Perfect (Pure) Competition:
1. many firms (some textbooks say infinite)
2. many buyers
3. homogenous product (exactly the same product)
4. free entry and exit (firms can enter or leave the market at zero cost)
5. perfect information
Economics: The social science that studies the production, distribution, and
consumption of goods and services.
Scarcity: The condition that exists when there are not enough resources that exist
to satisfy all of the competing uses.
Unit 3 - Macroeconomics
Module 36: Addressing Externalities
An Externality is a benefit or cost of a business transaction that affects a third
- This third party is neither a consumer nor a producer in the transaction but instead
just a bystander
Know the difference between demand and quantity demanded and which causes
a shift in demand.
Demand: The willingness to pay for a good or service.
Quantity Demand: amount of a product or service consumers are willing to buy at a gi
Econ Semester Exam
1. Scarcity: The condition that exists when there are not enough resources that
exist to satisfy all of the competing uses. Scarcity limits supply! THERE IS
ALWAYS scarcity somewhere. TIME is the ULTIMATE kind!
Module 40 : Income Redistribution
Social programs are government-funded programs that help underprivileged groups
who otherwise might not get assistance through private venues.
- Safety-net program are programs aimed at combating aimed poverty through a
Module 38: Market failure
A market failure is a concept within economic theory wherein the allocation of goods
and services by a free markets is not efficient.
Externalities are the benefits costs of a business transaction that affect a third
1. What is scarcity- The condition that exists when there are not enough
resources that exist to satisfy all of the competing uses.
2. What is Economics and what does it study? The study of the exchange in
goods and services and financial decisions based
Module 41 : Property Rights
Property rights include the right to use one's possessions in any way one chooses, within
the limits of the law.
- Property right give you certain legal rights, which collectively are occasionally referred to as
a "bundle of
Monopoly: is a market with
- High entry barriers, and,
- A single sellers of a well-defined product for which there are no good substitutes
TR= 10x100= 1,000
TC= ATC x q=$800
Monopoly Price Discrimination:
Why do old people and students get discounted ticket prices at the movies?
This is an act of price discrimination. Charging different prices to different people for the same
good. It is an attempt to increase profits (and ca
Monopoly and Economic Efficiency:
Two types of efficiency:
You can think of allocative efficiency as the maximization or full capture of the total surplus.
(Note: for efficiency, it doesn't matter who - producer or consumer - c
For most of the course so far we've talked about consumer choice and the demand side of the
This next section is about the supply side of the market, mostly consisting of firms of various
The supply curve, much like the demand curve
More on Utility Optimization:
When we try to maximize utility subject to a constraint we are trying to figure out what bundle of
goods that is obtainable (you can afford it) gives you the most utility/happiness.
1. a set of preferences (utility fun
ECON 306-005, Problem Set 2
You must turn in a physical copy at the beginning of class on 11/11 to receive credit. You may
work with other people and use a calculator on this problem set if needed. You must attempt
every problem to receive full cre
ECON 306-005, Problem Set 3
True/False and Explain Why:
In three to five sentences (if needed), explain why each statement is true or false. Use examples
and graphs if needed. Make sure to explain why the statement is either true or false. Do not just
A Firm's Short Run Supply Curve:
The SR supply curve for a firm is the MC curve above the minimum of the AVC curve. At a price
below the minimum of the AVC a firm will shutdown, meaning it will not produce (i.e. supply)
anything. The MC curve above the AV
Profit Maximization, an example:
*Note, the total cost equation does not look exactly like the one used in class. The one in class is
a lot more difficult to work with. The concept and technique is still the same.
TC = q2+5q+10
MC = 2q+5
ATC =( q2+5q+10)/
Review from Monday:
Marginal Revenue Product of Labor = Marginal Revenue * Marginal Product of Labor
MRPL = MR * MPL
The MRPL is the firms demand curve for labor. It shows the maximum willingness to pay for a
unit of labor and the relationship between pri
Optimum of the Resource-Owner:
The question of resource supply deals with how resource-owners choose to allocate the assets
they possess among the possible uses.
For the laborer, it asks question like: where should you work? How many hour
Up to this point we've mostly discussed the market for final products. The "Q" that firms
produced or consumers consumed was a final consumption product like coffee, a car, a phone,
Now we're going to look at the market for productive input
What commodities were used in the rat experiments to test strange prediction and (b) what did the experimenters do in order to satisfy the two theoretical conditions required
to make the strange prediction?
(A) The commodities used were sweet and sour wat