Combo with "Micro Econ" and 3 others
5 Ways to Solve Externalities
1. Private Bargaining and Negotiation 2. Legal rules and procedures 3. Taxes and Subsidies 4. Selling or Auctioning pollution rights 5. Direct Regulation
move inward
A higher price for one good causes the budget constraint to
Risk Premium
A payment to make up for the risk of not being repaid in full
Which of the following is true?
Any two countries can benefit from trade even if one country can produce all goods more cheaply
Law of diminishing marginal utility
As a person receives more of a good, the marginal utility from each additional unit of the good is smaller than from the previous unit.
All possible choices for the individual are shown by the
Budget Constraint
How Changes in Income and Prices Affect the Budget Constraint
Changes in income will alter the budget constraint, A higher income level means that the budget constrain will shift to the right of the original budget constrain, A lower income lever means that the budget constraint will lie to the left of the original budget constraint.
chemicals from consumer products and pharmaceuticals
Genetically mutated marine life caused by "endocrine disruptors" is being found in the Potomac. "Endocrine disruptors" are _______________.
2 hot dogs
If Burgers cost $1 each and hot dogs cost 50 cents each, what is the opportunity cost of having one more burger?
Interest rate
Risk premium + Expected Rate of inflation+ Time value of money
The US has an absolute advantage in production of both goods.
Suppose that England can produce a maximum of 30 units of Wheat OR 30 units of Sheep, if it uses all its resources efficiently and specializes in either Wheat or Sheep. Suppose also that the US can produce a maximum of 100 units of Wheat OR 50 units of Sheep, if it uses all its resources efficiently and specializes in either Wheat or Sheep. That is, Maximum production with specialization England US Wheat per acre 30 100 Sheep per acre 30 50
Substitutes
goods that can replace each other to some extent so that a rise in the price of one good leads to a lower quantity consumed of another good and vice versa
Price controls
government laws to regulate prices
Protectionism
government policies to reduce or block imports
Substitution Effect
if price of a product increases it becomes more expensive relative to substitutes, thus a household will likely buy less of it and more of other goods
Factors that might shift demand include
income, consumer tastes, and population
Intra-industry trade
international trade of good within same industry
If a firm has 'Market Power' it means
it is a 'price setter' (that is, it can raise its price without losing all its customers)
Anti-dumping laws
laws that block imports sold below the cost of production and impose tariffs that would increase the price of these imports to reflect their cost of production.
Consumer Surplus
measures the difference between the equilibrium price and the price consumers are willing and able to pay
Inelastic demand
occurs when buyer demand is not very sensitive to price changes
Comparative advantage
occurs when one producer (country) can produce something at a lower opportunity cost than another producer (country)
Three implications of Budget Constraints
opportunity Cost, Marginal Decision-Making, and Sunk Costs
Objectification
refers to the fear that putting a price on certain things and buying or selling them might move them into a class of impersonal objects
The production possibilities frontier (PPF)
reflects output assuming the full use of society's resources
Inflation
rise in the overall level of prices
'Dumping' refers to
selling a product at a price below (marginal) cost
Dumping
selling internationally traded goods BELOW THEIR COST OF PRODUCTION
The demand curve
shows the maximum price that consumers are willing and able to pay for each quantity
Economics
study of production, distribution, and consumption of goods and services
Tariffs
taxes imposed on imported products
Race to the bottom
when production locates in countries with the lowest environmental or other standards, putting pressure on all countries to reduce their environmental standards.
Excess demand
when quantity demanded is more than quantity supplied
Compound interest formula
Total interest- simple interest
Social Costs
________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process.
UNOS is an example of
a 'command' solution to an economic problem
Externality
a cost or benefit imposed on an individual or a group that is outside, or external to, the transaction
The Income Effect
a decline in the price of any product will make the household better off, income will be leftover leading to improved well-being
Budget constraint
a diagram that shows the possible choices
Price floor
a law that prevents a price from falling below a certain level
Price ceiling
a law that prevents a price from rising above a certain level.
Demand curve
a line that shows the relationship between price and quantity demanded of a certain good or service on a graph with quantity on the horizontal axis and the price on the vertical axis
Supply curve
a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis.
Demand
a relationship between price and the quantity demanded of a certain good or service
Supply
a relationship between price and the quantity supplied of a certain good or service
Demand schedule
a table that shows a range of prices for a certain good or service and the quantity demanded at each price
Supply schedule
a table that shows a range of prices for a good or services and the quantity supplied at each price
"Economies of Scale" refers to
achieving lower cost per unit of production as production becomes greater
Nontariff barriers
all the way a nation can draw up rules, regulations, inspections, and paperwork to make it more costly or difficult to import products
Infant industry argument
an argument to block imports for a short time, to give the infant industry time to mature, before eventually it starts competing on equal terms in the global economy.
Quotas
are a numeric (quantity) restriction on imports
Law of diminishing returns
as additional increment of resources are added to producing a good or service the marginal benefit from those additional increments will decline,
Profit is maximized
at a lower quantity than the quantity where revenue is maximized
Marginal analysis
comparing the benefits and costs of choosing a little more or a little less of a good.
The relative price
conveys the tradeoff between the two goods in this case burgers and bus rides.
Marginal Cost
cost of producing one extra unit
Fixed Cost
cost of setting up operations
Variable Cost
costs that vary with output
Sunk Cost
costs that were incurred in the past and cannot be recovered, and thus should not affect current decisions
Absolute advantage
when one nation can produce a product at lower cost relative to another nation
Production possibilities frontier
- a diagram that shows the combinations of output that are possible for an economy to produce
Complements
- goods that are often used together so that a rise in the price of one good tends to decrease the quantity consumed of the other good and vice versa.
Consumer surplus
- the benefit consumers revive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid
Based on the production possibilities in the previous question, the opportunity cost of producing each sheep in the US is _________.
2 units of wheat
Injunction
Court order forbidding negative externality causing behavior
_________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others.
Negative Externality
Import quotas
Numerical limitation on the quantity of products that can be imported
Simple interest formula
PV * i * n
Equilibrium
The combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to shift.
Time value of money
The cost of having to wait for repayment
(Present amount) x (1+ interest Rate) ^ (number of years) -future amount
The formula for starting with a certain amount of money in the present and a certain interest rate or rate of return and figuring how much it would be worth at a date in the future is
Comparative advantage
The goods in which a nation has its greatest productivity advantages or its smallest productivity disadvantage also the goods that a nation can produce at a lower coast when measured in terms of opportunity cost!
Utility
The level of satisfaction or pleasure that people receive from their choices.
Deadweight loss
The loss in social surplus that occurs when a market produces an inefficient quantity.
Opportunity set
The points along the budget contain represent that consumption opportunities are possible
Equilibrium quantity
The quantity at which quantity demanded and quantity supplied are equal at a certain price
Productive efficiency' refers to
Using resources to their fullest
Agriculture
What is "by far the largest source of pollution to all water ways in the country", according to one speaker (J. Charles Fox, former EPA administrator) in the video?
Splitting up the value chain
When many of the different stage of production a good happen in different geographic locations.
Allocative efficiency
When the mix of goods being produced represents the allocation that society more desires.
too low, too high
When there is an negative externality the market price is _______ and the market quantity is ____ relative to the socially optimal levels (select from the pairs from below to fill in the respective blanks).
Sunk Costs
Which of the following should typically be ignored because spending has already been made and cannot be changed?
Producer surplus
the benefit producers receive from selling a good or service measured by the price of the producer actually received minus the price the producer would have been willing to accept
Law of supply
the common relationship that a higher price is associated with a greater quantity supplied
Law of demand
the common relationship that a higher price leads to a lower quantity demanded of a certain good or service
Equilibrium price
the price where quality demanded to the quantity supplied
Social surplus
the sum of consumer surplus and producer surplus
Quantity demanded
the total number of units of a good or service purchased at a certain price
Quantity supplied
the total number of units of a good or services sold at a certain price
Diamond/Water Paradox
things that people need have little or no value where as things that people want have high value
A lower price for one good would lead to
to an outward movement of the budget constraint
Coase Theorem
under certain conditions, when externalities are present, private parties can arrive at a solution without government involvement
Total Cost
variable + fixed cost
Opportunity Cost
whatever must be given up to obtain something that is desired
Shift in supply
when a change in some economic factor related to supply causes a different quantity to be supplied at every price.
Surplus
when at the existing price, quantity supplied exceeds the quantity demanded also called excess supply.
Excess supply
when at the existing price, quantity supplied exceeds the quantity demanded, also called a surplus
Compound interest
when interest payments accumulate, so that in later time periods the interest rate is paid on the interest that has been earned and reinvested in previous years.
Efficiency
when it is impossible to get more of something without experiencing a tradeoff of less of something else
Productive efficiency
when it is impossible to produce more of one good without decreasing the quantity produced of another good.