Microeconomic Theory and Legal Institutions Vocabulary

Comprehensive vocabulary flashcards covering microeconomic theory, game theory, market efficiency, welfare economics, legal traditions, and legal dispute processes from the lecture notes.

Microeconomics

The branch of economics studying decision making by individuals and small groups—such as families, clubs, firms, and governmental agencies—concerning how scarce resources are allocated among competing ends.

Utility

The measure of satisfaction or happiness that an economic actor derives from consuming alternative combinations of goods, services, or outcomes.

Equilibrium

A pattern of interaction among economic actors that persists unless disturbed by outside forces, often arising from the interaction of maximizing agents.

Productive Efficiency

A condition of a production process in which it is impossible to produce the same output using a lower-cost combination of inputs, or to produce more output using the same combination of inputs.

Pareto Efficiency

An allocation of resources in which it is impossible to reallocate goods or resources so as to make at least one person better off in their own estimation without making someone else worse off.

Function

A mathematical relationship between two sets of numbers such that for each number in one set (the independent variable), there corresponds exactly one number in the other set (the dependent variable).

Positive Slope

A graphical property indicating a direct relationship between two variables, where the independent variable and dependent variable move in the same direction.

Complete Preference Ordering

A condition of rational consumer choice requiring that a consumer can compare and rank all possible combinations of goods and services as preferred, inferior, or indifferent.

Transitive Preference Ordering

A property of consumer preferences stating that if bundle $A$ is preferred to bundle $B$, and bundle $B$ is preferred to bundle $C$, then bundle $A$ must be preferred to bundle $C$.

Reflexive Preference Ordering

A condition on consumer preferences stating that any bundle of goods, $A$, is at least as good as itself.

Indifference Curve

A graph representing all combinations of two commodities (such as $x$ and $y$) that yield the exact same level of utility or satisfaction to a consumer.

Law of Demand

The economic principle stating that, all other things held equal (ceteris paribus), the price of a good and the quantity demanded of that good are inversely related.

Price Elasticity of Demand

A metric measuring how responsive the quantity demanded of a good or service is to a change in its price.

Profit-Maximizing Rule

The principle stating that a firm maximizes its profits by producing the quantity of output where marginal cost ($MC$) equals marginal revenue ($MR$).

Short Run

A production time frame during which at least one input factor (typically capital) is fixed, giving rise to fixed costs that do not vary with output.

Long Run

A production time frame in which all factors of production are variable, allowing firms to adjust capacity or exit and enter industries, resulting in zero economic profits in competitive equilibrium.

Economic Profits

The difference between total revenue and total costs of production, where total costs include the average rate of return on capital earned across the general economy.

Perfectly Competitive Industry

A market structure characterized by many small firms and buyers, where no single actor can influence the market price, resulting in price-taking behavior.

Monopoly

A market structure featuring a single supplier of a good or service with significant barriers to entry, enabling the seller to set prices above marginal cost.

Natural Monopoly

A monopoly that arises because economies of scale allow a single firm to produce output at a lower average cost than multiple competing firms could achieve.

Opportunity Cost

The economic value of the best alternative option foregone when a decision or choice is made.

Law of Comparative Advantage

The principle asserting that individuals or economic actors should engage in pursuits where their opportunity costs are lower than those of others.

Oligopoly

A market structure containing a few interdependent firms whose individual optimal strategic choices depend on the actions and prices of their competitors.

Imperfect Competition

A market structure featuring many firms with free entry and exit, but where firms produce differentiated goods rather than homogeneous products.

Dominant Strategy

In game theory, a strategy that yields the optimal outcome for a player regardless of the strategy chosen by the other player.

Nash Equilibrium

A state in game theory where no individual player can improve their payoff by unilaterally changing their strategy, given the choices of all other players.

Prisoner's Dilemma

A classic game theory scenario demonstrating how two rational actors following dominant strategies may arrive at an outcome that is worse for both than if they had cooperated.

General Equilibrium

A market state achieved when competitive forces lead to simultaneous equilibrium across every single market, equating marginal benefit and marginal cost universally.

External Cost

An unbargained-for cost imposed by an economic activity on third parties who are not directly involved in the transaction.

Public Good

A commodity characterized by nonrivalrous consumption and nonexcludability, making private market provision inefficient or insufficient.

Free Rider

An individual who consumes or benefits from a nonexcludable public good without paying toward its cost.

Asymmetric Information

A condition in exchange where one party possesses significantly more or better information regarding product quality or terms than the other party.

Potential Pareto Improvement

An efficiency criterion (also called Kaldor-Hicks efficiency) under which a policy change is desirable if the gainers gain enough that they could theoretically compensate the losers, whether compensation actually occurs or not.

Expected Monetary Value

The sum of the probability of each possible monetary outcome multiplied by the financial value of that outcome.

Risk Aversion

A decision-making attitude characterized by diminishing marginal utility of income, where an individual prefers a guaranteed income over an uncertain gamble with equal expected monetary value.

Risk Neutrality

A decision-making attitude characterized by constant marginal utility of income, where an actor is indifferent between a guaranteed income and an uncertain gamble of equal expected monetary value.

Risk Seeking

A decision-making attitude characterized by increasing marginal utility of income, where an actor prefers an uncertain gamble over a guaranteed income with equal expected monetary value.

Moral Hazard

The tendency of an insured person or entity to alter their behavior post-insurance purchase in a way that increases the probability or magnitude of a loss.

Adverse Selection

A problem caused by asymmetric information where insurance premiums set for average risk attract disproportionately high-risk applicants while driving away low-risk customers.

Common Law Tradition

A legal system, originating in England, in which law is primarily derived from judicial precedents, social norms, and court findings in specific disputes.

Civil Law Tradition

A legal system, originating in continental Europe and codified under models like the Code Napoléon, where law is derived primarily from written legislative statutes and authoritative commentaries.

Precedent

The practice of resolving legal disputes by applying the principles established in previous similar judicial decisions.

Adversarial Process

A legal procedure characteristic of common law systems where opposing lawyers present arguments before a judge who acts as a neutral referee.

Inquisitorial Process

A legal procedure characteristic of civil law systems in which the judge takes an active role in directing questioning, investigating facts, and uncovering the truth.

Code Napoléon

The comprehensive French civil code promulgated in $1804$ under Napoleon, modeled on Justinian's Corpus Juris Civilis.

United States District Courts

The trial courts of general jurisdiction in the federal judicial system, organized into $94$ districts across the nation.

United States Court of Appeals for the Federal Circuit

A specialized federal appellate court created in $1982$ with nationwide subject-matter jurisdiction over intellectual property, patent, and specific claim cases.

Plaintiff

The party who initiates a lawsuit by filing a formal complaint claiming to have suffered illegal harm at the hands of the defendant.

Defendant

The person or organization against whom a legal action or complaint is brought in a court of law.

Preponderance of the Evidence

The standard of proof in civil litigation requiring that the plaintiff's claims be more believable or probable than the defendant's defense.

Judgment Non Obstante Veredicto

A ruling entered by a judge in favor of one party notwithstanding a contrary verdict returned by the jury.

Contributory Negligence

A common law doctrine established in Butterfield v. Forrester ($1809$) holding that a plaintiff whose own lack of ordinary care contributed to their injury is completely barred from recovering damages.

Last Clear Chance Rule

A legal doctrine introduced in Davies v. Mann ($1842$) stating that if both parties are negligent, the party who had the final opportunity to avoid the accident bears full legal liability.