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Definition
| if you don’t know if a product is good or bad, you are not willing to pay a high price – this pushes good products out of the market (aka hidden characteristics). |
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| when one party in a contract passes the risk or cost involved with their behavior on to the other party (insurance). |
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| occurs when the agent’s goals differ from the principal’s and the agents behavior cannot be observed (aka hidden behavior) |
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| Federal Trade Commission (FTC) |
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Definition
| A federal regulatory group created by Congress in 1914 to investigate the structure and behavior of firms engaging in interstate commerce, to determine what constitutes unlawful “unfair” behavior, and to issue cease-and-desist orders to those found in violation of antitrust law. |
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Definition
| also empowered to act against violators of antitrust laws. It initiates action against those who violate antitrust laws and decides which cases to prosecute and against whom to bring criminal charges (FTC cannot bring criminal charges). |
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Term
| Government Agencies that enforce anti-trust laws |
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Definition
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Term
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Definition
They promote competition and restrict market power, primarily through antitrust laws, and
they restrict competition by regulating some industries. Price floors and ceiling are examples of this, as are the current interventions into the banking, auto and insurance industries. These are often meant to protect either the public or certain industries. |
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Term
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Definition
“Every contract, combination, or conspiracy in restraint of trade or commerce is declared to be illegal.”
“Every person who shall enter into any contract or conspiracy and be found guilty will be charged with a felony (used to say misdemeanor) and ... be fined .. and / or imprisoned” |
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Term
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Definition
One firm controls the market
Block entry |
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Term
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Definition
| demand for inputs is “derived” from the demand for the outputs that require those inputs. |
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Term
| marginal revenue product (MRP) |
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Definition
The
additional revenue a firm earns by employing one additional unit of input, ceteris paribus. |
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Term
| Marginal Revenue Product of Labor: |
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Definition
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Term
| Marginal Revenue Product of Capital: |
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Definition
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Term
| profit-maximizing amount of labor to hire |
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Definition
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Term
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Definition
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Term
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Definition
| cost of saving is present consumption. Cost of present consumption is future consumption |
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Term
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Definition
| Those goods produced by the economic system that are used as inputs to produce other goods and services in the future. |
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Term
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Definition
| The decline in an asset’s economic value over time. |
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Term
| important sources of market failure |
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Definition
imperfect market structure, or noncompetitive behavior,
the existence of public goods,
the presence of external costs and benefits, and
imperfect information. |
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Term
| public goods (social or collective goods) |
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Definition
Goods that are nonrival in consumption
and/or their benefits are nonexcludable (or nonexclusive). |
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Term
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Definition
One person’s enjoyment of the benefits of a public good does not interfere with another’s consumption of it.
Example: National Defense |
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Term
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Definition
Once a good is produced,
no one can be excluded from enjoying its benefits.
Example: Public art, national defense |
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Term
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Definition
Nonrival but exclusive
With congestion: private goods
Provided by private sector or government |
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Term
| Opportunity Cost of Leisure |
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Definition
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Term
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Definition
| As the wage increases, the worker’s real income rises, and the demand for leisure will rise. |
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Definition
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Term
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Definition
| Higher wage encourages more work because other activities now have a higher opportunity cost |
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Definition
| Higher wage raises a workers income increasing the demand for all normal goods including leisure so quantity supplied to market work decreases |
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Term
| Backward bending supply curve |
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Definition
| Income effect eventually dominates substitution effect reducing the quantity of labor supplied as the wage increases |
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Term
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Definition
1. Differences in training, education, age, and expirence
2. Differences in ability
3. Differences in Risk
4. Geographic Differences
5. Discrimination |
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Term
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Definition
| A group of workers who organize to improve their terms of employment |
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Definition
| a union whose members have a particular skill or work at a particular craft, such as plumbers of carpenters |
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Term
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Definition
| the process by which union and management negotiate a labor agreement |
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Term
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Definition
Nonmaterial things that contribute to the output of future goods and services.
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Term
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Definition
| A form of intangible capital that includes the skills and other knowledge that workers have or acquire through education and training and that yields valuable services to a firm over time. |
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Term
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Definition
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Term
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Definition
| New capital additions to a firm’s capital stock. Although capital is measured at a given point in time (a stock), investment is measured over a period of time (a flow). The flow of investment increases the capital stock |
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Definition
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Term
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Definition
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Term
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Definition
| A fee paid annually expressed as a percentage of the loan or deposit. |
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Term
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Definition
| The payments made for the use of money |
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Term
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Definition
| A contract between a borrower and a lender, in which the borrower agrees to pay the loan at some time in the future, along with interest payments along the way. |
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Term
| A firm will keep investing until |
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Definition
| marginal revenue product of capital is equal to the price of capital, or MRPK = PK |
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Term
| Marginal rate of return = |
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Definition
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Term
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Definition
| A cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction. Sometimes called spillovers, third-party effects, or neighborhood effects. |
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Term
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Definition
| The plight of the winning bidder who overestimates an asset's true value |
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Term
| marginal damage cost (MDC) |
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Definition
| The additional harm done by increasing the level of an externality-producing activity (consumption or production) by one unit. |
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Term
| marginal private cost (MPC) |
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Definition
| The cost of consumption or production paid by the consumer or firm. |
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