Ch. 1-2
A government-imposed limit on how low a price can be charged for a good or service
What is a price floor?
satisfaction obtained from acquiring one more unit of a product
marginal utility
extra revenue associated with selling one more unit of output
marginal revenue
What does international trade do to total economic value?
international trade increases economic value
occurs when resources are not allocated efficiently, leading to a net loss of economic welfare.
What are Market Failures?
the ability to produce a good at a lower opportunity cost than another producer
comparative advantage
What is the circular flow model?
The circular flow model demonstrates how money moves through society.
characteristics of a monopoly (must get both)
a single firm serves the market; strong barriers to entry
This curve represents the total cost to society of producing a good, including external costs.
What is the marginal social cost (MSC) curve?
Private firms do not take the additional costs on society into consideration during production.
Negative Externality of Production
the slope of the production possibilities curve
opportunity cost
as more units of a good are consumed, the additional satisfaction gained from consuming each additional unit decreases.
What is the law of diminishing marginal utility?
What factor of production would a teacher be an example of? ______
labor
A market structure characterized by many firms, identical products, and free entry and exit.
What is perfect competition?
This type of externality occurs when the consumption of a good benefits third parties, leading to underconsumption in a free market
What is a positive externality of production?
anything we give up when we make a choice is an
opportunity cost
What factor of production would a building be considered?
capital
A measure of how much quantity demanded changes in response to a change in income.
What is Income Elasticity of Demand (YED)?
how much money you will make if you hire one more person
Marginal Revenue Product of Labor
A financial incentive aimed at increasing production or consumption of a beneficial good.
What is a subsidy?
the percentage change in the quantity demanded of one good divided by the percentage change in the price of ANOTHER good
cross-price elasticity of demand
Name one of the four factor of production
-labor
-land
-capital
-entrepreneurship
What factor of production would creating a new product be?
entrepreneurship
a tariff on imported goods distributes some economic value to the government and increases the economic value received by the...
local producers
A method used to influence consumer behavior by making harmful goods more expensive.
What is a Pigouvian tax?