INTRODUCTION TO MICROECONOMICS
INTRODUCTION TO MICROECONOMICS ECON 201
Popular in Course
Popular in Economcs
verified elite notetaker
This 2 page Class Notes was uploaded by Obie Kunze on Monday October 19, 2015. The Class Notes belongs to ECON 201 at Oregon State University taught by D. Stone in Fall. Since its upload, it has received 15 views. For similar materials see /class/224543/econ-201-oregon-state-university in Economcs at Oregon State University.
Reviews for INTRODUCTION TO MICROECONOMICS
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 10/19/15
MicroEconomics 201 Sean Gordon Vocab Review June 7 2009 Perfect Price Discrimination A monopolist who can charge each buyer exactly his or her reservation price Network economies occur when the value of the good depends on the network of users Prisoner s Dilemma Each player chooses his dominant strategy the result is unattractive to the group of players as a whole steroids between 2 players Cartel a coalition of rms that agree to restrict output for the purpose of earning an economic pro t Commitment Problem a situation in which people cannot achieve their goals because of an inability to make credible threats or promises Dominant strategy One that yields a high payoff no matter what the other players in the game choose Dominated strategy Any other strategy available to a player who has a dominant strategy Credible Threat a threat to take an action that is in the threatener s interest to carry out Invisible Hand Theory Adam Smith s theory stating that the actions of independent selfinterested buyers and sellers will often result in the most ef cient allocation of resources Coase Theorem If at no cost people can negotiate the purchase and sale of the right to perform activities that cause externalities they can always arrive at ef cient solutions to the problems caused be externalities Socially Optimal Quantity The quantity of a good that results in the maximum possible economic surplus from producing and consuming the good Production Possibility curve shows the maximum production of one good for every possible production level of the other good Inferior good a good whose demand curve shifts leftward when the incomes of buyers increase Complement good 2 goods are complements in consumption if an increase in the price of one causes a leftward shift in the demand curve for the other or a decrease causes a rightward shift Normal good a good whose demand curve shifts rightward when the incomes of buyers increase Substitute good 2 goods are substitutes in consumption if an increase in the price of one causes a rigl1tward shift in the demand curve for the other or if a decrease causes a leftward shift Price elasticity of demand The percent change in the quantity demanded of a good or service that results from a l change in its price Price elasticity of supply The percent change in the quantity supplied that will occur in response to a 1 percent change in the price ofa good or service Marginal utility the additional utility gained from consuming 1 additional unit of good Marginal revenue the change in a rm s total revenue that results from a oneunit change in output Rational spending rule spending should be allocated across goods so that the marginal utility per dollar is the same for each good Consumer surplus the economic surplus gained by the buyers of a product as measured by the cumulative difference between their respective reservation prices and the price they actually pay Long run a period of time of suf cient length that all the rm s factors of production are variable Variable factor of production an input whose quantity can be altered in the short run Explicit costs the actual payments a firm makes to its factors of production and other suppliers Implicit costs the opportunity costs of the resources supplied by the rm s owner Economic pro t the difference between a rm s total revenue and the sum of its explicit and implicit costs excess profit Economic rent that part of the payment for a factor of production that exceeds the owner s reservation price the price below which the owner would not supply the factor Accounting pro t the difference between a rm s total revenue and its explicit costs Hurdle method of price discrimination the practice by which a seller offers a discount to all buyers who overcome some obstacle Market power a rm s ability to raise the price of a good without losing all its sales Monopolist maximizes pro t when the marginal revenue equals marginal cost When marginal revenues are zero total revenues are maximized The additional revenue collected from the sale of one additional unit of output is marginal revenue A single price monopolist is becoming a price discriminating monopolist The firm can expect an increase in both its output and its pro t The Invisible Hand Theory does not allocate resources ef ciently in the market because some costs of production are not included in private marginal costs The entire group of buyerssellers of a particular good or service makes up a market Large increase in populationincrease in the demand for apartments 2 demand curves have a common point demand shown by the steeper curve will be less elastic than the less steep curve A demand curve that is a vertical line illustrates price elasticity equal to 0 If marginal utility is positive as consumption increases total utility will increase as consumption increases According to the rational spending rule The relationship between the price of an item and the utility gained by consuming that item is the lower the price the lower the marginal utility Perfectly competitive firms maximize pro t when marginal costs equal price Unlike economic pro ts economic rents can t be easily driven to zero by entry
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'