eventually the additional output one gets from that additional input is going to fall
  42. variable costs
    costs that change as output changes
  43. average total costs
    total cost divided by the quantity produced
  44. average fixed cost
    fixed cost divided by quantity produced
  45. marginal cost
    the increase (decrease) in total cost from increasing (decreasing) the level of output by one unit
  46. perfectly competitive market
    a market in which economic forces operate unimpeded
  47. price taker
    a firm or individual who takes the price determined by market supply and demand as given
  48. barriers to entry
    social, political, or economics impediments that prevent firms from entering a market
  49. marginal revenue
    the change in total revenue associated with a change in quantity
  50. marginal cost
    the change in total cost associated with a change in quantity
  51. shutdown point
    that point below which the firm would be better off if it temporarily shuts down than it will if it stays in business
  52. market supply curve
    the horizontal sum of all the firms' marginal cost curves, taking account of any changes in input services that might occur
  53. normal profit
    the amount the owners of business would have received in the next-best alternative
  54. monopoly
    a market structure in which one firm makes up the entire market
  55. patent
    legal protection of a technical innovation that gives the person holding it sole right to use that innovation
  56. price-discriminate
    to charge different prices to different individuals or groups of individuals
  57. natural monopoly
    an industry in which a single firm can produce at a lower cost than two or more firms
Card Set:
Econ Test #2
2013-10-20 22:28:52

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