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.