midterm 2
Economics 1101 with Marsh at University of Minnesota - Twin Cities
About this deck
By: Steph Tomczyk
Created: 2009-11-05
Size: 45 flashcards
Views: 67
Created: 2009-11-05
Size: 45 flashcards
Views: 67
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
Kathy
Sign up (free) to study this.
absolute advantage
produce with fewer inputs
EX: less time = absolute advantate
EX: less time = absolute advantate
comparative advantage
lower OC
*smaller opportunity cost=comparative advantage
*impossible to have a comparative advantage in BOTH goods
*smaller opportunity cost=comparative advantage
*impossible to have a comparative advantage in BOTH goods
What are the gains from specialization and trade based off of?
comparative advantage
For both parties to gain from trade, what must happen?
the price at which they trade must lie between the 2 opportunity costs
externality
occurs when ppl who are not directly invovled with an activity are affected by it
solution to externalities
-ownership rights
-ownership rights
someone has a legal claim to ownership of a resource and these rights are enforced
problems w. coarse thm
-coordination
-bargaining power
-bargaining power
world price
price of a good that is being paid on the world market
price taker
a small country that is unable to influence the world price
production possibilities frontier
a curve represnting the max. combination of outputs given available factors of production and technology
opportunity cost
the OC of something is what you must give up to get that thing
composite good
a good that represents many different goods or services
shape of PPF-not linear
-agents cant specialize
-OC are constantly changing
-OC are constantly changing
autarky
no trade takes place
specialize
produce more of a good in which you have comparative advantage than you would have produced in autarky
foundation to Consumer Theory
-what a consumer can afford (BC)
-what a consumer wants to buy (IC)
-what a consumer wants to buy (IC)
budget constraint
species which bundles the consumer can afford based on income and prices of goods
indifference curves
depicts all the combinations of 2 goods for which a consumer is equally happy
Rules for IC
-can NOT cross
-bowed inward
-downward sloping
-higher ones are preferred
-bowed inward
-downward sloping
-higher ones are preferred
Marginal Rate of Substitution
the MRS of good 1 for good 2 is the additional amt of good 1 the consumer needs to be just as happy as if he loses one unit of good 2
Optimal Consumption Bundle
the bundle of goods that is both affordable and preferred the MOST by the consumer
substitution effect
change in OCB due to a change in relative prices
income effect
change in OCB due to a change in purchasing power
excludable
can prevent one person from consuming it
rival
one persons consumption diminishing another person's consumption of the good
implicit costs
input costs that do NOT require monetary payment
explicit costs
input costs that do require monetary payment
Total costs
implict + explicit costs to produce a certain amt of output
TR
amt of $ a firm receives for the sale of its output
Economic Profit
TR-total costs
Accounting profit
TR-explicit costs
production function
a rule telling us the output produced from a specific amt of inputs
marginal product
the additional amt of output generated by adding one unit of that input
diminishing MP
as inputs increase, the MP will eventually decrease
short-run
at least one factor of production is fixed
economies of scale
in the LR, the ATC decreases as output increases
Diseconomies of Scale
in the LR, ATC increases as the output increase
Constant Returns to Scale
in the LR, ATC remains constant
marginal revenue
the additional amt of revenue received for selling one extra unit of output
when does a firm max. profit
when MR=MC
sunk costs
costs which have already been committed to and can not be recovered
-EX: fixed costs
-EX: fixed costs
fixed costs
do NOT vary with output
what are you interested in in the SR
VC--AVC , more than ATC
About this deck
By: Steph Tomczyk
Created: 2009-11-05
Size: 45 flashcards
Views: 67
Created: 2009-11-05
Size: 45 flashcards
Views: 67
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
Kathy