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Microeconomics Final
Microeconomics (average total cost, marginal cost, externalities, monopolies, etc.)
23
Economics
Undergraduate 1
05/06/2012

Additional Economics Flashcards

 


 

Cards

Term
Negative Externalities
Definition

Social Cost (optimal quantity) > Private Cost (market quantity)

Government imposes corrective tax (pigou tax) or gives out tradeable permits (cap-and-trade) or regulates

Ex: pollution costs society $1--> pigou tax=$1


Term
Postive Externality
Definition

Social Value (optimal quantity) > Private Value (market quantity)

Government offers a subsidy

Ex: Education (U.S. vs. India)

Term
Coase Theorm
Definition
idea: if private parties/firms can bargain w/out cost over the allocation of resources, they can solve the problem of externalities on their own
Term
Average Total Cost
Definition

TC/Q 

Where MC=ATC, ATC increases

Term
Marginal Cost
Definition
change in TC/ change in Q
Term
Efficient Scale
Definition
Quantity of output that minimizes ATC
Term
Economies of Scale
Definition
long-run ATC falls as quantity of output increases
Term
Diseconomies of Scale
Definition
long-run ATC rises as the quantity of output increases
Term
Constant Returns to Scale
Definition
long-run ATC stays the same as output changes
Term
The Output Effect
Definition
more output sold, so Q is higher, and increases total revenue
Term
The Price Effect
Definition
price falls, profit decreases, and total revenue decreases
Term
Maximize Profit in Monopoly
Definition
Price>MR=MC--> intersection of MR and MC, then use D to find price
Term
Profit
Definition

total revenue-total cost

(p-ATC)Q

Term
Marginal Revenue
Definition

change in TR/change in Q

price of good in competitve market

Term
MR>MC
Definition

Keep producing/increase production

puts more $ in pockets (MR), then it will take out (MC)

MC crosses ATC @ min. ATC

Term
Profit Maximization (comp. market)
Definition

MR>MC  increase output

MR<MC  decrease output

MR=MC  max. profit

Term
Short Run
Definition

firm shuts down when P<AVC

supply curve=portion of MC curve that lies above AVC

 

Term
Long Run
Definition

Exit if P<ATC

supply curve=portion of MC that lies above ATC

Firm's must operate at zero economic profit

Term
Firm's Profit or Loss
Definition

Profit: (P-ATC)Q-->P>ATC

Loss: (P-ATC)Q-->P<ATC

Term
Maximizing Total Net Benefit in Monopoly
Definition
MC=P
Term
Economic Loss in Monopoly 
Definition

TC-TR

(ATC-P)Q

Term
Economic Profit in Monopoly
Definition
(P-ATC)Q
Term
Max. Net Benefit (externalities)
Definition
Max. NB=MB(society)=MC(society)
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