econ midterm 2

Tariff

A tax on imported goods

Utility

Ability or capacity of a good or service to be useful and give satisfaction to someone.

Nonmonetary rewards

Benefits or payoffs that are not financial in nature; examples include increased leisure time and "feel-good" experiences

fixed costs

Costs that do not vary with the quantity of output produced

domestic demand

Demand for products or services within a domestic economy

implicit costs

Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur

explicit costs

The actual payments a firm makes to its factors of production and other suppliers.

What happens in a domestic market when goods are imported?

The domestic market price decreases.

sunk cost

a cost that has already been committed and cannot be recovered

Giffen good

a good for which an increase in the price raises the quantity demanded

inferior good

a good that consumers demand less of when their incomes increase

normal good

a good that consumers demand more of when their incomes increase

autarky

a situation in which a country does not trade with other countries

confirmation bias

a tendency to search for information that supports our preconceptions and to ignore or distort contradictory evidence

Vietnam's comparative advantage in producing shrimp is due to differences in

climate

comparative advantage

country's ability to produce a given product relatively more efficiently than another country; production at a lower opportunity cost

Which curve shows the quantity of a good demanded by consumers within a country at any given price?

domestic demand curve

Accounting profit is revenue minus:

explicit costs

What factors often move between industries and affect trade, and aren't limited to just the industries that export or compete with imports?

factors of production

Average Fixed Cost (AFC)

fixed cost divided by the quantity of output; AFC=FC/Q

rational benefit

functional benefits that relate to the specific performance of the product or service

Salience Bias

give greater weight to evidence that is more easily accessible

Imports

goods produced abroad and sold domestically

Exports

goods produced domestically and sold abroad

offshore outsourcing

hiring people in another country to perform various tasks

A budget constraint requires that the cost of a consumer's consumption bundle be no more than the consumer's:

income

revenue

income

If the world price is greater than the autarky price and the domestic country exports the good, the domestic price of the good will:

increase

If factors are abundant, international trade tends to:

increase demand for them.

A normal good is a good for which demand:

increases when consumers are richer.

Which of these is a concern caused by globalization?

increasing income inequality between more educated and less educated workers

Capital

is the total value of assets owned by an individual or firm—physical assets plus financial assets.

economic profit is revenue

minus explicit costs and implicit costs.

arguments for trade protection

national security, job creation, infant industry argument

challenges related to globalization

offshore outsourcing

Recency bias

overemphasizes the most recent behaviors when evaluating individual performance

Most economic models assume that people act _____.

rationally

When a good is imported, the domestic price falls to the world price. As a result, the quantity of the good demanded by domestic consumers _____ and the quantity supplied by domestic consumers _____.

rises; falls

Marginal utility

satisfaction or usefulness obtained from acquiring one more unit of a product

marginal benefit curve

shows how the benefit from producing one more unit depends on the quantity that has already been produced

marginal cost curve

shows how the cost of producing one more unit depends on the quantity that has already been produced

domestic supply

supply of a product by domestic producers

Marginal benefit

the additional benefit to a consumer from consuming one more unit of a good or service

income effect

the change in consumption resulting from a change in real income

individual's consumption bundle

the collection of all the goods and services consumed by that individual

marginal cost

the cost of producing one more unit of a good

Diminishing marginal utility

the fact that each additional unit of a good adds less to utility than the previous unit

world price

the price of a good that prevails in the world market for that good

Optimal quantity

the quantity that generates the highest possible total profit

Average Total Cost (ATC)

total costs divided by quantity of output (TC/Q)

economic profit

total revenue - explicit costs - implicit costs

accounting profit

total revenue minus total explicit cost

Average Variable Cost (AVC)

total variable costs divided by quantity of output

Loss aversion

we emphasize losses more than gains

substitution effect

when consumers react to an increase in a good's price by consuming less of that good and more of other goods

decreasing marginal cost

when each additional unit costs less to produce than the previous one

Increasing marginal cost

when each additional unit costs more to produce than the previous one

Constant marginal cost

when each additional unit costs the same to produce as the previous one