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23 Cards in this Set
- Front
- Back
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If the government wants a natural monopoly to earn a "fair return" or zero economic profit, it will set...
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price equal to average total cost
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The purpose of antitrust laws is to...
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reduce anticompetitive activities
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The term "derived demand" refers to...
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demand for a resource derived from the demand for the product produced by that resource
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Economic rent is defined as...
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the payment to a resource in excess of its opportunity cost
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The marginal revenue product of labor equals
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change in total revenue/ change in units of labor
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In a perfectly competitive labor market, a profit-maximizing firm will hire labor up to the point at which the...
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wage rate = MRP of labor
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An improvement in technology, that allows workers to process twice as many insurance forms in an hour than before will cause...
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more workers to be employed because their marginal revenue product has increased
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Abby maximizes utility by allocating time among leisure, market work, and non-market work so that the
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marginal utility per hour of each is equal
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Substitution vs. Income slope direction
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upward vs. downward
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unions whose membership is confined to workers with a particular skill are known as...
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craft unions
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By saving households...
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are supplying loanable funds
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A technological breakthrough that increases the marginal productivity of capital would increase the...
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demand for loanable funds, leading to a higher equilibrium market interest rate
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Formula for present value
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PV= R/(1+r)^t
=future cash flow/ (1+required rate of return)^# of years one has to wait |
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An investment project should be undertaken...
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if the present value of the income stream earned from the project is higher than the cost of the project
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One way that the internet benefits consumers is by...
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reducing the marginal cost of information
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It is almost impossible to precisely determine the quality of many goods on eBay, as a result, people end up over paying for low quality goods. An example of...
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the winner's curse
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The "lemons problem" is that when there are hidden characteristics known only to the sller of a used car...
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the ration of lemons to high-quality cars is likely to be high
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Suppose the refrigerator repairman charges you for two hours of labor even though he could have fixed it in ten minutes. An example of...
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the principal-agent problem (or hidden action)
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Employers rely on a job applicants signals...
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because actual abilities are not observable prior to employment
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Good: rival and exclusive
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private good
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Good: non-rival and exclusive
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quasi-private goods (natural monopolies)
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Good: rival and nonexclusive
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open-access goods
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Good: non-rival and nonexclusive
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public good
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