Shared Flashcard Set

Details

Microeconomics
Principles of Microeconomics Tenth Ed. ch. 13-16, 18, & 20
100
Economics
Undergraduate 2
05/03/2012

Additional Economics Flashcards

 


 

Cards

Term
Imperfectly Competitive Industry
Definition
An industry in which individual firms have some control over the price of their output.
Term
Market Power
Definition
An imperfectly competitive's firm's ability to raise price without losing all of the quantity demanded for its product.
Term
Pure Monopoly
Definition
An industry with a single firm that produces a product for which there are no close substitutes and in which significant barriers to entry prevent other firms from entering the industry to compete for profits.
Term
Barriers to Entry
Definition
Factors that prevent new firms from entering and competing in imperfectly competitive industries.
Term
Natural Monopoly
Definition
An industry that realizes such large economies of scale in producing its product that single-firm production of that good or service is most efficient.
Term
Patent
Definition
A barrier to entry that grants exclusive use of the patented product or process to the inventor.
Term
Network externalities
Definition
The value of a product to a consumer increases with the number of that product being sold or used in the market.
Term
Rent-seeking Behavior
Definition
Actions taken by households or firms to preserve positive profits.
Term
Government Failure
Definition
Occurs when the government becomes the tool of the rent seeker and the allocation of resources is made even less efficient by the intervention of government.
Term
Public Choice Theory
Definition
An economic theory that the public officials who set economic policies and regulate the players act in their own self-interest, just as firms do.
Term
Price discrimination
Definition
Charging different prices to different buyers.
Term
Perfect Price Discrimination
Definition
Occurs when a firm charges the maximum amount that buyers are willing to pay for each unit.
Term
Rule of Reason
Definition
The criterion introduced by the Supreme Court in 1911 to determine whether a particular action was illegal or legal within the terms of the Sherman Act.
Term
Clayton Act
Definition
Passed by Congress in 1914 to strengthen the Sherman Act and clarify the rule of reason, the act outlawed specific monopolistic behaviors such as tying contracts, price discrimination, and unlimited mergers.
Term
Federal Trade Commission (FTC)
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.
Term
oligopoly
Definition
A form of industry structure characterized by a few dominant firms. Products may be homogenous or differentiated.
Term
Five Forces Model
Definition
A model developed by Michael Porter that helps us understand the forces that determine the level of competition and profitability in an industry
Term
Concentration Ratio
Definition
The share of industry output in sales or employment accounted for by the top firms.
Term
Contestable Markets
Definition
Markets in which entry and exit is easy
Term
Cartel
Definition
A group of firms that gets together and makes joint price and output decisions to maximize joint profits
Term
Tacit Collusion
Definition
Occurs when price- and quantity-fixing agreements among producers are explicit. THIS occurs when such agreements are implicit.
Term
Price Leadership
Definition
A form of oligopoly in which one dominant firm sets prices and all the smaller firms in the industry follow its pricing policy.
Term
Duopoly
Definition
A two-firm oligopoly.
Term
Game Theory
Definition
Analyzes the choices made by rival firms, people, and even governments when they are trying to maximize their own well-being while anticipating and reacting to the actions of others in their environment.
Term
Dominant Strategy
Definition
In game theory, a strategy that is best no matter what the opposition does.
Term
Prisoner's Dilemma
Definition
A game in which the players are prevented from cooperating and in which each has a dominant strategy that leaves them both worse off than if they could cooperate.
Term
Nash Equilibrium
Definition
In game theory, the result of all players' playing their best strategy given what their competitors are doing.
Term
Maximin Strategy
Definition
In game theory, a strategy chosen to maximize the minimum gain that can be earned.
Term
tit-for-tat strategy
Definition
A repeated game strategy in which a player responds in kind to an opponent's play.
Term
Celler-Kefauver Act
Definition
Extended the government's authority to control mergers.
Term
Herfindahl-Hirschman Index (HHI)
Definition
An index of market concentration found by summing the square of percentage shares of firms in the market.
Term
Monopolistic Competition
Definition
A common form of industry structure in the United States, characterized by a large number of firms, no barriers to entry, and product differentiation.
Term
Product Differentiation
Definition
A strategy that firms use to achieve market power. Accomplished by producing products that have distinct positive identities in consumers' minds.
Term
Horizontal Differentiation
Definition
Products differ in ways that make them better for some people and worse for others.
Term
Behavioral Economics
Definition
A branch of economics that use the insights of psychology and economics to investigate decision making.
Term
Commitment Device
Definition
Actions that individuals take in one period to try to control their behavior in a future period.
Term
Vertical Differentiation
Definition
A product difference that, from everyone's perspective, makes a product better than rival products.
Term
Market Failure
Definition
Occurs when resources are misallocated or allocated inefficiently.
Term
Externality
Definition
A cost or benefit imposed or bestowed on an individual or a group that is outside, or external to, the transaction.
Term
Marginal Social Cost (MSC)
Definition
the total cost to society of producing an additional unit of a good or service. Equal to the sum of the marginal costs of producing the product and the correctly measure damage costs involved in the process of production.
Term
Marginal Private Cost (MPC)
Definition
The amount that a consumer pays to consume an additional unit of a particular good.
Term
Marginal Damage Cost (MDC)
Definition
The additional harm done by increasing the level of an externality-producing activity by 1 unit
Term
Coase Theorem
Definition
Under certain conditions, when externalities are present, private parties can arrive at the efficient solution without government involvement.
Term
Injunction
Definition
A court order forbidding the continuation of behavior that leads to damage.
Term
Liability Rules
Definition
Laws that require A to compensate B for damages imposed.
Term
Public Goods
Definition
Goods that are nonrival consumption and/or their benefits are nonexcludable
Term
Nonrival in Consumption
Definition
A characteristic of public goods: One person's enjoyment of the benefits of a public good does not interfere with another's consumption of it.
Term
Nonexcludable
Definition
A characteristic of most public goods: Once a good is produced, no one can be excluded from enjoying its benefits.
Term
Free-rider problem
Definition
a problem intrinsic to public goods: because people can enjoy the benefits of public goods whether or not they pay for them, they are usually unwilling to pay for them.
Term
Drop-in-the-bucket problem
Definition
A problem intrinsic to public goods: the good or service is usually so costly that its provision generally does not depend on whether any single person pays.
Term
Optimal level of provision for public goods
Definition
The level at which society's total willingness to pay per unit is equal to the marginal cost of producing the good.
Term
Tiebout Hypothesis
Definition
An efficient mix of public goods is produced when local land/housing prices and taxes come to reflect consumer preferences just as they do in the market for private goods.
Term
Social Choice
Definition
The problem of deciding what society wants. The process of adding up individual preferences to make a choice for society as a whole.
Term
Impossibility Theorem
Definition
A proposition demonstrated by Kenneth Arrow showing that no system of aggregating individual preferences into social decisions will always yield consistent, nonarbitrary results.
Term
Voting paradox
Definition
A simple demonstration of how majority rule voting can lead to seemingly contradictory and inconsistent results. A commonly cited illustration of the kind of inconsistency described in the impossibility theorem.
Term
Logrolling
Definition
Occurs when congressional representatives trade votes, agreeing to help each other get certain pieces of legislation passed.
Term
Equity
Definition
Fairness
Term
Human Capital
Definition
The stock of knowledge, skills, and talent that people possess; it can be inborn or acquired through education and training.
Term
Compensating differentials
Definition
differences in wages that result from differences in working conditions. risky jobs usually pay higher wages; highly desirable jobs usually pay lower wages.
Term
minimum wage
Definition
the lowest wage that firms are permitted to pay workers
Term
property income
Definition
income from the ownership of real property and financial holdings. it takes the forms of profits, interest, dividends, and rents.
Term
transfer payments
Definition
payments by governments to people who do not supply goods or services in exchange.
Term
economic income
Definition
the amount of money a household can spend during a given period without increasing or decreasing its net assets. wages, salaries, dividends, interest income, transfer payments, rents, and so on are sources of economic income.
Term
Money income
Definition
the measure of income used by the Census Bureau. Because money income excludes noncash transfer payments and capital gains income, it is less inclusive than economic income.
Term
Lorenz Curve
Definition
A widely used graph of the distribution of income, with cumulative percentage of households plotted along the horizontal axis and cumulative percentage of income plotted along the vertical axis.
Term
Gini Coefficient
Definition
A commonly used measure of the degree of inequality of income derived from a Lorenz curve. It can range from 0 to a maximum of 1.
Term
Poverty Line
Definition
The officially established income level that distinguishes the poor from the nonpoor. It is set at three times the cost of the Department of Agriculture's minimum food budget.
Term
Utility Possibilities frontier
Definition
A graphic representation of a two-person world that shows all points at which I's utility can be increased only if J's utility is decreased.
Term
Utilitarian Justice
Definition
The idea that "a dollar in the hand of a rich person is worth less than a dollar in the hand of a poor person." If the marginal utility of income declines with income, transferring income from the rich to the poor will increase total utility.
Term
Rawlsian Justice
Definition
A theory of distributional justice that concludes that the social contract emerging from the "original position" would call for an income distribution that would maximize the well-being of the worst-off member of society.
Term
Labor Theory of Value
Definition
Stated most simply, the theory that the value of a commodity depends only on the amount of labor required to produce it.
Term
Social Security System
Definition
The federal system of social insurance programs. Has 3 separate programs each funded differently.
Term
Public assistance, or welfare
Definition
Government transfer programs that provide cash benefits to: 1) families with dependent children whose incomes and assets fall below a very low level and 2) the very poor regardless of whether they have children.
Term
Unemployment Compensation
Definition
A state government transfer program that pays cash benefits for a certain period of time to laid-off workers who have worked for a specified period of time for a covered employer.
Term
Medicaid and Medicare
Definition
In-kind government transfer programs that provide health and hospitalization benefits: Medicare to the aged and their survivors and to certain of the disabled, regardless of income, and Medicaid to people with low incomes.
Term
Food stamps
Definition
Vouchers that have a face value greater than their cost and that can be used to purchase food at grocery stores.
Term
Trade surplus
Definition
the situation when a country exports more than it imports.
Term
Trade deficit
Definition
The situation when a country imports more than it exports.
Term
Corn Laws
Definition
The tariffs, subsidies, and restrictions enacted by the British Parliament in the early nineteenth century to discourage imports and encourage exports of grain.
Term
Theory of Comparative Advantage
Definition
Ricardo's theory that specialization and free trade will benefit all trading partners (real wages will rise), even those that may be absolutely less efficient producers.
Term
Absolute advantage
Definition
The advantage in the production of a good enjoyed by one country over another when it uses fewer resources to produce that good than the other country does.
Term
Comparative Advantage
Definition
The advantage in the production of a good enjoyed by one country over another when that good can be produced at a lower cost in terms of other goods than it could be in the other country.
Term
Terms of Trade
Definition
The ratio at which a country can trade domestic products for imported products.
Term
Exchange rate
Definition
The ratio at which two currencies are traded. The price of one currency in terms of another.
Term
Factor Endowments
Definition
The quantity and quality of labor, land, and natural resources of a country.
Term
Heckscher-Ohlin theorem
Definition
A theory that explains the existence of a country's comparative advantage by its factor endowments. A country has a comparative advantage in the production of a product if that country is relatively well endowed with inputs used intensively in the production of that product.
Term
Protection
Definition
The practice of shielding a sector of the economy from foreign competition.
Term
Tariff
Definition
A tax on imports.
Term
Export subsidies
Definition
Government payments made to domestic firms to encourage exports.
Term
Dumping
Definition
A firm's or an industry's sale of products on the world market at prices below its own cost of production.
Term
Quota
Definition
A limit on the quantity of imports.
Term
Smoot-Hawley tariff
Definition
The U.S. tariff law of the 1930's, which set the highest tariffs in U.S. history (60%). It set off an international trade war and caused the decline of trade that is often considered one of the causes of the worldwide depression of the 1930's.
Term
General Agreement on Tariffs and Trade
Definition
An international agreement signed by the United States and 22 others in 1947 to promote the liberalization of foreign trade.
Term
World Trade Organization
Definition
A negotiating forum dealing with rules of trade across nations.
Term
Doha Development Agenda
Definition
An initiative of the World Trade Organization focused on issues of trade and development.
Term
Economic Integration
Definition
Occurs when two or more nations join to form a free-trade zone.
Term
European Union
Definition
The European trading bloc composed of 27 countries.
Term
U.S.-Canadian Free Trade Agreement
Definition
An agreement in which the United States and Canada agreed to eliminate all barriers to trade between the two countries in 1998.
Term
North American Free Trade Agreement (NAFTA)
Definition
An agreement signed by the United States, Mexico, and Canada in which the three countries agreed to establish all North America as a free-trade zone.
Term
Infant Industry
Definition
A young industry that may need temporary protection from competition from the established industries of other countries to develop an acquired comparative advantage.
Supporting users have an ad free experience!