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27 Cards in this Set
- Front
- Back
Resources
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scarce, some mechanism must allocate them
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Alternative allocation method
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1. Market Price
2. Command 3. Majority Rule 4. Contest 5. First-come, first served 6. Lottery 7. Personal Characteristics 8. Force |
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Marginal Benefit
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determines demand, anda demand curve is a marginal benefit curve
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Market Demand Curve
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is the horizontal sum of the individual demand curves and is the marginal social benefit curve
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Value
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is what people are willing to pay; price is what people must pay
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Consumer Surplus
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equals value minus price, summed over the quantity bought
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Minimum supply price
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determines supply, and the supply curve is the marginal cost curve
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Market Supply Curve
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is the horizontal sum of hte indiividual supply curves and is the marginal social cost curve
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Opportunity Cost
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is what producers pay; price is what producers receive
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Producer Surplus
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equals price minus opportunity cost, summed over the quantity sold
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Competitive equilibrium
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marginal social benefit equals marginal social cost and resource allocation is efficient
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Buyers and Sellers
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acting in their self-interest end up promoting the social interest
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Consumer Surplus and Producer Surplus
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the sum off consumer surplus and producer surplus is maximized
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Deadweight Loss
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producing less than or more than the efficient quantity creates deadweight loss
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Inefficiency and Deadweight Loss can be created by
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1. Price and Quantity Regulations
2. Taxes and Subsidies 3. Externalities 4. Public goods 5. Commons Resources 6. Monopoly 7. High Transactions costs |
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Demand Curve
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is a marginal benefit curve
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Individual demand
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hte relationship between the price of a good and the quantity demanded by one person
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Market Demand
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the relationship between the price of a good and the quantity demanded by all buyers
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Market Demand Curve
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is the horizontal sum of the individual demand curves and is formed by adding the quantities demanded by all the individuals at each price
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Marginal Social Benefit (MSB)curve
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The market demand curve
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Consumer Surplus
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is the value or marginal benefit of a good minus the price paid for it, summed over teh quantity bought
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Marginal Cost
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the cost of producing one more unit of a good or service; the minimum price that producers must receive to induce them to offer to sell another unit of the good ro service, but the minimum supply-price determines supply, a supply curve is a marginal cost curve
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Market Supply Curve
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The market supply curve is the horizontal sum of the individual supply curves and is formed by adding the quantities supplied by all the producers at each price; the market supply curve is the economy's marginal social cost(MSC)curve
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Producer Surplus
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whenn price exceeds marginal cost, the firm receives a producer surplus; a producer surplus is the price received for a good minus its minimum supply-price or marginal cost, summed over the quantity sold
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Marginal Social Benefit (MSB)
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Demand curve is also the MSB curve
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Marginal Social Cost (MSC)
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the supply curve is the MSC curve
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Equilibrium
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where the demand curve and the supply curve intersect marginal social benefit equals marginal social cost, this condition delivers an efficient use of resources, when the efficient quantity is produced, total surplus (the sum of consumer surplus and producer surplus) is maximized
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