ECO2023 FINAL EXAM - UCF

Microeconomics

the study of how households and firms make decisions and how they interact in markets

Macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

Resource Categories

land, labor, capital, and entrepreneurial ability

Scarcity

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

Opportunity cost

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another

Marginal benefit

the additional benefit to a consumer from consuming one more unit of a good or service

Marginal cost

the cost of producing one more unit of a good

Absolute Advantage

the ability to produce a good using fewer inputs than another producer

Comparative advantage

the ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity.

Why is the demand curve downward sloping?

a rational consumer will demand more of a commodity when its price falls

compliments in production

goods that must be produced together

Normal good

increase in income causes increase in demand and decease in income causes decrease in demand

Inferior good

increase in income causes decrease in demand and decrease in income causes increase in demand

Deadweight loss

value of econ surplus that is gone when market is not allowed to adjust to its competitive equilibrium

(P2-P1) x (Q0-Q1)

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2

Allocative efficiency

optimal distribution of goods and services, taking into account consumer's preferences.

Productive efficiency

producing goods and services with the optimal combination of inputs to produce maximum output for the minimum cost.

Elasticity

measurement of how an economic variable responds to a change in another

private benefit

a benefit that accrues directly to the decision maker

Private cost

the costs directly incurred by sellers

social benefits and cost

private benefits + external benefits

positive externalities

benefit that is enjoyed by a third-party as a result of an economic transaction

Negative ecternalities

a cost that is suffered by a third party as a result of an economic transaction

Free-rider problem

occurs when those who benefit from resources, public goods, or services do not pay for them, which results in an underprovision of those goods or services.

Market failures

situation in which the allocation of goods and services is not efficient, often leading to a net social welfare loss

Property rights

the ability of an individual to own and exercise control over scarce resources

Utility

Ability or capacity of a good or service to be useful and give satisfaction to someone.

Marginal Utility

an additional amount of satisfaction

Explicit cost

things that firms and people actually pay money for

Implicit cost

cost incurred even w no money changing hands

perfectly competitive market.

A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.

pure monopoly

A market structure in which one firm sells a unique product, into which entry is blocked, in which the single firm has considerable control over product price, and in which nonprice competition may or may not be found.

allocatively inefficient

monopolistically competitive firm

productively inefficient market structure because marginal cost is less than price in the long run.

oligopoly

a market or industry is dominated by a small number of large sellers ; may have collusion which reduce competition and lead to higher price

What is one difference between a firm in a perfectly competitive industry and a firm in a monopolistically competitive industry?

A monopolistically competitive firm does not have the exact same product as other firms.

A monopolistically competitive firm faces competition from firms producing close substitutes.

Oligopolies are considered to be:

neither allocatively nor productively efficient.