Busc-1B Microeconomics final study guide

renewable vs. non renewable resources

-non renewable: Have fixed supply or take a long time to renew themselves such as coal, oil, minerals -renewable: Forests, wildlife, oceans

know the effects on an excise tax on producers and consumers (supply and demand model)

STUDY GRAPH

understand the circular flow model that includes the government and it role in the market

STUDY GRAPH

know how to calculate the nominal interest rate vs. real interest rate and the price level: (nominal interest rate formula vs. the real interest rate formula)

The Fisher Equation real IR = nominal IR - inflation IR

know how to calculate real wages

(Real wage = Nominal Wages/ Prices )

sources of loanable funds

-household savings -business savings -commercial bank loans

future value vs. present value formula and calculation

Future Value: FV=PV(1+Rt) Present Value: PV=FV((1)/(1=R)^n)

know the Celler-Kefauver Act of 1950, Wheeler-Lea Act 1938

Celler -Kefauver: amended the Clayton Act by closing the merger loopholes Wheeler-Lea:gave the FTC authority to regulate deceptive advertising

In 2000 a ruling by a Federal court found that Microsoft was guilty of what issue?

Charged in May 1998 under the Sherman Act •Accused of having a "Windows" monopoly

understand efficiency loss (dead weight loss) and tax collection (tax revenue from a tax)

Efficiency Loss: 0.5("B" excise tax *"H" change of quantity) Tax Revenue: (excise tax * quantity after taxes imposed)

Understand the relationship between taxes and elasticity of supply? Elastic vs. inelastic supply. Example: If an excise tax is impose in the market and the supply curve is highly inelastic and the demand curve is normal who will pay the majority of the tax? (the consumer or producer)

Elastic: small portion paid by consumer and most paid by producer Inelastic: most of the tax is pad by consumer and small portion by producer

monopolist vs. monopsonist

Monopolist: Monopsony and inclusive unionism, Single buyer and seller, Not uncommon, Indeterminate outcome, Desirability, Monopsonist: a single buyer of labor and has all the buying power, labor is immobile, firm is a wage maker, NFL / NBA

know the provisions of Sherman Act(1890) and Clayton Act(1914) and what agencies enforce this laws

Sherman Act; P1: any contract that tends to restrain trade is illegal P2: trying to monopolize any part of trade is a felony Clayton Act; -outlaws price discrimination -prohibits tying contracts -prohibits stock acquisition -no interlocking directorates FTC and Department of Justice enforce these laws

Natural Monopoly

Situation where one firm can supply a market's entire demand for a good or service at a price lower than two or more firms can.

Supply of loanable funds vs. the demand for loanable funds and the equilibrium interest rate model

Supply: people will make more funds available at a higher rate Demand: there are a few investments that yield a higher rate of return that lower one Equilibrium: (IR) determines where interest rate is equal to the expected rate of return

Understand the cost of extraction model (shows the relationship between prices & quantity extracted)

TC= (EC + UC)

what are tying contracts and interlocking directorates

Tying: an agreement by a party to sell one product on the condition that the buyer also purchases a different or tied product Interlocking directorates: executives serving on multiple company boards

what is the difference between active antitrust perspective vs. laissez-faire perspective on antitrust laws

active antitrust perspective looks to achieve efficiency and ensure fairness to consumers and competitive firms laissez-faire perspective holds antitrust intervention is largely unecessary, particularly as it relates to monopoly.

Thomas Malthus view on population and resource allocation

any temporary increase in living standards would cause people o have more children, and thus increase the population.

understand that taxes lead to decrease in consumer surplus and a decrease in producer surplus due to higher prices to consumers and lower prices received by producers.

causes of the excise tax, and how it causes efficiency loss

As of 2012 what were the primary sources of U.S. electricity generation? (sources of energy)

coal, natural gas, nuclear energy

social regulation

concerned with the conditions under which goods and services are produced: FDA, EPA

the effects of an excise tax

increases the price the consumer pays and lowers the amount of funds received by the producer causing a reduction in equilibrium output due to the increase in price.

Industrial union, Craft unions,

industrial unions: organize workers by industry by skilled and unskilled workers, is also an inclusive unionism Craft union: reduces the supply of labor, and it's an exclusive unionism

burden of taxation and efficiency loss

efficiency loss: causes a reduction in equilibrium output due to the increase in price. the tax burden falls on the particular group or person.

what has happened to real wages in the U.S. ?

has nearly doubled since the 1960's

know how an excise tax affects the price consumers pay and the price producers received

increases the price the consumer pays and lowers the amount of funds received by the producer

pure economic rent price

is the price of a resource with a perfectly inelastic supply schedule

wage determination

is the theory of wage is determined by both the supply and demand curve

what has happened to the U.S. per capita consumption of water within the last decade? has it level off or increased?

it has been leveling off and declining

what productive inputs are actually or virtually fixed in supply?

non-renewable resource

Federal Trade Commission agency functions

responsible to enforce anti-trust laws

the allocation of resource consumption in the U.S.

the consumption of of resources per capita is dropping due to advancements in technology that allows us to produce or extract resources more efficiently.

know user cost of extraction of a non- reusable resource

the cost of extracting a nonrenewable resource in the present vs the future

relationship between living standards and birth rates

the relationship is negative (inversely related)

conglomerate, horizontal and vertical mergers

•Conglomerate: Involve merger of firms from different industries or different geographical areas •Vertical merger: Mergers between two firms who are at different stages of the production process •Horizontal merger: Merger between two competitors who sell similar products

Herfindahl Index meaning and calculation (HHI)

•The Herfindahl Index: Herfindahl Index is used by the government to decide whether or not to allow a merger HI = (%company 1)squared + (%company 2)squared + and so on