Externalities
A situation in which the market fails to produce the efficient level of output.
What is market failure?
The percentage change in quantity demanded of one good divided by the percentage change in the price of another good.
What is cross-price elasticity of demand?
A buyer or seller that is unable to affect the market price.
What is a price taker?
A situation in which economies of scale are so large that one firm can supply the entire market at a lower average total cost than can two or more firms.
What is a natural monopoly?
All the activities necessary for a firm to sell a product to a consumer.
What is marketing?
The point where marginal social benefit is equal to marginal social cost.
What is the allocatively efficient equilibrium?
Demand for food in general, compared to demand for twinkies.
What is inelastic demand?
What is zero economic profit?
The quantity where marginal revenue is equal to marginal cost.
What is the profit maximizing quantity?
Unlike a monopoly, the characteristic that guarantees zero profit in the long run.
What is free entry and exit?
The market equilibrium is higher than the socially optimal equilibrium.
What is a market with a negative externality?
Two goods with a negative cross-price elasticity of demand.
What are complements?
The quantity where price is equal to marginal cost.
What is the allocatively efficient quantity? or What is the profit maximizing quantity?
The amount of profit the monopoly receives if price is less than average total cost.
What is negative profit/loss?
The point on the demand curve corresponding to the quantity where marginal revenue is equal to marginal cost.
The only tax that does not result in deadweight loss.
What is a Pigovian tax?
A good with income elasticity of demand greater than one.
What is a luxury good?
The quantity where demand, marginal cost and average total cost all intersect.
What is the productively efficient quantity?
The lowest price the government can use as a price ceiling while still keeping a natural monopoly in business.
What is the zero profit price? or What is the point where demand intersects average total cost?
This is the result of firms entering or exiting the market until price is equal to average total cost.
What is the long run equilibrium? or What is zero profit?
The market demand curve for this type of good is built by adding up the price each consumer is willing to pay for each quantity, rather than adding quantity demanded at each price.
What is a public good?
The elasticity of demand when a decrease in price leads to an increase in revenue.
What is elastic demand?
A change in this cost does not change the profit maximizing quantity, only the amount of profit.
What is a fixed cost?
These two curves have this relationship because if the monopoly wants to sell one more unit, it must lower its price for all units.
What is demand/price greater than marginal revenue?
This relationship between these two points is the reason why the profit maximizing quantity is not allocatively efficient?
What is price greater than marginal cost?