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61 Cards in this Set
- Front
- Back
shows the amount of goods that can be produced given the amount of land, labor, machinery, and technology available
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Production Possibilities Frontier (PPF)
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who can produce the good at a lower cost; formula:
what you must give up/ what you want |
comparative advantage
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as price falls, quantity demanded rises and as price rises, quantity demanded falls; states that price and quantity are inversely related
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Law of demand
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how much will be purchased at any given price
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demand
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the amount that will be purchased at a particular price
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quantity demanded
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If there is a decrease in price, there will be an increase in ___________________.
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quantity demanded
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all other things held equal
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CETERIS PARIBUS
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5 common reasons demand will change
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1)a change in tastes and preferences 2)a change in law 3)a change in expectations 4)a change in income 5)a change in the price of other goods
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when incomes rise, demand for the good will fall
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inferior good
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when incomes rise, demand for the good will also rise
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norman good
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with ______________, the price of one falls and the demand for the other rises; the price rises, and the demand for the other falls
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complements
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With _______________, the price of one rises and the demand for the other also rises
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substitutes
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as price rises, quantity supplied will also rise; as price falls, quantity supplied will also fall
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law of supply
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what brings more of the good to the market at a lower price?
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competition
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what is caused by firms entering or leaving the industry?
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change in supply
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where quantity demanded equals quantity supplied and there are no unintended shortages or surpluses
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equilibrium
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coming together of buyers and sellers whose joint decisions determine the price
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market
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when quantity supplied is less than quantity demanded at a specific price;
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shortage
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when quantity supplied is greater than quantity demanded at a specific price
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surplus
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what says that it is against the law to raise a price of a good right after a disaster occurs?
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anti-price gouging laws
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legal maximum price which can be charged for a good or service; always lies below the equilibrium; always causes a shortage; in the long run, always hurts society
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price ceiling
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a legal minimum price which can be charged for a good or service; result in a surplus; always lies above the equilibrium; in the long run, always hurts society
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price floor
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the amount that consumers are willing to pay for a good or service, but did not have to
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consumers surplus
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what is the equation for producers opportunity cost (POC)?
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total revenue - producers surplu
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a measure of the responsiveness of consumers to a change in economic variable (such as price)
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elasticity
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the amount of satisfaction you receive from a good or service
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utility
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stay the same no matter how much is produced; include opportunity cost of producing that good or service; ex: rent, property tax, salary
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fixed costs
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costs that vary, change with production; ex: wages, inputs, utilities, transportation, unemployment insurance
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total variable costs
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given a fixed amount of capital, additional inputs will initially increase production; however, at some point adding more inputs will lower production because the capital is fixed
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law of diminishing marginal production
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1)large # of buyers and seller 2)homogenous good or service 3)free entry and exit 4)perfect information
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purely competitive market
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a price taker
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purely competitive market
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where will every firm operate in order to maximize profit?
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where MR = MC
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a time period short enough that at least one factor of production can't be changed
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short run
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a time period long enough that all factors of production can be changed
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long run
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single producer of a good or service (1 graph); price searcher
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monopoly
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economic activity lost due to monopoly presence
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dead weight loss
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"someone will build the better mousetrap" by joseph schumpeter
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schumpetarian monopoly
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says that the only way a monopoly can exist today is through government coersion; by Gordon Tolluck
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Tolluckian monopoly
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a group of firms which come together and act like a monopoly; ex: OPEC (Organization of Petroleum Exporting Countries)
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cartel
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regulations are passed to correct market failures
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public interest theory of regulation
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turned us into the consumer industry we are today; popularized mass production
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Samuel Insull
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regulations are passed, not to benefit the public, but to benefit the industry being regulated
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capture theory of regulation
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laws and regulations which seek to preserve business competition
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Antitrust laws
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when 2 competitors go together and agree to set a price; section I of the sherman act makes it illegal
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price fixing
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makes monopolization or the attempt to monopolize a felony
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section II of the sherman act
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makes price discrimination illegal
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the clayton act of 1914
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when was the sherman act formed?
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1890
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charging 2 different prices to 2 different groups where the difference in price is not based on a difference in cost
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price discrimination
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what 3 things must you have for price discrimination to occur?
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1)at least 2 different, easily identifiable groups 2)the firm must have some form of monopoly power 3)there can be no arbitrage
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makes tying arrangements, requirements contracts, exclusive dealings, and territorial restraints illegal where the effects of such may be to substantially decrease competition or tend to create a monopoly
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Section III of the Clayton act
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made all unfair methods of competition in commerce illegal
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the FTC act (federal trade commerce)
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a measure of the degree to which the largest firms in an industry account for total industry assets, sales, or some other factor
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concentration ratios
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# 1 way that firms tend to move towards monopolization
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mergers
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mergers in the same industry; always challenged by the government
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horizontal
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merging with a supplier; often challenged by the government
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vertical
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firms in separate industries merging together; never challenged by the government
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conglomerate
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5 steps firms have to go through to merge
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1)define the market
2)examine pre and post merger HHI 3)examine entry conditions 4)look at all other factors 5)judge must ask "Is it possible to increase efficiency without the merger?" |
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1)unionized labor 2)the state action doctrine 3)patents 4)agricultural cooperatives 5)Noerr-Pennington Doctrine 6)professional sports
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antitrust exemptions
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comes from sherman act; "does not prohibit 2 or more persons from associating together in an attempt to persuade the legislature to take particular action with respect to a law that would produce or restrain monopoly
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Noerr-Pennington Doctrine
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4 great environmental myths
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1)anthropogenic global warming
2)hole in the ozone 3)disappearing forest 4)mass extinctions |
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come from Norman Myers - 1976; wrote a book "the sinking ark"; said by 2000, 25% of all species of life on earth would be extinct
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mass extinction
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