Shared Flashcard Set

Details

Econ 142 Final
Intro to Micro
48
Economics
Undergraduate 1
12/12/2011

Additional Economics Flashcards

 


 

Cards

Term
Demand
Definition
P= a-b*Q
Term
Supply
Definition
P= a+b*Q
Term
Elasticity
Definition

 

Change in Quantity

Average Quantity



 

Change in Price

Average Price

 

Term

 

 

Inelastic product

Definition

 

 

less than one

Term

 

 

Elastic Product

Definition

 

 

Greater than one

Term

 

 

Total Revenue

Definition

 

 

Price X Quantity

Term

 

 

Marginal Cost

Definition

 

 

Change in Total Cost

Change in Output

Term

 

 

Average Variable Cost

Definition

 

 

Variable Cost

Output

Term

 

 

Average Total Cost

Definition

 

 

Total Cost

Quantity

Term

 

 

A monopoly wants to produce where...

Definition

 

 

MR = MC

Term

 

 

 A perfectly competitive firm produces where

Definition

 

 

P = MC

Term

 

 

MR always decreases by

Definition

 

 

twice the decrease in P

Term

 

 

Marginal Product

Definition

 

 

Change in Output

Change in # inputs

Term

 

 

Marginal Revenue

Definition

 

 

Change in Total Revenue

Change in Output

Term

 

 

Marginal Revenue Product

Definition

 

 

Change in Total Revenue

Change in #inputs

Term

 

 

in wages, MRP sets

Definition

 

 

the upper limit/ maximum

Term

 

 

Monopsony:

Definition

 

Single employer with many suppliers of labor

Term

 

 

A monopsony will hire...

Definition

 

 

as long as MRP is greater than MC

Term

 

 

Effect of monopsony on labor market (2):

Definition

 

 

1. Lower wages

 

2. Fewer hired

Term

 

 

George Akerloff

Definition

 

 

"Lemons"

 

Asymmetric Information makes a market break down

Term

 

 

Asymmetric information:

Definition

 

 

One party knows something the other doesn't

Term

 

 

Adverse Selection

Definition

 

 

One party takes advantage of hidden information, bad products and consumers more likely to be selected

Term

 

 

Risk Pooling

Definition

 

 

Insurance companies force everyone to buy insurance to share costs

Term

 

 

Joseph Stiglitz

Definition

 

 

Screening

 

Underinformed party finds a way to get informed party to reveal information

Term

 

 

Mike Spence

Definition

 

 

Signaling

 

Informed party conveys the information

Term

 

 

Moral Hazard

Definition

 

 

Hidden action/behavior after entered into transaction

Term

 

 

Principal-Agent Problem

Definition

 

 

Principal wants agent to do something on their behalf: do they?

Term

 

 

Shirking

Definition

 

 

When agent doesn't do what principal wants

Term

 

 

Principal-agent solution:

Definition

 

 

Align incentives/interests

Term

 

 

 

Efficiency Wages

Definition

 

 

Pay employees higher than the market wage

 

ie Henry Ford

Term

 

 

Regulate a monopoly by...

Definition

 

 

Price = Average Total Cost

Term

 

 

Law of One Price

Definition

 

identical products should sell for same price everywhere

IF AND ONLY IF

trancsaction costs are zero

Term

 

 

Arbitrage

Definition

 

 

buying and reselling same product

 

leads to equilibrium

Term

 

 

Price Discrimination

Definition

 

 

Charging different price for same thing with same production costs

 

*works because different market elasticities

Term

 

 

Price Discrimination Requires:

(3)

Definition

 

1. Firm possesses Market Power

 

2. Customers have different willingness to pay and the firm knows this

 

3. Firm must be able to segregate customers into groups and prevent reselling

Term

 

 

First Degree Price Discrimination

Definition

 

 

charge each customer exactly what willing to pay

Term

 

 

Second Degree Price Discrimination

Definition

 

 

Price per unit changes depending on how many units bought

Term

 

 

Third degree Price Discrimination

Definition

 

 

Consumers split into groups

Term

 

 

Monopolist practicing 3rd Degree will

Definition

 

 

choose output in each market where MR = MC

Term

 

 

Two-Part Tariff

Definition

 

 

Consumer pays initial charge for right to buy related good at new price

Term

 

 

Income distribution now of top 1%

Definition

 

 

24% income, 40% wealth

Term
Inequality problem because
Definition
1. Top have more because rest have less
2. Hurts economy - smaller expansions
Term
25 years ago income inequality
Definition
Top 1% had 12% income, 33% wealth
Term
Inequality hurts economy with
Definition
- smaller expansions
- Shrinking opportunity
- Distortions hurt efficiency
- Underinvestment in infrastructure
Term
Why inequality increasing
Definition
- technology reduced bluecollar jobs
- globalization and outsourcing
- social change (12% fewer unions)
**tax policy (low capital gains tax)
**lax antitrust laws
**unregulated financial system
Term
Citizens United Supreme Court case
Definition
removed limits on campaign spending
Term
Trickle down behavioralism
Definition
the 99% live beyond their means
Term
Largest cost of increased inequality (Stiglitz)
Definition
Harms our sense of identity and fair play
Supporting users have an ad free experience!