# Econ Final

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1. Private goods
• excludable, rival in consumption
• Ex: food
2. Public goods
• not excludable, not rival
• Ex: national defense
3. Common resources
• rival but not excludable
• Ex: fish in the ocean
4. Natural monopolies
• excludable but not rival
• Ex: cable TV
5. Externality
• a type of market failure
• uncompensated impact of one person's actions on the well-being of a bystander.
• can be negaive or positive
6. Pigouvian taxes
Corrective taxes. designed to induce private decision-makers to take account of the social costs that arise from a negative externality
7. The Coase Theorem
If private parties can costlessly bargain over the allocation of resources, they can solve teh externalities problem on their own
8. Average v. Marginal tax rate
Average = total taxes paid / total income: measures the sacrifice a taxpayer makes

Marginal = the extra taxes paid on an additional dollar o income: measures the incentive effects of taxes on work effort, savings, etc
9. Tax systems: Regressive, Proportional, Progressive
• R: rich pay smaller fraction as it goes up
• Proportional: all pay the same fraction
• Progressive: rich pay larger fraction as it goes up
10. Total revenue; Average revenue; Marginal revenue
• TR = P X Q
• AR = TR/Q = P
• MR = ^TR/^Q
11. Profit maximization for competitive firm
• Profit maximizing Q:
• MR = MC
12. Shutdown
• Cost = revenue loss (TR)
• Benefit = cost savings (VC) (must pay FC)

• So, shut down if TR < VC
• Shut down if P <AVC
13. Exit
• cost: revenue loss (TR)
• Benfit: cost saving (TC)

• So exit if TR < TC
• Exit if P < ATC
14. Enter
if P > ATC
15. Long-run equilibrium
• entry/exit complete
• Remaining firms earn zero economic profit

in the long run, P=minimun ATC
16. Perfect Competition
Many firms; no market power; easy entry/exit; identical products; rice, wheat, milk
17. Monopoly
only one firm; has market power; difficult entry; electricity, cable TV, tap water
18. Monopolistic Competition
many firms; has market power; easy entry/exit; differentiated products; shampoo, cereal, novels, movies, CD's.
19. Oligopoly
just a few firms; market power; difficult entry/exit; similar-identical products; car, cigarettes
20. D curves for markets
• Monopoly: market D curve
• Competitive firm: MR=P. p set at market p. flat
21. Profit maximization for monopoly
• produce Q where MR = MC
• once Q identified, monopolist sets the highest P consumers WTP from D curve
22. Profit for M and C firms
profit = (P - ATC) X Q. square on graph
23. competitive market equilibrium
P = MC total surplus maximized
24. Monopoly equilibrium
P > MR=MC. DWL!
25. Monopolistic competition profit maximization
produce Q where MR = MC

Charge markup to D price.

### Card Set Information

 Author: dustin_thompson ID: 54246 Filename: Econ Final Updated: 2010-12-08 07:34:02 Tags: econ final Folders: Description: Econ final Show Answers:

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