Midterm II Microeconmics

Perfect — here’s a complete and clear flashcard set for Chapter 9: Decision Making and Rational Behavior.
It’s formatted for easy studying or Quizlet import — concise, complete, and covering all definitions, models, and behavioral terms.

💡 Flashcards — Chapter 9: Decision Making and Rational Behavior

Flashcard 1
Q: What do all economic decisions involve?
A: The allocation of scarce resources.

Flashcard 2
Q: What is an “either–or” decision?
A: A choice about whether or not to do something.

Flashcard 3
Q: What is a “how much” decision?
A: A choice about how much of a resource to put into an activity.

Flashcard 4
Q: What is opportunity cost?
A: The value of what you give up when you use a resource for a specific purpose.

Flashcard 5
Q: What are explicit costs?
A: Costs that involve a direct outlay of money.

Flashcard 6
Q: What are implicit costs?
A: Costs that don’t involve money but represent the value of forgone benefits.

Flashcard 7
Q: What is economic profit?
A: Total revenue minus both explicit and implicit costs.

Flashcard 8
Q: What is accounting profit?
A: Total revenue minus only explicit costs.

Flashcard 9
Q: Why can accounting profit be misleading?
A: It ignores implicit costs like opportunity cost of time or capital.

Flashcard 10
Q: According to the “either–or” decision principle, how should choices be made?
A: Choose the activity with the positive economic profit.

Flashcard 11
Q: What is marginal analysis?
A: Comparing the benefit and cost of doing one more unit of an activity.

Flashcard 12
Q: What is marginal cost?
A: The additional cost of producing one more unit of a good or service.

Flashcard 13
Q: What is marginal benefit?
A: The additional benefit earned from producing one more unit.

Flashcard 14
Q: What does the marginal cost curve show?
A: How marginal cost changes as output increases.

Flashcard 15
Q: What does the marginal benefit curve show?
A: How marginal benefit changes as output increases.

Flashcard 16
Q: What is constant marginal cost?
A: When each additional unit costs the same as the previous one.

Flashcard 17
Q: What is increasing marginal cost?
A: When each additional unit costs more than the previous one (upward-sloping curve).

Flashcard 18
Q: What is decreasing marginal cost?
A: When each additional unit costs less than the previous one (downward-sloping curve).

Flashcard 19
Q: What is decreasing marginal benefit?
A: When each additional unit provides a smaller benefit than the one before.

Flashcard 20
Q: What is the optimal quantity?
A: The quantity that generates the highest total profit.

Flashcard 21
Q: What is the profit-maximizing principle of marginal analysis?
A: The optimal quantity is where marginal benefit equals marginal cost.

Flashcard 22
Q: What is a sunk cost?
A: A cost that has already been incurred and cannot be recovered.

Flashcard 23
Q: Should sunk costs affect future decisions?
A: No — they should be ignored.

Flashcard 24
Q: What is the sunk cost fallacy?
A: The mistaken belief that sunk costs should influence current decisions.

Flashcard 25
Q: What is behavioral economics?
A: The study of how psychology and economics interact to explain real decision-making.

Flashcard 26
Q: What does rational behavior mean?
A: Choosing the option that leads to the most preferred outcome.

Flashcard 27
Q: Can it be rational to choose a lower economic payoff?
A: Yes, due to fairness, nonmonetary rewards, bounded rationality, or risk aversion.

Flashcard 28
Q: What is bounded rationality?
A: When people make satisfactory decisions because finding the best one is costly or complex.

Flashcard 29
Q: What is risk aversion?
A: The tendency to avoid potential losses, even at the cost of lower returns.

Flashcard 30
Q: What is an irrational choice?
A: A choice that leaves someone worse off than if they had chosen another option.

Flashcard 31
Q: Name the eight forms of irrational behavior.
A:

Misperceptions of opportunity cost
Overconfidence
Unrealistic expectations
Mental accounting
Loss aversion
Framing bias
Fear of missing out (FOMO)
Status quo bias

Flashcard 32
Q: What is mental accounting?
A: Treating dollars unequally depending on where they come from or how they’re spent.

Flashcard 33
Q: What is loss aversion?
A: Oversensitivity to losses, leading to risk-avoidant decisions.

Flashcard 34
Q: What is framing bias?
A: Making decisions based on how choices are presented instead of their true value.

Flashcard 35
Q: What is FOMO (Fear of Missing Out)?
A: Making poor investment decisions due to fear of missing a profitable opportunity.

Flashcard 36
Q: What is status quo bias?
A: Avoiding change by sticking with current choices or situations.

Flashcard 37
Q: What are nudges in behavioral economics?
A: Small changes in how choices are presented to encourage more rational behavior.

Perfect — here’s a complete and easy-to-study flashcard set for Chapter 8: International Trade.
It covers every key term and concept from your text while keeping definitions short and clear for memorization or Quizlet upload.

🌍 Flashcards — Chapter 8: International Trade

Flashcard 1
Q: What is international trade?
A: The exchange of goods and services between countries.

Flashcard 2
Q: What causes international trade?
A: Comparative advantage — when a country can produce a good at a lower opportunity cost than another.

Flashcard 3
Q: What are imports?
A: Goods and services purchased from abroad.

Flashcard 4
Q: What are exports?
A: Goods and services sold abroad.

Flashcard 5
Q: What is globalization?
A: The increasing economic linkages and trade between countries.

Flashcard 6
Q: What is hyperglobalization?
A: Extremely high levels of international trade due to advances in technology and communication.

Flashcard 7
Q: What does the Ricardian model of trade assume?
A: Constant opportunity costs and gains from trade between countries.

Flashcard 8
Q: What does the Ricardian model show?
A: Two countries are better off trading than remaining in autarky.

Flashcard 9
Q: What is autarky?
A: A situation where a country does not trade with others.

Flashcard 10
Q: What determines comparative advantage in reality?
A: Differences in climate, factor endowments, and technology.

Flashcard 11
Q: What does the Heckscher–Ohlin model explain?
A: How a country’s factor endowments determine its comparative advantage.

Flashcard 12
Q: What does “factor intensity” mean?
A: How much a good’s production uses a particular factor (like labor or capital).

Flashcard 13
Q: According to the Heckscher–Ohlin model, what do countries export?
A: Goods that use their abundant factors intensively.

Flashcard 14
Q: What determines the domestic price of a good in autarky?
A: The intersection of the domestic supply and demand curves.

Flashcard 15
Q: What happens to domestic price when trade opens?
A: It moves toward the world price.

Flashcard 16
Q: What happens if the world price is below the autarky price?
A: The country imports the good.

Flashcard 17
Q: What are the effects of imports on surplus?
A: Consumer surplus rises, producer surplus falls, and total surplus increases.

Flashcard 18
Q: What happens if the world price is above the autarky price?
A: The country exports the good.

Flashcard 19
Q: What are the effects of exports on surplus?
A: Producer surplus rises, consumer surplus falls, and total surplus increases.

Flashcard 20
Q: What happens to industries due to trade?
A: Export industries expand, and import-competing industries contract.

Flashcard 21
Q: How does trade affect factor markets?
A: It raises demand for abundant factors and lowers demand for scarce ones.

Flashcard 22
Q: What is trade protection?
A: Government policies that limit imports or promote exports.

Flashcard 23
Q: What are the two main types of trade protection?
A: Tariffs and import quotas.

Flashcard 24
Q: What is a tariff?
A: A tax on imports that raises domestic prices and reduces total surplus.

Flashcard 25
Q: Who benefits and who is hurt by a tariff?
A: Domestic producers benefit; consumers are hurt.

Flashcard 26
Q: What is an import quota?
A: A legal limit on the quantity of a good that can be imported.

Flashcard 27
Q: How does an import quota differ from a tariff?
A: The revenue goes to those with import licenses, not the government.

Flashcard 28
Q: What is an export subsidy?
A: A government payment to producers who sell goods abroad.

Flashcard 29
Q: What is the main reason for trade protection in practice?
A: Political pressure from organized import-competing industries.

Flashcard 30
Q: Why do consumers rarely oppose trade protection?
A: They are unaware of the hidden costs they pay.

Flashcard 31
Q: What are international trade agreements?
A: Agreements between countries to reduce trade barriers and prevent trade wars.

Flashcard 32
Q: Name some key trade agreements.
A: NAFTA, USMCA, European Union (EU), and World Trade Organization (WTO).

Flashcard 33
Q: What does the WTO do?
A: Oversees global trade negotiations and settles disputes between member countries.

Flashcard 34
Q: What is one major concern about globalization?
A: Rising income inequality, especially from manufacturing imports from poorer countries.

Flashcard 35
Q: What is offshore outsourcing?
A: Moving jobs and production abroad to reduce costs.

Flashcard 36
Q: How has globalization affected job security?
A: Many jobs once safe from competition have moved overseas.

Flashcard 37
Q: What is the overall effect of trade on total surplus?
A: Trade increases total surplus for the economy as a whole.

Perfect — here’s a complete, simplified flashcard set for Chapter 7: Taxes that covers every key idea in your text, clearly formatted for studying or uploading to Quizlet.

🎓 Flashcards — Chapter 7: Taxes and Tax Policy

Flashcard 1
Q: What is an excise tax?
A: A tax on the purchase or sale of a good.

Flashcard 2
Q: What does an excise tax do to prices?
A: It raises the price paid by consumers and lowers the price received by producers.

Flashcard 3
Q: What is the tax wedge?
A: The difference between the price consumers pay and the price producers receive due to a tax.

Flashcard 4
Q: What is tax incidence?
A: How the burden of a tax is divided between consumers and producers.

Flashcard 5
Q: Does tax incidence depend on who officially pays the tax?
A: No, it depends on the elasticities of supply and demand.

Flashcard 6
Q: When does the tax fall mainly on producers?
A: When the price elasticity of demand is higher than the price elasticity of supply.

Flashcard 7
Q: When does the tax fall mainly on consumers?
A: When the price elasticity of supply is higher than the price elasticity of demand.

Flashcard 8
Q: What determines tax revenue from an excise tax?
A: The tax rate and the number of units sold.

Flashcard 9
Q: Why do excise taxes cause inefficiency?
A: They discourage mutually beneficial transactions, creating deadweight loss.

Flashcard 10
Q: What are administrative costs of a tax?
A: Resources used to collect, pay, and avoid the tax, beyond the amount of the tax itself.

Flashcard 11
Q: What happens to total surplus when a tax is imposed?
A: It decreases — the loss in total surplus is greater than the tax revenue collected.

Flashcard 12
Q: What does the deadweight loss from a tax represent?
A: The value of transactions that no longer occur because of the tax.

Flashcard 13
Q: When is the deadweight loss from a tax larger?
A: When demand or supply (or both) are more elastic.

Flashcard 14
Q: When is there no deadweight loss from a tax?
A: If either demand or supply is perfectly inelastic.

Flashcard 15
Q: What makes a tax efficient?
A: It minimizes deadweight loss and administrative costs.

Flashcard 16
Q: What are the two major principles of tax fairness?
A: The benefits principle and the ability-to-pay principle.

Flashcard 17
Q: What is a lump-sum tax?
A: A tax that is the same amount for everyone, regardless of income or behavior.

Flashcard 18
Q: Why is a lump-sum tax efficient but unfair?
A: It doesn’t distort incentives but ignores differences in ability to pay.

Flashcard 19
Q: What trade-off exists in tax policy?
A: A trade-off between equity (fairness) and efficiency.

Flashcard 20
Q: What is a tax base?
A: What is being taxed (e.g., income, sales, property).

Flashcard 21
Q: What is a tax structure?
A: How the tax depends on the tax base — such as being proportional, progressive, or regressive.

Flashcard 22
Q: Give examples of different tax bases.
A: Income tax, payroll tax, sales tax, profits tax, property tax, and wealth tax.

Flashcard 23
Q: What is a proportional tax?
A: A tax that takes the same percentage of the base for all taxpayers.

Flashcard 24
Q: What is a progressive tax?
A: A tax where higher-income people pay a higher percentage of their income.

Flashcard 25
Q: What is a regressive tax?
A: A tax where lower-income people pay a higher percentage of their income than higher-income people.

Flashcard 26
Q: Which fairness principle justifies progressive taxes?
A: The ability-to-pay principle.

Flashcard 27
Q: What is the marginal tax rate?
A: The percentage of an additional dollar of income that is taxed.

Flashcard 28
Q: Why can highly progressive taxes be inefficient?
A: They create high marginal tax rates that discourage earning more income.

Flashcard 29
Q: What kind of tax system does the U.S. have overall?
A: A progressive tax system with a mix of progressive and regressive taxes.

Perfect 👍 Here’s a full flashcard set for Chapter 6: Elasticity — written clearly and formatted for easy studying or uploading to Quizlet.

🎓 Flashcards — Chapter 6: Elasticity

Flashcard 1
Q: What does elasticity measure in economics?
A: Elasticity measures responsiveness — how much consumers or producers respond to changes in prices or other variables.

Flashcard 2
Q: What is the formula for price elasticity of demand?
A: The percent change in quantity demanded divided by the percent change in price (dropping the minus sign).

Flashcard 3
Q: What method is best for calculating elasticity in practice?
A: The midpoint method — it uses averages of starting and final values to find percent changes.

Flashcard 4
Q: What does perfectly inelastic demand mean?
A: Quantity demanded doesn’t change at all when the price changes.

Flashcard 5
Q: What does perfectly elastic demand mean?
A: Consumers buy as much or as little as they want at one specific price.

Flashcard 6
Q: What does a perfectly inelastic demand curve look like?
A: A vertical line.

Flashcard 7
Q: What does a perfectly elastic demand curve look like?
A: A horizontal line.

Flashcard 8
Q: When is demand considered elastic, inelastic, or unit-elastic?
A:

Elastic: elasticity > 1
Inelastic: elasticity < 1
Unit-elastic: elasticity = 1

Flashcard 9
Q: What happens to total revenue when demand is elastic and price increases?
A: Total revenue decreases.

Flashcard 10
Q: What happens to total revenue when demand is elastic and price decreases?
A: Total revenue increases.

Flashcard 11
Q: What happens to total revenue when demand is inelastic and price increases?
A: Total revenue increases.

Flashcard 12
Q: What happens to total revenue when demand is inelastic and price decreases?
A: Total revenue decreases.

Flashcard 13
Q: What happens to total revenue when demand is unit-elastic and price changes?
A: Total revenue stays the same.

Flashcard 14
Q: What factors increase the price elasticity of demand?
A:

Availability of close substitutes
Being a luxury good rather than a necessity
Large share of income spent on the good
More time elapsed since the price change

Flashcard 15
Q: What does cross-price elasticity of demand measure?
A: How the quantity demanded of one good changes when the price of another good changes.

Flashcard 16
Q: What does a positive cross-price elasticity indicate?
A: The goods are substitutes.

Flashcard 17
Q: What does a negative cross-price elasticity indicate?
A: The goods are complements.

Flashcard 18
Q: What does income elasticity of demand measure?
A: The percent change in quantity demanded divided by the percent change in income.

Flashcard 19
Q: What does a negative income elasticity indicate?
A: The good is an inferior good.

Flashcard 20
Q: What does a positive income elasticity indicate?
A: The good is a normal good.

Flashcard 21
Q: When is a good income-elastic or income-inelastic?
A:

Income-elastic: elasticity > 1
Income-inelastic: elasticity between 0 and 1

Flashcard 22
Q: What is the formula for price elasticity of supply?
A: Percent change in quantity supplied divided by percent change in price.

Flashcard 23
Q: What is perfectly inelastic supply?
A: Quantity supplied doesn’t change at all when price changes; the supply curve is vertical.

Flashcard 24
Q: What is perfectly elastic supply?
A: Quantity supplied is zero below some price and infinite above it; the supply curve is horizontal.

Flashcard 25
Q: What factors affect the price elasticity of supply?
A:

Availability of resources to expand production
The time elapsed since the price change (longer time = higher elasticity)

Absolutely — here’s a clear, concise flashcard set for your Chapter 5: Government Intervention in Markets text.

🎓 Flashcards — Chapter 5: Government Intervention in Markets

Flashcard 1
Q: Why do governments intervene in markets even when they’re efficient?
A: To pursue greater fairness or to please powerful interest groups.

Flashcard 2
Q: What are the two main types of government intervention in markets?
A: Price controls and quantity controls.

Flashcard 3
Q: What are common side effects of government interventions in markets?
A: Inefficiency and illegal activity.

Flashcard 4
Q: What is a price ceiling?
A: A maximum market price set below the equilibrium price.

Flashcard 5
Q: Who benefits from a price ceiling?
A: Successful buyers.

Flashcard 6
Q: What does a price ceiling create in the market?
A: A persistent shortage.

Flashcard 7
Q: Why does a price ceiling cause shortages?
A: Because quantity demanded increases and quantity supplied decreases.

Flashcard 8
Q: List the inefficiencies caused by a price ceiling.
A:

Deadweight loss from inefficiently low quantity
Inefficient allocation to consumers
Wasted resources
Inefficiently low quality

Flashcard 9
Q: What illegal behavior can price ceilings encourage?
A: Black markets or shadow markets.

Flashcard 10
Q: When can price ceilings be justified?
A: During market inefficiency or natural disasters to promote equity and social welfare.

Flashcard 11
Q: What is a price floor?
A: A minimum market price set above the equilibrium price.

Flashcard 12
Q: Who benefits from a price floor?
A: Successful sellers.

Flashcard 13
Q: What does a price floor create in the market?
A: A persistent surplus.

Flashcard 14
Q: Why does a price floor cause surpluses?
A: Because quantity demanded decreases and quantity supplied increases.

Flashcard 15
Q: List the inefficiencies caused by a price floor.
A:

Deadweight loss from inefficiently low quantity
Inefficient allocation of sales among sellers
Wasted resources
Inefficiently high quality

Flashcard 16
Q: What is a common real-world example of a price floor?
A: Minimum wage laws.

Flashcard 17
Q: What is a quantity control (quota)?
A: A limit on the quantity of a good that can be bought or sold.

Flashcard 18
Q: What is a quota limit?
A: The total quantity of a good that can legally be sold.

Flashcard 19
Q: What is a license in the context of quotas?
A: The right granted by the government to sell a specific quantity of a good.

Flashcard 20
Q: What is quota rent?
A: The earnings from owning a license; the difference between the demand price and the supply price at the quota limit.

Flashcard 21
Q: What does it mean when economists say a quota “drives a wedge” between prices?
A: It means the difference between the demand price and supply price equals the quota rent.

Flashcard 22
Q: What are the main downsides of quotas?
A: Deadweight loss and illegal activity.