Microeconomics Midterm Review

A legally determined maximum price that sellers may charge

a legally determined minimum price that sellers may receive

the difference between the highest price a consumer is willing to pay and the price the consumer actually pays

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

the additional cost to a firm of producing one more unit of a good or service

the difference between the lowest price a firm would be willing to accept and the price it actually receives

the sum of consumer surplus and producer surplus

the reduction in economic surplus resulting from a market not being in competitive equilibrium.

a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

a market in which buying and selling takes place at prices violate government price regulations.

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.

A table showing the relationship between the price of a product and the quantity of the product demanded

the amount of a good or service that a consumer is willing and able to purchase at a given price

a curve that shows the relationship between the price of a product and the quantity of the product demanded.

the demand by all the consumers of a given good or service.

the rule that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of the product rises, the quantity demaded of the product will decrease

the change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to the other goods that are substitutes

the change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power.

the requirement that when analyzing the relationship between two variables - such as price and quantity demanded - other variables must be held constant

A good for which the demand increases as income rises and decreases as income falls.

a good for which the demand increases as income falls and decreases as income rises.

goods and services that can be used for the same purpose.

goods and services that are used together.

the characteristics of a population with respect to age, race, and gender.

the amount of a good or service that a firm is willing and able to supply at a given price

A table that shows the relationship between the price of a product and the quantity of the product supplied

a curve that shows the relationship between the price of a product and the quantity of the product supplied.

The rule that, holding everything else constant, increases in price causes increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied.

a positive or negative change in the ability of a firm to produce a given level of output with a give quality or inputs.

a situation in which quantity demanded equals quantity supplied

a market equilibrium with many buyers and many sellers

a situation in which quantity supplied is greater than the quantity demanded

a situation in which the quantity demanded is greater than the quantity supplied

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

the study of the choices people make to attain their goals, given scarce resources

a simplified version of reality used to analyze real-world economic situations

a group of buyers and sellers of a good or service and the instition or arrangement by which they come together to trade.

analysis that involves comparing marginal benefits and marginal costs.

the idea that because of scarcity, producing more of one service or good means producing less of another good or service.

the highest valued alternative that must be given up to engage in an activity

an economy in which the government decides how economic resources will be allocated

an economy in which the decisions of households and firms interacting in markets allocate economic resources

an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources

the situation in which a good or service is produced at the lowest possible cost

a state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides marginal benefit to society equal to the marginal cost of producing it

the situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction

the fair distribution of economic benefits

something measurable that can have different values, such as the wages of software programmers

analysis concerned with what is

analysis concerned with what ought be

the study of how households and firms make choices, how the interact in markets, and how the government attempts to influence their choices

the study of the economy as a whole, including topics such as inflation, unemployment and economic growth

the ability of an economy to produce increasing quantities of goods and services

the act of buying or selling

the ability of an individual, a firm, or country to produce more of a good or service than competitiors, using the same amount of resources

the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors

markets for goods- such as computers- and services- such as medical treatment

markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability.

the inputs used to makegoods and services

a market with few government restrictions on how a good or service can be produced or sold, or on how a factor of production can be employed.

someone who operates a business, bringing together the factor of production-labor, capital, and natural resources-to produce goods and services.

the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it

input costs that require an outlay of money by the firm

Input costs that do not require an outlay of money by the firm (e.g. interest forgone on money used). The opportunity costs associated with a firm's use of resources that it owns.

A firm's total revenue minus its explicit costs

total revenues minus total opportunity costs of all inputs used, or the total of all implicit and explicit costs.

a condition for long-run equilibrium; all inputs make exactly their opportunity costs so that no firm wants to enter or exit the industry

Costs that have already been incurred and cannot be recovered

A period during which at least one of a firm's resources is fixed

a period of time long enough for all inputs to be varied (no fixed costs)

relationship between the quantity of inputs a firm uses and the quantity of output it produces

extra output due to the addition of one more unit of input

increasing one factor of production will increase output up to a point, then begin to decrease

a cost that does not change, no matter how much of a good is produced

a cost that rises or falls depending on how much is produced

Fixed cost divided by the quantity produced

total variable costs divided by quantity of output

total costs divided by quantity of output

The change in total cost that results from a change in output: MC= ΔTC/ΔQ

the total revenue a firm receives from the sale of its product minus all costs incurred (implicit and explicit) producing it

a firm whose primary goal is to maximize the difference between its total revenues and total costs

an input used in the production of a good or service

a market in which no individual supplier has significant influence on the market price of the product

a firm that has no influence over the price at which it sells its product

1. all firms sell the same standardized product 2. the market has many buyers and sellers, each of which buys or sells only a small fraction of the total quantity exchanged 3. productive resources are mobile 4. buyers and sellers are well informed

a period of time sufficiently short that at least one of the firm's factors of production cannot be varied

a period of time sufficient in length so that all the firm's factors of production are variable

a technological relationship between inputs and outputs

the increase in total output caused by an increase of one unit in the variable factor of production, holding all else constant

an input whose quantity can be altered in the short run

an input whose quantity cannot be altered in the short run

total output divided by units of the variable factor of production

the increase in total revenue obtained by producing and selling one more unit of output

the increase in total cost incurred by producing one more unit of output

any cost that changes as the firm changes its output

Change in total cost / change in quantity

total variable cost / quantity

the quantity of output at which a factory reaches minimum average total cost

a firm's minimum average variable cost; if price drops below minimum average variable cost, the firm will minimize its losses by shutting down

the change in quantity supplied arising from a one percent change in price