Term
|
Definition
| arises when a person engages in an activity that influences the well being of a bystander but neither pays nor receives any compensation for that effect. |
|
|
Term
|
Definition
| private costs of producers plut the costs of bystanders affected adversely or beneficially |
|
|
Term
| internalizing the externality |
|
Definition
| altering incentives so that people take account of the external affects of their actions |
|
|
Term
|
Definition
technology spillover- the impact of one firm's research and production efforts on other firms' access to technoligical advance.
industrial policy- Gov. intervention that aims to prooste technology enhancing industries
patent protection- gives inventors property rights over inventions for a time, gives greater incentive to conduct research to advance tech. |
|
|
Term
| Command and Control Policy |
|
Definition
| government regulate behavior directly to respond to externalities |
|
|
Term
|
Definition
| gov. provides incentives so private decision makers will chooose to solve the problem on their own. |
|
|
Term
| Corrective taxes and subsidies |
|
Definition
| market based policy where gov. encats taxes to deal with the effects of negative externalities. called pigovian taxes. designed to induch private decision makers to take account of the social costs that arise from a negative externality. |
|
|
Term
| tradable pollution permits |
|
Definition
| market based policy that gov uses to solve negative externality |
|
|
Term
|
Definition
| private solution to externality. says that private economic actors can potentially solve externalities amongst themselves by reaching a bargain in which everyone is better off and the outcome is efficient, without cost. |
|
|
Term
|
Definition
| costs that parties incur in the process of agreeing to nd following through on a bargain. can be the cause of not solving an externality privately. |
|
|
Term
|
Definition
exludable and rival in consumption
ex: ice cream cones, clothing, congeste toll roads |
|
|
Term
|
Definition
goods that are neither excldable or rival in consumption
ex: tornado siren, national defense, uncongested non toll roads, light house |
|
|
Term
|
Definition
rival in consumption but not excludable
ex: fish in ocean, environment, congested nontoll roads |
|
|
Term
|
Definition
goods that are excludable but not rival in consumption
ex:fire protection, cable TV, uncongested toll roads. |
|
|
Term
|
Definition
| a study that compares the costs and benefits to society of providing a public good |
|
|
Term
|
Definition
| the study of how firms' decisions about prices and quantities depend on the market conditions they face |
|
|
Term
|
Definition
| input costs that require outlay of money by the firm |
|
|
Term
|
Definition
| input costs that do not require an outlay of money by the firm. |
|
|
Term
|
Definition
P*Q
amount firm recieves for sale of its output |
|
|
Term
|
Definition
FC+VC
market value of the inputs a firm uses in production |
|
|
Term
|
Definition
|
|
Term
|
Definition
| total revenue minus total cost, including both explicit and implicit costs |
|
|
Term
|
Definition
| total revenue minus total explicit costs |
|
|
Term
|
Definition
| relationship between quantity of inputs used to make a good and the quntity of output of that good. |
|
|
Term
| marginal product/ marginal product of labor |
|
Definition
| the increase in output that arises from an additional unit of input |
|
|
Term
| diminishing marginal product |
|
Definition
| property where the marginal product of an input declines as the quantity of the input decreases. |
|
|
Term
|
Definition
| costs that vary with the quantity of output produced |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
changeTC/ changeQ
increase in total cost that arises from an extra unit of production |
|
|
Term
|
Definition
| quantity of output that minimizes ATC |
|
|
Term
|
Definition
| the property where long run ATC falls as the quantity of output increases |
|
|
Term
|
Definition
| property where long run ATC rises as the quantity increases |
|
|
Term
| constant returns to scale |
|
Definition
| property where long run ATC stays the same as quantity of output changes |
|
|
Term
| reason for economies and diseconomies of scale |
|
Definition
| Long-run ATC is falling at low levels of production because of increasing specialization and rising at high levels of production because of increasing coordination prolems |
|
|
Term
|
Definition
| many buyers and sellers, goods offered by various sellers are the same, firms can freely enter and exit. |
|
|
Term
|
Definition
TR/Q
for all firms average revenue equals the price of the good |
|
|
Term
|
Definition
change TR/ change Q
the change in total revenue from an additional unit sold. for competitve firms, MR equals the price of the good. |
|
|
Term
|
Definition
| maximize profit where MR=MC |
|
|
Term
|
Definition
|
|
Term
|
Definition
| cost that has already been committed and cannot be recovered. |
|
|
Term
| long run entering and exiting markets |
|
Definition
Enter if P>ATC
Exit if P<ATC
the competitve firm's long-run supply curve is the portion of its marginal cost curve that lies above ATC
in the long run equilibrium of a competitive market with free entry and exit, firms must be operating at their efficient scale. firms that remain in the market must be making 0 economic profit. |
|
|
Term
| reading profit on a graph |
|
Definition
| profit is the difference between price and ATC multiplied by the quantity. |
|
|
Term
|
Definition
| the firm that would exit the market if the price were any lower |
|
|
Term
|
Definition
monopoly resources- firm owns a key resource for production
gov. regulation- gov givs a single firm exclusive right to produce some good or service
production process- single firm can produce output at a lower cost that can a large number of producers= natural monopoly- arises when there are eonomies of scale over the relevant range of output. |
|
|
Term
| characteristics of monopolies |
|
Definition
marginal revenue is always less than the price of its good.
In competitve markets price equals marginal cost. in monopolized market, price exceeds marginal cost.
profit is between the price-- ATC*Q
the socially optimum quantity is equilibrium of demand and MC, monopolies rarely produce there. DWL is the triange made between D and MC |
|
|
Term
|
Definition
market structure in which only a few sellers offer similar or identical proucts
as # of sellers rises, it looks more like a competitive market.
|
|
|
Term
|
Definition
a market structure in which many firms sell products that are similr but not identical.
many sellers, product differentation, free entry and exit
unlike monopoly, it can not earn economic profit in the long run
ex: novels, movies |
|
|
Term
|
Definition
| study of how people behave in strategic situations |
|
|
Term
|
Definition
| a group of firms acting in unison |
|
|
Term
|
Definition
| a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen |
|
|
Term
|
Definition
| a particular "game" that illustrates why cooperation is difficult to maintain even when it is mutually beneficial |
|
|
Term
|
Definition
| a strategy that is best for a player regardless of the strategies chosen by the other players |
|
|
Term
|
Definition
| the inputs used to produce goods and services |
|
|
Term
| value of the marginal product |
|
Definition
marginal product of that input multiplied by the market price of the output.
firms hire until the point where the value of the marginal product of labor = wage |
|
|
Term
|
Definition
| the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior |
|
|
Term
|
Definition
| a person who is performing an act for another person, called the principal |
|
|
Term
|
Definition
| a person for whom another person, called the agent, is performing some act |
|
|
Term
|
Definition
the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party.
ex: the seller knows more about the good than the buyer like a used car salesman. |
|
|
Term
|
Definition
an action taken by an informed party to reveal private information to an uninformed party
ex: advertising |
|
|
Term
|
Definition
an action taken by an uninformed party to induce an informed party to reveal information
ex:insurance policies with different amount premiums |
|
|
Term
|
Definition
|
|
