Microeconomics Quiz Flashcards

Terms Definitions
dollar vs pound
Define: Long Run
Nothing's fixed
Assumptions of Demand
-tastes/preferences(input) -consumer income(inferior/normal) -price of related good(subs/compliment) -demographics(growing/shrinking) -future expectations(good/bad)
how world SHOULD work
o Play-or-Pay-
requiring that employers either provide insurance for their workers or pay a special payroll tax to finance insurance for non-covered workers.
accounting cost
actual expenses plus depreciation charges for capital equipment
Strategic Behavior
Self-interested economic actions that take into account the expected reaction of others.
the market system
free enterprise; economic system;Property resources are privately owned ;


nParticipants act in their own self-interest resulting in competition among independent buyers and sellers of each product and resource.
3 economic ideas
1. people are rational.
2.people respond to economic incentives
3. optical decisions are made at the margin
Opportunity Cost
Next best alternative forgone when using a resource
complete market economy
gov't not intervene; free market
The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets (e.g. coffee industry).
Partnership disadvantages
-each partner has unlimited liability for the company's debt-legal complications arise when any change in ownership occurs
max MP is same point as...
min MC
Marginal Revenue Productivity
Higher productivity yeilds higher wages. ???
 whenever MC lies above ATC
ATC will rise
Supply Schedule
table that shows the relationship between the price of a good and the quantity supplied.
A nation has a comparative advantage in some product when it can produce that good at a lower domestic opportunity cost than can a potential partner
Production possibilities
The various combinations of goods that can be produced in an economy when it uses its available resources and technology efficiently.
individual demand
the relationship between the price of a good and the quantity demanded by one person*sum of horizontals
change in D
shift of entire curve. right=increase left=decrease
Monopolistic Competition
products are similar but not identical in quality
the lost surplus associated with transactions that no longer occur due to market intervention 
Budget Line
A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices
income effect
change in Qd from change in "purchasing power" or "real income"
(change to a new IC)
Inferior Good
A good for which quantity demanded falls as income rises - its income elasticity is negative
Elasticity of Supply
measures how much the quantity supplied responds to changes in price; depends on the flexibility of sellers to change the amount of the good they produce
A schedule showing the amounts of a good or service that sellers (or a seller) will offer at various prices during some period.
impact of one persons actions on the well-being of a bystander.
marginal utility
the change in total utility generated by consuming one additional unit of that good or service
Net benefits-
the total dollar value of all benefits minus the total dollar value of all costs. Equal to the dollar value of gains or losses to be made.
dead weight loss
the decrease in total surplus that results from an inefficient level of production
willingness to pay
consumer's max price at which they'll buy a good
Total Revenue (TR)
The total number of dollars received by a firm from the sale of a product; equal to the total expenditures for the product prodcued by the firm; equal to the quantity sold (demanded) multiplied by the price at which it is sold.
Variable Input
an input that changes with the number of outputs.
Contagen affect
If price of compliment goes up, sale of other product goes down.
Division of Labour
The breaking up of a production process into a series of specialized tasks, each done by a different worker
the fixed amount that the issuer of a bond agrees to pay the bondholder each year
Circular-Flow Diagram
a visual model of the economy that shows how dollars flow through markets among households and firms.
long-run market equilibrium
when the quantity supplied equals the quantity demanded, given that sufficient time has elapsed for entry into an exit from the industry to occur
Law of Increasing Costs
The opportunity cost of producing a good increases as more of the good is produced. The law is based on the fact that not all resources are suited to the production of all goods and that the order of use of a resource in producing a good goes from the most productive resource unit to the least.
petro dollars
mid east asked for money in dollars so they could buy things internationally
Average Variable Cost (AVC)
A firm's total variable cost divided by output (the quantity of product produced).
change in quantity demand due to the price
Law of Diminishing Returns
the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline.
Price maker
a firm that sets the price of the product it sells
variable cost
a cost that depends on the quantity of output produced
Fixed Cost (FC)
Cost that does not vary with the level of output and that can be eliminated only be shutting down.
a perfectly elastic demand curve is...
horizontal, and the elasticity equals ∞.
Very Long Run
A period of time that is long enough for the technological possibilities available to a firm to change
Marginal utility (MV)
Change in total utility due to a one unit change in quantity of a good or a service consumed
movments along the demand curve
is a change in the quantity demeanded of a good that is the result of a change in that good's price.
Characteristics of Single Price Monopoly
Barriers to entry - earning them LR profitsNo close substitutesControls a scarce resource
What is a price taker?
A firm that can alter its rate of production and sales without significantly affecting the market price of its product.
If Francis experiences a decrease in his income, then we would expect Francis's demand for...
normal goods to decrease, and dmd for inferior goods to increase
Nonmonetary Factors
Everything else:a. age e. religionb. gender f. educationc. race g. occupationd. taste h. fashion/ trendsetc.
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