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The two unique powers held by the government
Power to Tax. A legal monopoly on force
What is economics the study of?
Choices/Desicions on limited resources
What is the difference between economic and accounting profit?
Economic Profit takes implicit costs into account
What is the study of economics of an individual firm and operations of a particular market?
Microeconomics
What is the point in a market where the supply and demand equals each other?
Equilibrium
What is comprised of all of the buyers and sellers of a particular good or service?
A Market
This process allows suppliers in an oligopoly to act as a monopoly
Collusion
A common issue faced by cartels
Cheating
When we say that humans are rational we mean that they what?
Perform cost-benefit analysis
What is the process of two parties obtaining higher consumption of resources through trade?
Gains from trade
The two components of marginal cost
Fixed Costs and Variable Costs
What are products that are inversely related to income?
Inferior goods
Inelastic
Monopolies do this in order to maximize profits.
Hold supply to artificially create supply; contrived scarcity
The process in which barriers to entry and created by constant innovation replacing old technologies
Creative Destruction
What form of economics makes analysis on what should happen opposed to what actually happened in the economy?
Normitive Economics
What are the shifters of the supply?
Input Costs, Technology, Expectations, Number of Sellers
What measures the total benefits market participants receive?
Total market surplus
What economic concept states that for someone to gain from the economy someone else must lose?
Pareto Efficiency
What is a market called if the good or service being bought and sold is highly standardized, the number of buyers and sellers is large, and all of the participants are well informed about the market price?
Perfectly Competitive
Any deviation from the competitive market price in a closed economy leads to what?
Deadweight loss
Who described the impact of entrepreneurs?
Joseph Schumpter
Under what conditions does price discrimination increase efficiency. How does this condition result in increased efficiency.
Price above EQ. More people can afford to buy the product under price discrimination.
Define a market failure. What will the government do in order to remedy one?
When a market fails to produce a socially beneficial outcomes. The government will place price controls.
Name all the demand shifters!
Who wrote An Inquiry into the Wealth of Nations?
Adam Smith
A Netflix subscription is what type of good (think rivalry and excludability)
A Collective Good
What policy was passed in order to help the government deal with monopolies. Bonus 100 points: What 2 powers did this policy give the government
1890 Sherman Anti-Trust Act. The power to large mergers and acquisitions. The power to break up companies
When should monopolies reduce production?
Marginal Cost is greater than marginal revenue
Demand and Supply both shift to the left. What happens to P, Q, Consumer surplus, and Producer surplus
Price is ambiguous, Quantity decreases, Consumer and Producer Surplus also decrease
Jack can make 4 radios and 6 TVs. Mary can make 3 radios and 9 TVs. Who has absolute advantage in radios and who has it in TVs. Who has comparative advantage in what
Comparative Advantages: Jack has it in radios. Mary has it in Tvs
What is the secret movie from the category titles?
The Incredibles
A market is above equilibrium price . What happens to price and quantity supplied. Involve economic profit in your explanation.
When the market is above equilibrium price economic profit is positive meaning there is LOTS of money to be made. Seeing this, suppliers enter the market, increasing Qs and lowering prices.
Latvia's domestic market price for sporks is 6$. They open up to the global market where the market price is 8$. Will Latvia start to import or export sporks. Does the global market act as a price ceiling or floor?
Latvia will export sporks. The global market acts a price ceiling.
How do natural monopolies emerge?
In economies of scale large fixed costs cause average production costs to keep decreasing as production increases. It becomes economically preferable for only one firm to operate