Microeconomics Flashcards

Only 10 flashcards are shown at a time! Once you’ve mastered these 10 Economic terms, click the shuffle button below for 10 new terms. There are approximately 115 flashcards covering Microeconomics.

Productive efficiency
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When a good is produces in the least cost manner, productive efficiency is achieved. This means that firms producing the good are achieving the lowest possible average production cost; in other words, they are producing at the lowest point on their average total cost curve, where marginal cost intersects the ATC. Among the four market structures (perfect competition, monopolistic competition, oligopoly and monopoly), only perfectly competitive firms will achieve productive efficiency in the long-run, since the price in the market will always be competed down to the firms’ minimum ATC.

Productive efficiency
Price
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This is the amount paid for a good determined by the supply and demand for the good in the market. Price rises and falls as demand and supply rise and fall.

Price
Expectations
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Refers to the assumptions individual households and firms hold about future economic conditions. Current decisions are often made based on expectations of the future.

Expectations
Marginal Private Cost (MPC)
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The costs of production of a good experienced by the firms in market. Does not take into account any social or environmental costs.

Marginal Private Cost (MPC)
Interest
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The payment for capital in the resource market. Firms pay interest on the money they borrow to acquire capital equipment (technology). Households receive interest for providing their savings to banks, who make the loans to the firms paying interest.

Interest
Product market
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The market in a nation’s circular flow of income in which households demand goods and services, which firms provide. Households make purchases, providing revenue for firms, which they in turn use to acquire resources from households in the resource market.

Product market
Shift
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Refers to movements of curves in an economic diagram either inward or outward, up or down.

Shift
Services
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The non-physical output of firms meant for consumption in a product market. Services are “non-tangible” goods, such as taxi rides, accounting, doctor visits, teaching, and other products that can be bought and sold, but not physically consumed.

Services
Substitute
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When a good can be used instead of another good, the two goods are substitutes. For instance, Coke and Pepsi are substitutes. The demand for one good is directly related to the price of its substitutes.

Substitute
Human capital
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The value of labor created through education, training, knowledge and health. An important determinant of aggregate supply and the level of economic growth in a nation.

Human capital

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