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Econ 201 Final
final note cards
108
Economics
Undergraduate 2
12/05/2006

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Term
Average Product is equal to
Definition
total product/quantity of labor
Term
If the price of good x is 25 and the price of good y is 10, then the slow of the indfference curve at equilibrium is equal to
Definition
25/10 = 2.5
Term
-(Px/Py)
Definition
slope of the budget line
Term
A point on the PPF is
Definition
the combination of goods that can be produced when all resources are being used efficeintly
Term
In economics, utility refers to...
Definition
the satisfaction derived from consumption
Term
If the price of a substitute for candy bars were to rise, the demand curve would shift ____ , the equilibrium quantity would _____, and the equilibrium price would _____?
Definition
If the price of a substitue for candy bars were to rise, the demand curve would shift right, the equilibrium quantity would rise, and the equiibrium price would rise.
Term
The basic competitive model is...
Definition
a highly simplified model dependant on a series of assumptions
Term
By the term "demand curve" economists mean the curve describing the relationship between price and quantity demanded. The focus on the price means...
Definition
economists are assuming that other variables that influence quantity demanded are constant so that the effect of price changes can be isolated.
Term
The price elasticity of demand for pencils is likely to be ______ than the price elasticity of demand for ocean cruises because _____.
Definition
The price elasticity of demand for pencils is likely to be more inelastic than the price elasticity of demand for ocean cruises because pencils represent a smaller portion of a person's income.
Term
An example of an issue studied by macroeconomics is
Definition
the relation between the rate of unemployment and inflation
Term
Fixed costs refer to
Definition
the cost of capital in the short run
Term
The quantity supplied is influenced by both change in price and changes in determinants of supply. Changes in ______ result in ________ the supply curve.
Definition
The quantity supplied is influenced by both change in price and changes in determinants of supply. Changes in determinants of supply result in shifts of the supply curve.
Term
if the income elasticity for rice demand is negative and we observe the quantity demanded of rice increases, we know that the income of a consumer
Definition
has decreased
Term
At the equilibrium price the quantity supplied ______ the quantity demanded.
Definition
is equal to
Term
If the price elasticity of a demand is .80, and we observe a price increase of 40% we can expect that...
Definition
the quantity demanded will decrease by 32%.

.80*.40 = 32%
Term
If a country is operating below its production possibilities curve...
Definition
output of both goods could be increased at the same time
Term
The primary focus of economics is on
Definition
the related problems of scarcity and choice.
Term
If the price elasticity of demand for donuts is 1.5, a donut shop can predict that a 10% increase in price of donuts will...
Definition
cause total revenue to decline.
Term
Economic growth would be represented as ______ of the PPF
Definition
A shift outward/right of the ppf
Term
The combinations of goods that yield the same level of utility lie on a consumer's
Definition
indifference curve.
Term
If the point is below the ppf...
Definition
there is an underemployment of resources
Term
According to the anthropological reearch Marshal Sahlins, needs and wants are...
Definition
historically and socially determined.
Term
Marginal UtilityX/Px = Marginal UtilityY/Py
Definition
consumer equilibrium
Term
Utility derived from one more unit of consumption is
Definition
Marginal Utility
Term
The Marginal Product of Labor
Definition
Is the outpout obtained from one additional unit of labor utilized in production
Term
When average total cost is below marginal cost ATC
Definition
ATC is increasing
Term
The distance between the atc curve and the avc cure is equivalent to
Definition
AFC = average fixed cost
Term
If the price of elasticity is 1.25 and we observe a 25% increase in quantity supplied, we can infer that
Definition
price increased by 20%

.25/1.25 = .20
Term
MP can be expressed as
Definition
the slope of the total product curve
Term
Hector intends to spend 36 gold coins on wine and olives. He could purchase 18 kilows of olives and no wine or 4 wines and no olives.
If the wine is placed on the vertical axis what would be the slow of Hector's budget line expressed over relative price
Definition
Polives/Pwine = 2/9
Term
A PPF shows increasing opportunity costs when
Definition
the slope increases as we move along the x-axis
Term
The law of diminishing marginal returns tells us that holding capital constant, the mpl ...
Definition
eventuall decreases as more and more labor is added to production.
Term
If the quantity demanded exceeds the quantity supplied at the existing price
Definition
the price of the good will increase until quantity demanded equals quantity supplied.
Term
What do markets do?
Definition
enable exchanges between buyers and sellers (consumers and firms)
Term
Marginal Utility X/Marginal Utility Y
Definition
slope of the indifference curve.
Term
the distane between the avc curve and the avc curve is equivalent to
Definition
average fixed cost
Term
in production, long run is different from short run because
Definition
both capital and labor are variable in the long run
Term
the demand curve for the product of a firm in perfect competition is
Definition
horizontal because the firm is a price taker
Term
when your firm discovers that accounting profits are zero
Definition
you would be very converned because it indicates that economic profits are negative.
Term
In perfect competition we assume
Definition
many firms
Term
Increasing returns to scale
Definition
is the downward sloping section of the LR ATC curve
Term
In the long run, a firm in perfect competition will produce where
Definition
P= min ATC
P= AVC
MC= MR
P= MC
Term
In the short run, a firm in perfect competition will
Definition
have profits, or losses or break even
Term
If the price of a good in a competitive market is below the minimum average total cost of a firm, the firm
Definition
is having losses
Term
In a graph we would find consumer surplus as the
Definition
area above the price leel and below the demand curve
Term
A positive externality refers to
Definition
benefits that do not accrue to the individual/firm taking the action
Term
A natural monopoly occurs because
Definition
costs of production decline over a large amount of output (very large economics of scale)
Term
Shutdown Point
Definition
P= min AVC
Term
Breakeven point
Definition
P = min ATC
Term
Losses
Definition
TR < TC
Term
Profit Maximization
Definition
MC = MR
Term
[image] the graph above shows a firm in the long run. In what type of market structure is the firm operating? Does it have loss, profit, or breaking even?
Definition
monopoly; losses
Term
Under monopoly the quantity of output will be ____ and the price will be ____ than under perfect competition.
Definition
Under monopoly the quantity of output will be lower and the price will be higher than under perfect competition.
Term
In the long run, a monopoly may
Definition
have profits, losses, or break even.
Term
A patent is
Definition
a barrier to entry that creates a legal monopoly
Term
In the case of natural monopolies
Definition
governments can regulate the price or recur to public ownership to protect consumers.
Term
Anti-trust regulations refer to
Definition
laws that forbid the formation of monopolies in an industry
Term
Price regulation of a natural monopoly
Definition
P = ATC
Term
Monopoly Long Run
Definition
P>MC
Term
Ownership of essential input
Definition
diamond production
Term
Legal barrier to entry
Definition
Medical drug manufacturing
Term
Market failure refers to a situation where
Definition
economic efficiency is not achieved
Term
For a perfectly competitive firm in long run equilibrium
Definition
MC = MR and TR = TC
Term
If the quantity of output produced is kept below the equilibrium quantity that would be produced in perfect competition (where demand and supply meet)
Definition
there is a loss in consumer and producer surplus.
Term
The demand curve for a monopoly
Definition
is downward sloping and is identical to the total market demand for the good
Term
MC to a firm
Definition
the addictional cost of producing one more unity of output
Term
an increase in the total demand for a good produced in perfect competition will result in _____ for an individual firm.
Definition
A shift up of the demand curve.
Term
Externalities _________the assumptions of a perfect competition because they imply____.
Definition
Externalities violate the assumptions of a perfect competition because they imply that firms and consumers do not bear all the costs or benefits of their actions.
Term
In the long run, a firm in perfect competition will not experience losses because
Definition
the firm will either exit, or other firms will eit resulting in an increase in the market price of the good.
Term
A good is said to be non-excludable when
Definition
it is too costly to preven tits use by any one person
Term
A firm experiences _____ in the downward sloping section of the long run avtc cuve.
Definition
A firm experiences increasing returns to scale in the downward sloping section of the long run avtc curve.
Term
In pefect competition, economic profits will...
Definition
attract entry by new firms, driving the market price of the good down.
Term
We say tht an economy is Pareto efficient when
Definition
no one can be made better off w/o making someone else worse off.
Term
MC curve =
Definition
slope of the TC curve
Term
[image] above is a firm in the short run. what is the profit of the firm?
Definition
profit = 0
Term
In the case of a natural monopoly, the application of anti trust regulations may not be in the best interest of consumers because...
Definition
under natural monopoly one firm can produce at lower costs tahn two or more firms, so breaking up a natural monopoly could result in higher prices.
Term
Represented graphically, producer surplus is the area
Definition
below the equilibrium price and above the supply cuve.
Term
Regulatory agency capture refers to the situation when
Definition
a regulatory agency ceases to ahve the best interest of consumers and society as the guide for its activities.
Term
During the industrial revolution the ____ of government regulation of the labor market proved to be extremely ____ to workers because they faced _____.
Definition
During the industrial revolution the lack of government regulation of the labor market proved to be extremely detrimental to workers because they faced long work days.
Term
Monopolistic competition is characterized by
Definition
many firms and diffentiated products
Term
Oligopoly is characterized by a few _____ firms where ______ is a possibility.
Definition
Oligopoly is characteried by a few interedependent firms where collusion is possible.
Term
Firms in monopolistic competition use
Definition
advertisement to increase product differentiation.
Term
The 8 hour work day
Definition
was the result of a prolonged struggle by unions.
Term
Grievance procedutres in the work place are an example of
Definition
the voice benefits of unions
Term
Right to work laws
Definition
allow firms to hire non union employees
Term
Efficiency Wage
Definition
makes the loss of employment more costly
Term
Taylorism
Definition
breaks down production into small tasks that require little skill
Term
National Labor Relations Board
Definition
government agency that mediates between labor and employers in cases of disputes
Term
workers and employers can be said to have an atagonistic/conflictive relationship because...
Definition
their interests are opposed with respect to wages and labor intensity/effort.
Term
When the hourly wage is used for compensation, systems of control are implemented by the employers because
Definition
hiring one hour of labor does not guarantee the level of labor intesity (labor effort) that will be applied.
Term
The relaxation or elimination of government rules that limit the activites of private enterprises is called
Definition
deregulation
Term
neoliberalism refers to
Definition
policies that increase the role of markets in the allocation of resources
Term
when an individual decides on how much labor to provide to the labor market, we consider the cost of leisure to be equivalent to...
Definition
the wage rate forgone for each hour of leisure.
Term
the neoclassical model of the labor market (using the indfference curves to derive labor supply) is deficient because
Definition
individuals cannot exercise full freedom in their choice of numbers of hours spent at work
Term
direct supervision is what type of control
Definition
simple control
Term
salary is commonly accompanied by
Definition
bureaucratic control
Term
the piece wage is
Definition
payment per unit produced
Term
an assembly line is this type of control
Definition
technical control
Term
Income inequality in the United States
Definition
has increased considerably since the 1980's
Term
A tax on aluminum production equal to the negative externality that results from aluminum production would
Definition
shift the private mc of the firm to the left, resulting in a socialy efficient quantity of aluminum being produced
Term
when someone takes an action that imposes costs on others we have a case of
Definition
a negative externality
Term
Progressive taxation refers to
Definition
a tax system that weighs more heavily on high income groups than low income groups
Term
The implementation of marketable permits for pollution
Definition
would assign pollution rights to those who hold them, and allow the exchange of these rights.
Term
according to neoclassical theory, at equilibrium the wage rate received by employees
Definition
is equal to the value of the marginal product of labor
Term
gini coefficient
Definition
measure of income inequality
Term
regulation of emissions
Definition
command and control apporach to pollution
Term
coase theorem
Definition
assigns property rights
Term
mc to society
Definition
firm's supply curve plus negative externality
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