ECON 11 Flashcards

Terms Definitions
Copyright
A government-granted exclusive right to produce and sell a creation.
Positive Analysis
Analysis concerned with WHAT IS.
Laizzez-faire
an economic policy of leaving coordination or individuals' actions to the market. French term meaning to let things take their course and to leave things allone
Rational
People make decisions that they feel will be best for them. BENEFITS OUTWEIGH COST.
Sherman Act (1890)
Prohibited price fixing and collusion.
Price Floor
An example of government intervention in which a minimum price is place on a given good or service in an effort to encourage production.
Inefficiency
gaining less output from inputs, that if devoted to some other activity, would produce more output
Normative Analysis
Analysis concerned with WHAT OUGHT TO BE.
Physical Capital
Manufactured goods that are used to produce other goods and services. IE computers, factory buildings, machine tools, warehouses, trucks.
Oligopoly
A market structure in which a small number of interdependent firms compete.
Supply Curve
A curve that shows the relationship between the price of a product and the quantity of the product supplied.
Efficiency
achieving goals using as few inputs as possible. Refers only to a specific goal and that goal does not always have to be making money
Production Possibilities Curve
a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs. Graphical representation of the opportunities cost concept
Wealth Effect
The tendency for people to increase their consumption spending when the value of their financial and real assets rise and to decrease their consumption spending when the value of those assets fall.
Economic Loss
The situation in which a firm's total revenue is less than its total cost, including all implicit costs.
Game Theory
The study of how people make decisions in situations in which attaining their goals depends on their interactions with others; in economics, the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms.
Property
Tangible, like land or a store or a factory, or Intangible, like an idea.
Cross-Price Elasticity of Demand
The percentage change in quantity demanded of one good divided by the percentage change in the price of another good.
Economic Decision Rule
If the marginal costs of doing something exceed the marginal benefits, don't do it. If the Marginal benefits exceed the marginal costs, do it. This Rule does not include sunk costs.
Minimum Efficient Scale
The level of output at which all economies of scale are exhausted.
Market Power
The ability of a firm to charge a price greater than marginal cost.
Free Rider
Person who gets a benefit but does not contribute to paying for the cost of that benefit
Long Run
The period of time in which a firm can vary all of its inputs, adopt new technology, and increase or decrease the size of its physical plant.
What does the demand curve for individual firms in a perfectly competitive market look like?
it is completely horizontal (perfectly elastic
does a firm want to increase total profit or profit per unit? Which would have a higher output?
A firm wants to maximize total profit. Total profit is at a higher output
Utility
Usefulness
C
(Consumption)1) Durable goods2) Non-durable goods3) Services
allocative efficiency
"invisible hand" determines this
elastic demand
responsive to price changes
Xn
Net exports of goods and services(Exports)-(Imports)
Otto von Bismarck
established first government-run health insurance, social security, and workers' compensation
Unemployment Rate
# unemployed/ #in labor force
Representative democracy
elected representatives vote on behalf of constituents
market economies are subject to fluctuations of macroeconomic activity (i.e., business cycles) such fluctuations are sometimes caused by “underconsumption” people with lower levels of income/wealth typically exhibit a “higher marginal propensity t
Demand Stabilization
Structural unemployment
Unemployment that occurs when there are more people searching for a job than at the current wage. This is the result of minimum wages and typically occurs in a single market (auto workers)
Supply schedule
the numerical tabulation of the quantity supplied of a good at different prices. a supply schedule is the numerical representation of the law of supply
TR= PriceXQuantity
Elasticity in relation to total revenue
protective
of, pertaining to, or designed to favor certain industries or groups, often over imported rivals, as in protective tariffs
Marginalism
The usefulness of adding one more item to the production of a product or service
do the numbers on a supply schedule increase or decrease (going from top to bottom)
decrease
private ownership
capital and land are property of households and businesses, not of government
A resource for which the quantity cannot change.
Fixed input
5 market failures
*1. public goods and services*2. spillovers*3. market power/lack of competition*4. economic instability 5. imperfect information
Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1200 to kids attending the prom. Th
$1200
consumer good
Goods that are ready for consumption in satisfaction of human wants, as clothing or food, and are not utilized in any further production
persistent dumping
A form of dumping in which the consumer is offered a consistently lower price
Long Run Aggregate Supply (LRAS) Shifts
Right(K↑, Labor↑, Tech↑) Left(War, Famine, Opposite right shifts)
refer to table 7.1. what was country a's labor force participation rate in 2009a.63b.55c.66.9d.87.3
63 percent
Interest Rate Effect
The changes in household and business buying as the interest rate changes.
The idea that people are able to consider every relevant choice.
Unbounded Rationality
Federal Reserve Districts
The 12 banning districts created by the Federal Reserve Act
current GDP
GDP not adjusted to remove the effects of inflation
a measure of the total gains from trade realized by consumers in a market, defined as the difference between buyer’s reservation price and actual price paid added over all units purchased.
Total Consumers’ Surplus
Kim Dae-Jung
the first President of the ROK to meet with a President of the DPRK
What is commodity money?
Physical goods that can be traded (precious metals
deflation
a fall in the general price level or a contraction of credit and available money
Holding everything else constant,
the more liquid is asset A, relative to alternative assets, the greater will be the demand for asset A
a merit good is one which
has been deemed socially desirable via the political process
What are export subsidies
a payment by a country to its exporters, allowing them to sell their products at a lower price than at home
Would a firm operate in a diseconomy of scale
yes, as with monopolies. Pharmaceutical firms can operate in decreasing returns to scale, yet enjoy huge profits.
total world production, total world consumption
this is the only constraint on trade, these two must be equal

 
 
 
 
 
 
 
 
 
 

 


total cost

 
 
 
 
 
 
 
 
 
 

 


the
market value of the inputs a firm uses in production
a cost of an activity that is borne by someone not engaging in the activity
External Cost or Negative Externality
a Nash equilibrium is a set of strategies such that
each firm's choice is the best one given the strategy chose by the other player
TC=
FC(expl) + VC(impl)
maximize profi
mc = mrw
Good
anything from which individuals receive utility or satisfaction
substitutes
goods/services that can serve as replacements for one another
Financial Intermediaries
financial institutions through which savers can indirectly provide funds to borrows
budget
An element of financial planning where all income is listed and compared to all expenditures. Often expenditure decisions need to be made to hold spending less than or equal to income.
protectionism
the fostering of developing domestic industries by protecting them from foreign competition through duties or quotas imposed on importations
103.Marxs famous critique of capitalism was ________________.A) The Communist ManifestoB) Das Kapital
B) Das Kapital
Leon Trotsky
During his tenure, the "scissor crisis" ensued-- agricultural prices fell and manufacturing prices rose(Stalin, Bolshevik, Lenin, Menshevik, Trotsky)
Kim Young-Sam
first civilian President in three decades (ROK)
Free Market
A market with few government restrictions on how a good or service can be produced or sold, or on how a factor of production can be employed.
Productivity Slowdown
avg productivity per worker per hour
period from late 60's to mid 80's where avg productivity growth declined and was not growing at the same pace
measurement errors and adjustment to new technology lag
urban population
people living incorporated villages or towns with 2,500 or more inhabitants
price theory
mechanism by which buyers and sellers coordinate exchangehow they communicate
Shutdown price
when market price falls below average variable cost (AVC)
Production Efficiency
Concerns how well resources are used in a particular use
constant cost industry
long-run industry supply curve is perfectly elastic
Focusing on the products that you are able to produce efficiently.
Specialization
Barter
The direct exchange of one set of goods or services for another
growth accounting
a method to determine the contribution to economic growth from increased capital,labor, and technological progress.
 
Nominal GDP
Nominal GDP is a measure of national output based on the current prices of goods/services
the production of goods and services valued at current prices

not desirable b/c it does not tell us whether change in GDP overtime is b/c of price change or change in real output and services
nominal GDP = P1Q1 + P2Q2....
 
 
1rst Law of Supply
Holding other relevant constant, the higher the price of a good, the greater will be the quanity supplied
DPRK
this claims to have found the tomb of the mythical bear/god founder of Korea
Unmet public goods
The free market cannot define the equilibrium price and quantity; can't meet the demand of a product, so government steps in. Ex: fire department, military defense, building of sidewalks
rent control
a price ceiling on rents set by government
acceleration principle
the principle that an increase in the demand for a finished product will create a greater demand for capital goods
decrease in demand
at each price, willing to buy fewer units of the good
Decrease in interest rate leads to:
Increase in I
Shifts AEp UP
Increases rGDP
Increases C
Shifts AD right
a health insurance plan under which the covered care is limited to designated providers and the use of services is coordinated by a patients' primary care physician
health maintenance organization (HMO)
Constant Returns to Scale
Long run average total cost is unchanged as output increases
Question #1What are Economic Models and how do they relate to scientific analysis?
theories or 'models' that economist rely on to analyze real-world issues, such as the economic effects of outsourcing (obtaining goods from an outside or foreign supplier)they are used to make ecnomic ideas sufficiently explicit and concrete to be used for decision making by individuals, firms or gvt.
consumption + investments + government spending + net exports
what is the equation for GDP?
Price elasticity of supply
% change in quantity supplied over % change in price
a monopolistic competitor differs from a perfectly competitive form in that
it faces a downward sloping demand curve
What does "medium of exchange" mean?
It is acceptable to most traders, standardized qua
In the short run if marginal product is at its maximum then...
Marginal cost is at its minimum
personal fiancial planning main goal
put money to work and livin within ur mean
• What is the evidence regarding the money's worth of health care expenditure in the US?
Flat of the curve things relate to this, but it's an open-ended question, resources not being allocated efficiently
The law of increasing cost explains what?
why the PPC is bowed out or concave to the origin
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Term:
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