econ1
Definition of scarcity
The gap between limited resources and unlimited wants
Elasticity of demand formula
% Change in quantity demanded/ % Change in Price
What does it mean when MC> ATC?
Short-run Supply curve
When does a monopoly become inelastic?
When MR=0
What is a monopsony?
Is an imperfectly competitive factor market where only a single firm buys resources
What does each economy need to decide on?
(3 economic questions)
What to produce?
How to produce?
Who to Produce for?
Law of Supply
The relationship between the price level and the quantity supplied of a good or service is direct or positive
At what point does a firm maximize profit?
MR=MC
What is a colluding oligopoly?
Also known as the cartel, this is a type of oligopoly which have a few large firms dominate an industry and use collusion to set prices and outputs
Least cost rule equation.
MPx/Px=MPy/Py
What is productive efficiency?
Production at a combination that minimizes cost
Definition of a deadweight loss
The loss of economic efficiency in terms of utility for consumers/ producers such that the optimal or allocative efficiency is not achieved
What happens to ATC in the long run
Economies and Diseconomies of scale
How do you know a monopoly is making a loss?
The ATC is higher than the Demand curve
Determinants of labor supply
1. Personal Values /Leisure
2. Intervention by government
3. A number of Qualified workers
Shifters of PPC
1. Change in quantity and quality of resources
2. Change in technology
3. Trade
What is a quota?
A government-imposed limit on production levels
What does economic profit represent?
Accounting profits- implicit costs
What is excess capacity?
It is the difference between a firm’s current inefficient level of production and the productively efficient level of output
What does it mean by Progressive taxes
Tax that takes a larger percentage of income from the higher income group than from the low-income group's
Definition of terms of trade
The rate at which one good can be exchanged for another
What is Excise Tax?
A per unit tax levied on specific products that are aimed at decreasing the production of a good or service
3 Characteristics of a perfect competition economy.
Many small firms, price takers, low barriers to entry,
Break-even in the long run, identical products being sold, perfectly efficient in the long run, and no non-price competition
Three conditions that need for a monopoly to practice price discrimination
Must have monopoly power, must be able to segregate the market, consumers can’t easily resell the product in the market
In which externality is the MSB>MPB?
Positive externality