Economics Test 2
Economics 202 with Zhang at Texas A&M University
About this deck
By: Daniel Sylvia
Textbook:
Microeconomics (9th Edition)
Created: 2011-03-29
Size: 53 flashcards
Views: 73
Textbook:
Microeconomics (9th Edition)Created: 2011-03-29
Size: 53 flashcards
Views: 73
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Price ceiling
a legally determined maximum price that sellers may charge
Price floor
a legally determined minimum price that sellers may recieve
Marginal benefit
The additional benefit to a consumer from consuming one more unit of a good or service. A demand curve is also one of these curves.
Consumer surplus
the difference between the highest price a consumer is willing to pay for a good or service and the price the consumer actually pays
Marginal cost
the additional cost to a firm of producing one more unit of a good or service. A supply curve is one of these curves.
Producer surplus
the difference between the lowest price a firm is willing to accept for a good or service and the price it actually receives.
Economically efficient
Equilibrium in a competitive market is ___________ _______________.
Economic surplus
The sum of consumer surplus and producer surplus.
Deadweight loss
The reduction in economic surplus resulting from a market not being in competitive equilibrium.
Price floors
- increase producer surplus
- decrease consumer surplus
- cause a deadweight loss
Price ceilings
- increase consumer surplus
- reduce producer surplus
- cause a deadweight loss
Black market
Where buying and selling take place at prices that violate government price regulations. Can be caused by price ceilings and price floors.
Taxes
- result in a loss of consumer surplus
- loss of producer surplus
- deadweight loss
Utility
the enjoyment or satisfaction that people receive from consuming goods and services. The goal of a consumer is to spend available income so as to maximize this.
Marginal utility
the change in total utility a person receives form consuming one additional unit of a good or service
the Law of diminishing marginal utility
states that consumers receive diminishing additional satisfaction as they consumer more of a good or service during a given period of time.
budget constraint
the amount of income consumers have available to spend on goods and services.
Income effect
the change in the quantity demanded of a good that results from the effect of a change in the price on consumer purchasing power
substitution effect
the change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power
technology
the processes a firm uses to turn inputs into goods and services
technological change
refers to a change in the ability of a firm to produce a given level of output with a given quantity of inputs
Short run
A firm's technology and the size of its factory, store, or office are fixed
long run
a firm is able to adopt new technology and to increase or decrease the size of its physical plant
Total cost
the cost of all the inputs a firm uses in production
Variable costs
costs that change as output changes
Fixed costs
costs that remain constant as output changes
Opportunity cost
the highest valued alternative that must be given up to engage in an activity
Explicit cost
a cost that involves spending money
implicit cost
A non-monetary opportunity cost
Production function
The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is the firm's ___________ ___________.
Marginal product of labor
the additional output produced by a firm as a result of hiring one more worker
Law of diminishing returns
Specialization and division of labor cause the marginal product of labor to rise for the first few workers hired, but eventually this causes the marginal product of labor to decline.
Average product of labor
the total amount of output produced by a firm divided by the quantity of workers hired
Average fixed cost
equal to fixed cost divided by the level of output
average variable cost
equal to variable cost divided by the level of output
Long-run average cost curve
shows the lowest cost at which a firm is able to produce a given level of output in the long run
Economies of scale
The long-run average cost curve falls as output expands due to this.
Minimum efficient scale
the level of output at which all economies of scale have been exhausted
Constant returns to scale
After economies of scale have been exhausted, firms experience this, where their long-run average cost curve is flat
Diseconomies of scale
At high levels of output, the long-run average cost curve turns up as the firm experiences this.
Perfectly competitive market
this must have many buyers and sellers, firms must be producing identical products, and there must be no barriers to entry of new firms.
Price takers
Firms in perfectly competitive markets are these, and see their sales drop to zero if they attempt to charge more than the market price.
Profit
the difference between total revenue (TR) and total cost (TC).
Average Revenue (AR)
total revenue divided by the quantity of the product being sold.
Marginal Revenue (MR)
the change in total revenue from selling one more unit
sunk cost
a cost that has already been paid and that cannot be recovered.
shutdown point
the minimum point on the firm's average variable cost curve
Economic profit
a firm's revenues minus all its costs, implicit and explicit
Economic loss
the situation in which a firm's total revenue is less than its total cost, including all implicit costs.
long-run competitive equilibrium
the situation in which the entry and exit of firms has resulted in the typical firm breaking even.
long-run supply curve
shows the relationship between market price and the quantity supplied.
Productive efficiency
Perfect competition results in this, which means that goods and services are produced at the lowest possible cost.
Allocative efficiency
Perfect competition results in this, which means the goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.
About this deck
By: Daniel Sylvia
Textbook: Microeconomics (9th Edition)
Created: 2011-03-29
Size: 53 flashcards
Views: 73
Textbook:
Microeconomics (9th Edition)Created: 2011-03-29
Size: 53 flashcards
Views: 73
About StudyBlue
STUDYBLUE makes things that make you better at school.
Things like online flashcards with photos and audio.
Things like personalized quizzes and friendly reminders about when (and what) to study next.
Think of it as a digital backpack™: access to all of your study materials online and on your phone.
STUDYBLUE exists to make studying efficient and effective for every student, for free. Join us.
“I have been getting MUCH better grades on all my tests for school. Flash cards, notes, and quizzes are great on here. Thanks!”
Kathy
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