Honors Econ Microeconomics Vocab - Assignment Essays %

question

economics

answer

the study of people and choices

question

cost and benefit

answer

economic analysis that assigns a numerical value to the cost-effectiveness of an operation, procedure, or program

question

opportunity cost

answer

whatever you give up to do something; the next best thing

question

scarcity

answer

the tension between infinite wants and finite resources; people have unlimited wants but limited resources that have a cost

question

incentives

answer

a set of external (rather than intrinsic) motivators that explain people's choices; push you to do something

question

perverse incentive

answer

an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers

question

microeconomics

answer

the study of how consumers, workers, and firms interact to generate outcomes in specific markets

question

specialization

answer

makes people more productive

question

trade

answer

makes people better off

question

production possibilities frontier

answer

if you produce all you can of one thing you can't produce anything of another

question

comparative advantage

answer

one country being able to produce more of a good than another country

question

mutually beneficial trade

answer

when countries trade with one another for goods they each have a different comparative advantage in, both getting more than they could produce on their own of that same good

question

invisible hand

answer

a force that seems to guide the market because everything seems to go together so perfectly

question

planned economy

answer

economy where the government controls the factors of production

question

socialism

answer

specific objectives and spread of goods equally across society

question

command economy

answer

economy completely controlled by the government

question

market economy

answer

economy where individuals control the factors of production; businesses make things for profit

question

laissez faire/capitalism

answer

free market where the government keeps their hands out of things; consumer biased; government regulates production, provides the law, etc. but companies make things for consumers; like crowdfunding

question

circular flow model

answer

model showing the market from households --> product market --> resource market

question

market

answer

any place where buyers and sellers meet to exchange goods and services

question

voluntary exchange

answer

buyers and sellers willingly decide to make transactions

question

price signals

answer

the information that markets generate to guide the distribution of resources

question

law of demand

answer

price goes up, people buy less; price goes down, people buy more

question

law of supply

answer

price goes up, increasing supply; price goes down, decreasing supply; an increase in price gives producers an incentive to produce more

question

surplus

answer

extra product at a higher price

question

shortage

answer

less product at a lower price

question

equilibrium price/quantity

answer

perfect price and amount of demand

question

laws of the market

answer

1. supply can increase
2. supply can decrease
3. demand can increase
4. demand can decrease

question

marginal analysis

answer

an analysis of how individuals, businesses, and governments make decisions

question

additional

answer

equals marginal

question

utility

answer

satisfaction or happiness people get from consuming a good or service

question

law of decreasing additional satisfaction

answer

equals law of diminishing marginal utility

question

utils

answer

a unit used to quantify satisfaction; completely subjective

question

demand curve

answer

equals marginal benefit curve

question

supply curve

answer

equals marginal cost curve

question

diamond-water paradox

answer

although resources such as food, shelter, and water are more useful in terms of survival than precious resources such as phones or diamonds, phones command a higher price in the market

question

substitution effect

answer

as prices rise, consumers will replace expensive items with less costly alternatives

question

elasticity of demand

answer

a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price

question

elasticity of supply

answer

a measure of the responsiveness of quantity supplied to a change in price

question

productive efficiency

answer

the idea that the products are being made at the lowest possible cost

question

allocative efficiency

answer

state of the economy in which production represents consumer preferences

question

price gouging

answer

when sellers raise prices for essential items to a much higher level than is considered reasonable; make them more available to people that actually need them

question

predatory pricing

answer

the idea a business can drive out other competitors even at a short term loss

question

price ceiling

answer

when the government sets a maximum price for a good or service; can make societies worse off

question

price floor

answer

when the government sets a low price boundary in a specific market; makes producers produce more, but consumers find other alternatives

question

low price ceiling

answer

because of this producers don't want to produce because they won't get much money, causing there to not be enough of a product in the market

question

high price floor

answer

because of this producers produce more because they want the money, but people find other alternatives or buy something else they want more so they don't have to pay a high price

question

dead weight loss

answer

production above or below equilibrium price and quantity

question

subsidy

answer

a government payment given to individuals, organizations, or businesses designed to offset cash to advance a specific public goal

question

free riders

answer

people who benefit without paying; respond to incentives

question

market failure

answer

when markets fail to provide enough public goods

question

public good

answer

anything having the characteristics of non-exclusion and non-rivalry

question

non-exclusion

answer

cannot exclude/disfavor people that do not pay

question

non-rivalry

answer

one person's consumption of the good doesn't ruin it for others

question

tragedy of the commons

answer

the idea that common goods that everyone has access to are often misused and exploited; fueled by personal incentives; turning on your blinders to others

question

externality

answer

a situation where there are external costs or benefits that stem from other people or society as a whole

question

negative externality

answer

people are made worse off

question

positive externality

answer

people are made better off

question

regulatory policies

answer

rules established by government decree

question

market-based policies

answer

policies designed to manipulate markets, prices, and incentives to correct market failures

question

explicit costs

answer

traditional out-of-pocket costs of running a business

question

implicit costs

answer

indirect opportunity costs

question

normal profit

answer

minimum level of economic profit a company needs to stay in business

question

variable costs

answer

costs that vary depending on a company's production volume; ex. more resources means more money spent

question

fixed costs

answer

basic operating expenses of a business that cannot be avoided

question

economies of scale

answer

companies that produce more can utilize mass production techniques and spread out their fixed costs over many units

question

profit maximizing rule

answer

continue to produce as long as the marginal revenue of the last unit produced is greater than or equal to the marginal cost

question

marginal revenue

answer

additional revenue earned from selling another unit

question

marginal cost

answer

the additional cost of producing another unit

question

law of diminishing marginal returns

answer

as you add variable resources to a set number of fixed resources, the additional output generated from each additional worker will eventually decrease

question

sunk cost

answer

a cost that has already been paid and cannot be recovered

question

derived demand

answer

demand for labor depends on the demand for the products a business sells

question

efficiency wages

answer

when employers offer higher than normal wages to workers to increase productivity and retention

question

union

answer

an organization that advances the collective
interest of employees and strives to improve working conditions and increase wages

question

collective bargaining

answer

when representatives for the workers in a union negotiate with employers; if their demands aren't met
workers go on strike, and stop production altogether

question

wage discrimination

answer

paying someone less because of their gender, race, age, or religion

question

monopsony

answer

a market in which there is only one buyer

question

minimum wage

answer

the lowest wage permitted by law or by a special agreement with a union

question

pure monopoly

answer

a market controlled by one seller with a good or service that has no close substitutes

question

barriers to entry

answer

what a monopoly's power comes from; stops other companies from entering a market

question

crony capitalism

answer

influencing government regulations so people have no choice but to buy from a specific company

question

oligopoly

answer

when a firm has a large majority of market share and acts like a monopoly

question

anti-trust laws

answer

promote competition and outlaw anti-competitive tactics

question

sherman act

answer

outlawed any monopolies and any attempts at monopolization

question

horizontal integration

answer

the act of buying companies that produce similar products

question

vertical integration

answer

the act of a company buying or directly owning and controlling its entire supply chain

question

patent

answer

grants an inventor exclusive rights to profit from a specific product or process

question

natural monopoly

answer

when it is more cost effective to have one large producer rather than several smaller competing firms

question

non-coercive monopoly

answer

a monopoly where buying things from the company isn't forced but people still do it anyway

question

deregulation

answer

the process of removing or reducing state regulations

question

price discrimination

answer

the practice of charging different consumers different prices for exactly the same product

1 of 91

question

economics

answer

the study of people and choices

question

cost and benefit

answer

economic analysis that assigns a numerical value to the cost-effectiveness of an operation, procedure, or program

question

opportunity cost

answer

whatever you give up to do something; the next best thing

question

scarcity

answer

the tension between infinite wants and finite resources; people have unlimited wants but limited resources that have a cost

question

incentives

answer

a set of external (rather than intrinsic) motivators that explain people's choices; push you to do something

question

perverse incentive

answer

an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers

question

microeconomics

answer

the study of how consumers, workers, and firms interact to generate outcomes in specific markets

question

specialization

answer

makes people more productive

question

trade

answer

makes people better off

question

production possibilities frontier

answer

if you produce all you can of one thing you can't produce anything of another

question

comparative advantage

answer

one country being able to produce more of a good than another country

question

mutually beneficial trade

answer

when countries trade with one another for goods they each have a different comparative advantage in, both getting more than they could produce on their own of that same good

question

invisible hand

answer

a force that seems to guide the market because everything seems to go together so perfectly

question

planned economy

answer

economy where the government controls the factors of production

question

socialism

answer

specific objectives and spread of goods equally across society

question

command economy

answer

economy completely controlled by the government

question

market economy

answer

economy where individuals control the factors of production; businesses make things for profit

question

laissez faire/capitalism

answer

free market where the government keeps their hands out of things; consumer biased; government regulates production, provides the law, etc. but companies make things for consumers; like crowdfunding

question

circular flow model

answer

model showing the market from households --> product market --> resource market

question

market

answer

any place where buyers and sellers meet to exchange goods and services

question

voluntary exchange

answer

buyers and sellers willingly decide to make transactions

question

price signals

answer

the information that markets generate to guide the distribution of resources

question

law of demand

answer

price goes up, people buy less; price goes down, people buy more

question

law of supply

answer

price goes up, increasing supply; price goes down, decreasing supply; an increase in price gives producers an incentive to produce more

question

surplus

answer

extra product at a higher price

question

shortage

answer

less product at a lower price

question

equilibrium price/quantity

answer

perfect price and amount of demand

question

laws of the market

answer

1. supply can increase
2. supply can decrease
3. demand can increase
4. demand can decrease

question

marginal analysis

answer

an analysis of how individuals, businesses, and governments make decisions

question

additional

answer

equals marginal

question

utility

answer

satisfaction or happiness people get from consuming a good or service

question

law of decreasing additional satisfaction

answer

equals law of diminishing marginal utility

question

utils

answer

a unit used to quantify satisfaction; completely subjective

question

demand curve

answer

equals marginal benefit curve

question

supply curve

answer

equals marginal cost curve

question

diamond-water paradox

answer

although resources such as food, shelter, and water are more useful in terms of survival than precious resources such as phones or diamonds, phones command a higher price in the market

question

substitution effect

answer

as prices rise, consumers will replace expensive items with less costly alternatives

question

elasticity of demand

answer

a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price

question

elasticity of supply

answer

a measure of the responsiveness of quantity supplied to a change in price

question

productive efficiency

answer

the idea that the products are being made at the lowest possible cost

question

allocative efficiency

answer

state of the economy in which production represents consumer preferences

question

price gouging

answer

when sellers raise prices for essential items to a much higher level than is considered reasonable; make them more available to people that actually need them

question

predatory pricing

answer

the idea a business can drive out other competitors even at a short term loss

question

price ceiling

answer

when the government sets a maximum price for a good or service; can make societies worse off

question

price floor

answer

when the government sets a low price boundary in a specific market; makes producers produce more, but consumers find other alternatives

question

low price ceiling

answer

because of this producers don't want to produce because they won't get much money, causing there to not be enough of a product in the market

question

high price floor

answer

because of this producers produce more because they want the money, but people find other alternatives or buy something else they want more so they don't have to pay a high price

question

dead weight loss

answer

production above or below equilibrium price and quantity

question

subsidy

answer

a government payment given to individuals, organizations, or businesses designed to offset cash to advance a specific public goal

question

free riders

answer

people who benefit without paying; respond to incentives

question

market failure

answer

when markets fail to provide enough public goods

question

public good

answer

anything having the characteristics of non-exclusion and non-rivalry

question

non-exclusion

answer

cannot exclude/disfavor people that do not pay

question

non-rivalry

answer

one person's consumption of the good doesn't ruin it for others

question

tragedy of the commons

answer

the idea that common goods that everyone has access to are often misused and exploited; fueled by personal incentives; turning on your blinders to others

question

externality

answer

a situation where there are external costs or benefits that stem from other people or society as a whole

question

negative externality

answer

people are made worse off

question

positive externality

answer

people are made better off

question

regulatory policies

answer

rules established by government decree

question

market-based policies

answer

policies designed to manipulate markets, prices, and incentives to correct market failures

question

explicit costs

answer

traditional out-of-pocket costs of running a business

question

implicit costs

answer

indirect opportunity costs

question

normal profit

answer

minimum level of economic profit a company needs to stay in business

question

variable costs

answer

costs that vary depending on a company's production volume; ex. more resources means more money spent

question

fixed costs

answer

basic operating expenses of a business that cannot be avoided

question

economies of scale

answer

companies that produce more can utilize mass production techniques and spread out their fixed costs over many units

question

profit maximizing rule

answer

continue to produce as long as the marginal revenue of the last unit produced is greater than or equal to the marginal cost

question

marginal revenue

answer

additional revenue earned from selling another unit

question

marginal cost

answer

the additional cost of producing another unit

question

law of diminishing marginal returns

answer

as you add variable resources to a set number of fixed resources, the additional output generated from each additional worker will eventually decrease

question

sunk cost

answer

a cost that has already been paid and cannot be recovered

question

derived demand

answer

demand for labor depends on the demand for the products a business sells

question

efficiency wages

answer

when employers offer higher than normal wages to workers to increase productivity and retention

question

union

answer

an organization that advances the collective
interest of employees and strives to improve working conditions and increase wages

question

collective bargaining

answer

when representatives for the workers in a union negotiate with employers; if their demands aren't met
workers go on strike, and stop production altogether

question

wage discrimination

answer

paying someone less because of their gender, race, age, or religion

question

monopsony

answer

a market in which there is only one buyer

question

minimum wage

answer

the lowest wage permitted by law or by a special agreement with a union

question

pure monopoly

answer

a market controlled by one seller with a good or service that has no close substitutes

question

barriers to entry

answer

what a monopoly's power comes from; stops other companies from entering a market

question

crony capitalism

answer

influencing government regulations so people have no choice but to buy from a specific company

question

oligopoly

answer

when a firm has a large majority of market share and acts like a monopoly

question

anti-trust laws

answer

promote competition and outlaw anti-competitive tactics

question

sherman act

answer

outlawed any monopolies and any attempts at monopolization

question

horizontal integration

answer

the act of buying companies that produce similar products

question

vertical integration

answer

the act of a company buying or directly owning and controlling its entire supply chain

question

patent

answer

grants an inventor exclusive rights to profit from a specific product or process

question

natural monopoly

answer

when it is more cost effective to have one large producer rather than several smaller competing firms

question

non-coercive monopoly

answer

a monopoly where buying things from the company isn't forced but people still do it anyway

question

deregulation

answer

the process of removing or reducing state regulations

question

price discrimination

answer

the practice of charging different consumers different prices for exactly the same product

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