Final - Economía I UFM

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29 Terms

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Commodity tax
Tax on goods
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Excise tax
A tax that is paid directly by suppliers to the government
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Sales tax
A tax that is paid directly by consumers to the government.
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Economic incidence
The division of a tax burden according to who actually pays the tax.
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Legal incidence
The division of a tax burden according to who is required under the law to pay the tax.
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What is the main consequence of a tax?
Less quantity exchanged
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Label a supply and demand graph with a tax wedge
knowt flashcard image
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Subsidy
A "negative tax", where the government gives money to consumers or producers.
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What is the main consequence of a subsidy?
Creates inefficient increase in trades.
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Label a supply and demand curve with a subsidy wedge
knowt flashcard image
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Protectionism
The economic policy of restraining trade through tariffs, quotas o other regulations that burden foreign producers but not domestic producers.
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Tariff
A tax on imports
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Quota
Restriction on the quantity of goods that can be imported.
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Label a supply and demand graph with the impact of a tariff
knowt flashcard image
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What is the main difference between wage, rent and income, and profit?
Contractual agreements reduce uncertainty.
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How do opportunity costs influence an entrepreneur’s decisions?

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Monetary expenses do not capture the total costs of production.

The forgone wage of an entrepreneur might not appear on a ledger, but it will remain in mind and influence choices.
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What causes profits to not be reduced to zero by competition?
Uncertainty
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What do entrepreneurs do?
They try to reorganize activity to gain profit. They also take the responsibility if it is loss. They are the residual claimant.
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Three forms of entrepreneurial driving force
Arbitrage, innovation, imitation
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Arbitrage
To buy goods at a low price and sell them at a higher price.
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Innovation
Entrepreneurs are always on the lookout for better ways to satisfy consumer demand.
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They key to an efficient market process is
Open entry and exit, because comparative advantages change over time.
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Speculators help the market by
Coordinating market exchanges through time, they even out the flow of commodities into consumption and diminish price fluctuations over time.
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Cost plus markup theory
Business firms calculate their unit costs and add on a percentage markup.
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Marginal revenue
The additional revenue expected from an action under consideration.
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To maximize net revenue, you need to
Set a price that will enable you to sell all those units, but only those units, for which marginal revenue is expected to be greater than marginal cost.
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How are you able to lower the price only to a select group of people?
Price discrimination
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Three conditions for successful price discrimination

1. distinguish buyers with different elasticities of demand
2. prevent low-price buyers from reselling to high-price buyers
3. control resentment.
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How do price searchers find what they’re looking for?
* estimating the marginal cost and marginal revenue
* determining the level of output that will enable them to sell all those units of output, and only those units for which marginal revenue is greater than marginal cost
* setting their price so that they can just manage to sell the output produced