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EC110 MicroFinal-Elder
University of alabama
36
Economics
Undergraduate 1
12/13/2011

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Term
Consumer surplus is
Definition
the amount the consumer was willing to pay less the amount the consumer paid
Term
The long run is a time period that is
Definition
long enough to change the size of the firm’s plant
Term
When a person has a comparative advantage in producing a good or service, the person has a(n)
Definition
lower opportunity cost in producing that product than someone else
Term
The downward slope of a demand curve
Definition
represents the law of demand
Term
following is correct about firms in an oligopoly
Definition
No one firm controls price, but each has an influence on the price.
Term
In order to be successful, a cartel must
Definition
agree on the total level of production and on the amount produced by each member
Term
Marginal cost is the change is cost that results from a one unit increase in
Definition
output
Term
When there is a surplus in a market
Definition
there is downward pressure on price
Term
A firm that is a price taker faces a perfectly
Definition
elastic demand curve
Term
New firms will exit a perfectly competitive market when
Definition
price is less than average total costs in the long run
Term
A point on the production possibilities frontier reflects an
Definition
attainable point with full employment of all resources
Term
An increase in price causes an increase in total revenue when
Definition
demand is inelastic
Term
When a tax is levied on a good
Definition
a wedge is placed between the price buyers pay and the price sellers receive
Term
What happens to the demand for a good if a complement’s price increases?
Definition
The demand decreases and the demand curve shifts leftward.
Term
If a monopolist faces a downward sloping market demand curve, its
Definition
marginal revenue is always less than the price of the units it sells
Term
Producer surplus is
Definition
the difference between the market price and the marginal cost of producing the good.
Term
In a perfectly competitive market, if firms are earning an economic profit, the economic profit
Definition
attracts entry by more firms, which lowers the market price
Term
A monopoly market
Definition
generally fails to maximize total economic well being
Term
Economic growth is shown on the production possibility frontier as
Definition
an outward shift in the PPF
Term
Perfectly inelastic demand means that consumers
Definition
will buy a certain quantity, regardless of price
Term
In the long run, a profit maximizing firm will choose to exit a market when
Definition
total revenue from production is less than total costs
Term
An implicit cost is
Definition
when a factor of production is used but a money payment is not made
Term
When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by
other firms in the market, we have
Definition
the Nash equilibrium
Term
The exit of firms out of a competitive market causes the supply curve to
Definition
shift leftward
Term
Firms in monopolistic competition compete on
Definition
price, quality, and advertising
Term
In production of goods and services, tradeoffs exist because
Definition
society has only a limited amount of productive resources
Term
If a good has a lot of substitutes, then its demand is
Definition
elastic
Term
In contrast to perfectly competitive markets, monopolists
Definition
can earn an economic profit indefinitely
Term
In the prisoner’s dilemma
Definition
when each player chooses his dominant strategy the players reach a Nash equilibrium
Term
Firms entering a perfectly competitive market will cause the price of the product to
Definition
decrease
Term
In a typical cartel agreement, the cartel maximizes profit when it
Definition
behaves like a monopoly
Term
Oligopoly is a market structure in which
Definition
a small number of firms compete
Term
What is a characteristic of monopolistic competition?
Definition
When firms are free to enter and exit the market
Term
The prisoners' dilemma provides insights into the
Definition
difficulty of maintaining cooperation
Term
For a profitmaximizing
monopolist
Definition
P > MR = MC
Term
A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is
called
Definition
the Nash equilibrium
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