ECON 110A/111 Principles of Economics Exam Review

These flashcards cover key vocabulary and concepts from the Principles of Economics exam, providing definitions and explanations relevant to the material.

Externalities

Costs or benefits that affect a party who did not choose to incur those costs or benefits.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive.

Deadweight Loss

The loss of economic efficiency when equilibrium for a good or service is not achieved or not achievable.

Monopolistic Competition

A market structure where many firms sell products that are similar but not identical.

Long-Run Equilibrium

A situation in which the supply and demand for a product are balanced, and firms earn zero economic profit.

Nash Equilibrium

A situation in which every player in a game is choosing the best strategy they can, given the strategies chosen by the other players.

Quantity-based Intervention

Government action that modifies the quantity of a good available in the market to correct inefficiencies.

Price-based Intervention

Government action that sets a price limit to address externalities.

Inelastic Demand

Demand that is not significantly affected by price changes.

Price Discrimination

The strategy of selling the same product at different prices to different consumers.

Socially Optimal Quantity

The quantity of a good that results in the highest level of overall benefit to society.

Public Good

A good that is non-excludable and non-rivalrous in consumption.

Oligopoly

A market structure in which a small number of firms have significant market power.

Marginal Revenue

The additional revenue earned from selling one more unit of a product.

Economic Profit

The difference between total revenue and total cost, including both explicit and implicit costs.

Positive Externality

A benefit that affects a third party not involved in a transaction.

Tax Incidence

The manner in which the burden of a tax is distributed among participants in a market.

Short-run Effects

Immediate consequences of a change in economic variables before markets and firms have time to adjust.

Long-run Effects

Consequences that unfold over time, allowing for all adjustments to take place in response to economic changes.