Econ Midterm Notes 2

Extra satisfaction

________ generated by consumption of an additional good or service during a specific time period.

Patent protection

________ is one way to deal with technology spillovers: the firm that makes a technological breakthrough can capture most of the profits.

Objection

________: difficult to measure externalities with any precision.

human psychology

A field of economics that incorporates insight from ________ into the models of economic.

Long run

________: A period over which all production inputs are variable.

Government

________ can help the less affluent by using ________ revenues.

outside party

When costs spill over to a(n) ________ who is not involved in producing or consuming the good.

Difficulty

________ in Reselling: For price discrimination work, the purchaser buying the product….

market system

When the ________ fails to produce an efficient level of output because of these side effects even if the economy is competitive its still possible that the ________ fails.

Self regulation

________ is also applied to positive externalities.

economic agents producers

By ________ and consumers- receiving the wrong signals.

AFC

Average fixed costs (________): A per- unit measure of fixed costs; fixed costs divided by output.

general public

Groups with an intense interest in particular voting issues that may be different from that of the ________.

FC

Fixed costs (________): Costs that do not vary with the level of output.

maximum satisfaction consumers

To achieve ________ have to allocate income in such a way that the ratio of the marginal utility to the price of the goods is equal for all goods purchased.

Marginal product

________ (IMP): The change in total output of a good that results from a one- unit change in input.

model

A(n) ________ that predicts candidates will choose a position in the middle of the distribution.

Market power

________: Price discrimination is possible only with ________.

Economic profits

________: Total revenues minus explicit and implict costs.

ideal corrective tax

A(n) ________: Forces a firm to internalize the externality.

additional benefit

When considering: additional cost, ________ of increased consumption of all goods.

Production function

________: The relationship between the quantity of inputs and the quantity of outputs produced.

similar good

A consumers switch to another ________ when the price of the preferred good increases.

available information

When the ________ is initially distributed in favor of one party relative to another in an exchange.

Government

________ spending that is committed for the long run.

Self regulation

________: sometimes externality problems can be handled by individuals without the intervention of the government.

Ex

Education

Ex

pollution, if the firm uses clean air in production and returns dirty air to the atmosphere

Patent protection is one way to deal with technology spillovers

the firm that makes a technological breakthrough can capture most of the profits

Subsidies

government produces either give refunds to individual who receives an inoculation or provide an incentive for businesses to give their employees "free inoculations at the office

Regulation

the government could pass this requiring each person to get an inoculation, shift the demand curve rightward toward the efficient level of output

Self-regulation

sometimes externality problems can be handled by individuals without the intervention of the government

When considering

additional cost, additional benefit of increased consumption of all goods

Objection

difficult to measure externalities with any precision

Section 13.3 Exhibit 2, Total Revenue"

D, A, Qm, 0 that whole section

Two major approaches to dealing with the monopoly problem

antitrust policies, regulation

Market power

 Price discrimination is possible only with market power

Difficulty in Reselling

 For price discrimination work, the purchaser buying the product…

Taxes on the emission of polluting firms are primarily intended to

Encourage firms to pollute less

An ideal corrective tax

Forces a firm to internalize the externality

If compliance standards are too stringent

The marginal social cost of pollution reducation may outweigh the marginal social benefit of pollution reduction

An advantage that corrective taxes and tradable emissions permits have over compliance standards if that the former

Makes it in the interest of firms to reduce pollution in the most efficent manner possible

Transferable pollution rights

Rights are given to a firm to discharge a specific amount of pollution; their transferable nature creates incentive to lower pollution leve

Benefits are greater than the costs for some course of action (ex

environmental cleanup), potential transactions can make some people better off without making anyone worse off

Ex

cheeseburger, food, clothing, cars, and houses

Ex

national defense (everyone enjoys the benefits of national defense)

Ex

fish (in the vast ocean waters rival because fish are limited-a fish taken by one person is not available for others)

Ex

country clubs and tennis clubs

Ex

customer buying used car and seller knowing more information

Ex

social security, medicare, medicaid

Ex

ports, bridges, defense spending

Ex

a second ice cream

Ex

eating whole pizza

Ex

eating another slice of pizza

Another framing bias

people will often tend to make their decisions based on pieces of information they are already given

Profits

The difference between total revenues and total costs

Accounting profits

Total revenues minus total explicit costs

Economic profits

Total revenues minus explicit and implict costs

Sunk costs

Costs that have been incurred and cannot be recovered

Short run

A period too brief for some production inputs to be varied

Long run

A period over which all production inputs are variable

Production function

The relationship between the quantity of inputs and the quantity of outputs produced

Total production (TP)

The total output of a good produced by the firm

Marginal product (IMP)

The change in total output of a good that results from a one-unit change in input

Fixed costs (FC)

Costs that do not vary with the level of output

Variable costs

Costs that vary with the level of output

Total cost (TC)

The sum of the firms fixed costs and variable costs

Average total cost (ATC)

A per-unit cost of operation; total cost divided by output

Average fixed costs (AFC)

A per-unit measure of fixed costs; fixed costs divided by output

Average variable cost (AVC)

A per unit measure of variable costs; variable costs divided by output

Marginal cost (MC)

The change in total costs resulting from a one-unit change in output