Unit 2: Supply and Demand
This law states that there is a negative relationship between price and quantity demanded.
What is the law of demand.
This rule states that
MR (marginal revenue) = MC (marginal cost)
What is the profit maximizing rule.
For imperfect competition, marginal revenue is _____ the demand curve.
What is below
Marginal revenue times marginal product equals this
What is Marginal revenue product (MRP)
The goods are rival and exclusive.
What is private goods
The 5 shifters of supply.
What are:
1. Input costs
2. Prices of related goods/services (complements and substitutes)
3. Price Expectations
4. Total number of producers
5. Technology
This is the additional cost of producing one more unit of output.
What is marginal cost
This happens to consumer surplus and deadweight loss if a monopoly perfectly price discriminates.
What is consumer surplus and deadweight loss are eliminated.
Workers are wage takers and have identical skills in this type of market
What is a perfectly competitive labor market
This is the difference between a lump sum tax and a per-unit tax.
What is a tax on each unit that is produced vs a fixed tax that is independent of how many units are made.
Elasticity of a good with perfectly elastic demand.
0
This happens in the long run if a perfectly competitive firm in a constant cost industry is earning profit in the short run.
What is firms enter and price rises until there is no longer any profit.
This is the optimal option for a firm, regardless of how the other firm acts.
What is dominant strategy
These are the four factors of production
What are land, labor, capital, entrepreneurship
This is the definition of a regressive tax.
What is a tax that take a larger percentage of income from low income individuals.
The type of good if cross price elasticity is negative.
What are complements.
This is the shutdown rule for firms in the short run.
What is Price = AVC.
If price is below the minimum AVC, firms should shut down, and if it's above they should continue producing in the short run.
These 2 things differentiate monopolistic competition from perfect competition.
What are differentiated goods and price control
This is the rule that states (MP labor / P labor) = (MP capital / P capital)
What is the least cost rule for combining resources?
What does the Gini coefficient measure?
What is income inequality shown through percent of income vs. percent of households
For a price ceiling to be binding, it must go ______ the equilibrium price.
What is below
These are three characteristics of perfectly competitive firms.
What is: (only need 3)
1. many firms
2. identical goods/services
3. low barriers to entry
4. price takers
5. normal profit in the long run
An unregulated monopoly has _____ prices and _____ quantity than a perfectly competitive market.
What are higher prices and lower quantity
What is the reason MFC is greater than S on the monopsony graph?
When a monopsony wants to hire more workers, wages must be increased to induce workers to give up their leisure
Positive externalities generate a quantity _____ than the socially optimal quantity.
What is less