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ECON 1101 在线学习quizlet.com/_6roqzq 1.

opportunity cost: The best alternative that must be given up to obtain some item.

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Property rights: the ability of an individual or firm to own and exercise control over resources

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Law of Supply: the quantity supplied of a good rises when the price of the good rises.

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slope: Rate of change; Rise over run

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4.

market: where a group of buyers and sellers interact to purchase a good or service.

Market supply: the sum of all individual supplies for all sellers of a particular good or service. (horizontal summation)

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the Law of Demand: As the price rises, the quantity demanded of the good falls, conversely, as the price falls, the quantity demanded rises

Change in quantity supplied: Can only occur with a change in the price of the good

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Change in supply: a shift in the supply curve, either to the left or right Input price Technology Expectations Number of sellers

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Marginal Product: Is the additional output that is generated from an additional unit of input

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law of diminishing returns: When additional units of a variable input are added to fixed inputs after a certain point, the marginal product of the variable input declines.

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production costs: equals to all opportunity cost (including explicit cost-requires money outlay and implicit cost-don't require money outlay)

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Economic profit: total revenue minus total cost, including both explicit and implicit costs

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Market demand: the sum of all individual demands for a particular good or service. （horizontal summation)

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Change in quantity demanded: 1. movement along the demand curve 2. only generated by a change in the price of the product. Change in demand: a shift in the demand curve, either to the left or right Consumer income Price of related goods Tastes/Preferences Number of buyers Expectations

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Normal goods: Goods for which demand goes up when income is higher and for which demand goes down when income is lower.

Total Revenue: how much consumers pay/producers receive from sales

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Accounting profit: total revenue minus total explicit cost

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Average costs: determined by dividing the firm's costs by the quantity of output it produces. (TC/Q)

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Marginal cost: the increase in total cost caused by an extra unit of production. (△TC/ △ Q)

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cost curve: 1. The average total-cost curve is U-shaped. 2. Marginal cost eventually rises with the quantity of output. 3. The marginal-cost curve crosses the average-total- cost curve at the minimum of average total cost.

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Profit: total revenue minus total cost total revenue: Firm's return from sale of output (Price* Quantity) total cost: Amount paid for inputs used to make output

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MR=MC: Where marginal revenue equals marginal cost the firm's output maximises profit

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Sunk costs: costs that have already been incurred and cannot be recovered; the firm considers its sunk costs when deciding to exit(in LR) or shut down(in SR)

Consumer Surplus: The difference between what you are willing to pay and what you have to pay (the market price)

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short-run decision: In short run a firm decides to cover its' variable costs of production to remain in business.

Elasticity of demand:

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economics of scale: when the production increases , the average total cost decreases

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diseconomies of scale: when the production increases , the average total cost increases

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constant returns to scale: when average total cost of production is constant as output increases.

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Inferior goods: Goods for which demand tends to fall when income rises.

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Substitutes: two goods for which an increase in the price of one leads to an increase in the demand for the other

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Complements: two goods for which an increase in the price of one leads to a decrease in the demand for the other

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Choke price: price that cuts off all demand for a good or service /where quantity demand = 0 (i.e y-intercept)

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law of diminishing marginal utility/benefit: the principle that consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time

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Optimal bundle: 1. QaPa+QbPb=I 2. MBa/Pa=MBb/Pb

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Marginal benefit: how much total benefit increases when consume one more unit

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how responsive quantity demanded is to changes in the price level.

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producer surplus: the difference between the willingness to sell a good/service and the price that the seller receives

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elasticity of supply: a measure of the way quantity supplied reacts to a change in price

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Equilibrium: where supply and demand are balanced

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Surplus: When market price > equilibrium price, then quantity supplied > quantity demanded. --Suppliers lower price to increase sales, thereby moving toward equilibrium.

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Shortage: When market price < equilibrium price, then quantity demanded > the quantity supplied. --Suppliers raise price due to too many buyers chasing too few goods, thereby moving toward equilibrium.

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Law of supply and demand: the price of any good adjusts to bring the supply and demand for that good into balance.

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Total suplus: Consumer surplus + producer surplus Value to buyers - costs of sellers

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deadweight loss: a loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved.

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Perfect Competitive market: -Many sellers and buyers -Homogeneous products ->price takers -Consumers have perfect information -Free entry and exit into the market -Firms seek to maximise profits ->zero economic profits in Long Run

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price ceiling: a legal maximum on the price at which a good can be sold --only binding when it lies below the equilibrium price. --in response to the shortage, rationing ->needs/merit basis ->lines/queues (inefficient use of time) ->random to friends and families ->black market price floor: a legal minimum on the price at which a good can be sold. --only binding when it lies above the equilibrium price.

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production possibilities curve: Shows the relationship between the maximum production of one good for a given level of production of another good

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Absolute advantage: When an economic agent can produce more output than another agent with the same resources or same output by less resources

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Comparative advantage: The ability of one economic agent to produce at lower opportunity cost than another

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Specialization: By specialising in production of the good for which we have a comparative advantage we can increase total production

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Terms of trade: The "price" of one good in terms of the other; the exchange rate between goods

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Trade: 1. Comparative advantage determines trade 2. Even if one person/country has Absolute Advantage in BOTH goods, They WON'T have Comparative Advantage in both goods. And thus the trade is beneficial 3. Trade allows individuals and countries to specialise in producing the good that they have comparative advantage in producing 4. country opens up to free trade

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Free trade: The ability to trade without hindrance or encouragement from the government

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Net exporters: 1. domestic price is lower than the world price (have comparative advantage in producing that good) 2. open up to trade will benefit producers (increase producer surplus) 3. decrease consumer surplus 4. overall, increase total surplus and there will be GAIN FROM TRADE

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Net importers: 1. domestic price is above the world price (the other country or the rest of the world has comparative advantage in producing that good) 2. open up to trade will benefit consumers (increase consumer surplus) 3. decrease producer surplus 4. overall increase total surplus and there will be GAIN FROM TRADE

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Roots of Comparative Advantage: 1. Climate and natural resources 2. Relative abundance of labor and capital 3. Technology 4. External economies

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Tariff: A tax on imported goods --by increasing the price, decrease the size of imports which decrease the total surplus and cause a DWL.

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Quotas: Decreases the amount of a good that is imported into the domestic economy --efficiently increase the price, thus increasing domestic supply and decreasing domestic demand

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Tax: Method of raising revenue by government to pay for spending/programs. Can be placed on either the buyer(Dcurve) or the seller(S-curve), and in the end, the effect is the same. --create inefficiency in the market

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Deadweight loss in tax/subsidies: determined by size of the tax and the elasticities of supply and demand

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lump-sum tax: a tax of a fixed amount paid by all taxpayers, change ATC but has no affect on MC, AVC

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per unit tax: a tax on each additional unit produced, and affects variable costs: MC, ATC, AVC

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subsidy: A government payment that supports a business or market. It can given to either buyers or sellers , and the end effect is the same. --create inefficiency in the market: under- or over-production with too much resources being utilised.

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Market failure: Three major resources: externalities, public goods, common resources

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price discrimination: 1st degree: changes every consumer their WTP 2nd degree: changes different prices based on characteristics of purchase 3rd degree: different prices for different groups based on characteristics of consumers. (two ways: AC-pricing (economic profit=0) and MC-pricing (negative economic pricing, needs subsidies)

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Externality: additional/unaccounted for effects resulting from activities --can occur in either production of a good/service or from the consumption

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Private marginal cost (PMC): The supply curve depicts a producers willingness to sell per unit. It encompasses their costs of production (both explicit and implicit)

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monopolistic competition: Many firms but selling slightly differentiated product (economic profit = 0 in LR) --ATC cross D-curve at Pmc&Qmc

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Game theory: 3 key elements: players, strategy, payoffs

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Social marginal benefit (SMB): =private marginal benefit + externalities

Prisoner's Dilemma: -simultaneous game -1-shot game -total payoffs in matrix accounts for all payoffs

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Coase Theorem: Suggest that private markets can be effective in dealing with externalities (in some circumstances) --key assumption : Property Rights Costless Bargaining

dominant strategy: best response/strategy regardless of what the other player does --pure strategy (when the player always choose the same action)

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dominant strategy equilibrium: the players have no incentives to change their strategies

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Nash strategy: best response GIVEN what the other player does

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Nash Strategy Equilibrium: multiple equilibrium

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mixed strategy: choosing a different action randomly

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sequential games: not simultaneous (has first move advantage)

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Social marginal cost (SMC): =private marginal cost + externalities

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Private marginal benefit (PMB): The demand curve depicts a consumers willingness to pay per unit. It encompasses how much benefit they think they will derive from each unit.

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Regulation (command and control): enforce laws that control production and consumption with associated externalities. --benefits as decrease DWL in decreasing negative externality and increasing positive externality by increasing production and consumption

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Market based instruments: Taxes and subsidies Tradable permits (Creating a market of tradable pollution permits allows the workings of the invisible hand to determine an efficient price for pollution. The Government sets the total allowable quantity of permits and the market sets the price for these scarce permits.)

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Public goods: Not EXCLUDABLE (whereby a person can be prevented from using a good/service), NOT RIVAL (whereby one person's use diminishes other people's use) Market failures increase because the ability of economic agents to FREE RIDES (use Vertical summation)

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Common Resources: rival but not excludable Market failure arises due to the ability of agents to FREE RIDE AND diminish another's benefit. --Solutions: 1. regulation 2. taxes 3. tradable permits 4. property rights

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Monopoly: the sole seller of a product that does not have any close substitutes. Arises due to barriers to entry: 1. monopoly resources 2, Government regulation 3. The production process (high FC) -key difference from perfect competition: price maker (downward D-curve) -MR sits below the D-curve with twice slope (due to price effect and quantity effect) -make positive economic profits in SR and LR...