microeconomics - final exam

what is correlation?

a consistently observed relationship between two variables

which of the following is an example of correlation?

study time and grade point average

what is causeation?

cause and effect

what is the omitted variable?

two events are cause by a third factor, which is missing in the equation

what is reverse causality(reverse causation)?

an observation between two variables where we assume X cause Y, when in reality Y causes X

what is an example of reverse causality?

violent crimes and the amount of police officers

what are some examples of why a market fails?

lack of information, externalities, and public goods

what is a production externality?

externality that occurs when a good or service is being produced

what is a consumption externality?

externality that occurs when a good or service is being consumed

what is a network externality?

the effect that an additional user of a good or participant in an activity has on the value of that good or activity

what is an externality?

a cost or benefit imposed without compensation on someone other than the person who caused it

what is the diminishing marginal product?

an economic principle stating that as you add more of one input to a fixed number of other inputs the additional output you get from each new input will eventually start to decline

what is the formula for the value of marginal product?

Marginal Product x Price

what is a public good?

a commodity or service that every member of society can use without the availability to others

what are some examples of public goods?

clean air and national defense

what are some examples of private goods?

food, clothing, cars, and personal electronics

what are some examples of club goods?

movie theaters, private parks, satellite TV, and TOLLS

what are some examples of common goods?

fish stocks, timber, and coal

what is deadweight loss

the loss of total welfare or economic efficiency that occurs when the market equilibrium for a good or service is achieved

what is an oligopoly?

a market form in which a market or industry is dominated by a small number of sellers who are likely to be aware of the actions of the others and can influence price and quantity sold

what are things that describe an oligopoly?

few firms, similar products, and barriers to entry

what are economies of scale?

the cost advantage that grows as a business increases its scale of production

what are predatory behaviors?

incumbent firms may take strategic actions to deter entry

what is the Coarse theorem?

the idea that even in the presence of an externality, individuals can reach an efficient equilibrium through private trades, assuming zero transaction costs

external costs

negative externality

what is the level of barrier to enter in a perfect competition market?

very low

what is the level of barrier to enter in a monopoly market?

very high

what is the level of barrier to enter in a monopolistic competition market?

low

what is the level of barrier to enter in an oligopoly market?

high

what is the tragedy of commons?

the deletion of a common resource due to individually rational but collectively inefficient overconsumption

what is nash equilibrium?

an equilibrium reached when all players choose the best strategy given the choices of all other players

what is dominant strategy?

a strategy that is the best one for each player to follow, no matter what strategy the other players choose

what is poverty?

pronounced deprecation of well-being

what is chronic poverty?

spending three or more years in poverty

what is transient poverty?

poverty state lasting at least two consecutive months within a year

what is absolute poverty?

income below a certain amount, fixed at a given point in time

what is relative poverty?

a measure that defines poverty in terms of the income of the rest of the population

what is the purchasing power parity?

An index that describes the overall difference in prices of goods between countries

The wage differential between a teacher who receives 45,000 and a professional athlete whose wage is about $4.5 million is consistent with…

Teachers have a lower MRP than athletes

A problem that occurs when the non-excludability of a public good leads to under-supply is…

the free-rider problem

In Sanfey et al (2003), the parts of the brain that were more activated during the experiment were the following, except one:

amygdala

Reciprocal altruism (Trivers, 1971) is any of the following:

All the above