will expand as long as marginal cost is less than the market price
-small relative to the market
-sell an identical product
-in a market w many buyers and no barriers to exit or entry
Why do economists like competition?
-forces firms to become more efficient and innovate
-shifts resources from unproductive areas to productive areas
the branch of social science that deals with the production and distribution and consumption of goods and services and their management
The concept that there is less of a good freely available from nature than people would like
The logical error of comparing actual things with unrealistic, idealized alternatives. Tendency to assume that there is a perfect solution to a particular problem.
Production Possibilities Curve (PPC)
bowed-out production possibilities curves illustrate increasing opportunity cost, whereas straight-line production possibilities curves illustrate constant opportunity cost
Law of Comparative Advantage
The worker, firm, region, or country with the lowest opportunity cost of producing an output should specialize in that output
-better than socialism
-an economic system based on private property and free enterprise
1/2bXh, area below the demand curve but above the price, the difference between the maximum consumers are willing to pay and what they will actually pay
Quantity Demanded or Supplied
Movement along the curve caused by change in the price of the good in question
Change in Demand or Supply
A change in anything that affects demand aside from the price of the good
1/2bXh, area above the supply curve but below the price, the difference between the minimum producers are willing to acccept and what they actually accept
same as market for goods and services w a different name for price/quantity; Price=Wage, Quantity=Employment
principal agent problem
a problem caused by an agent pursuing his own interests rather than the interests of the principal who hired him
Price elasticity (demand) is larger when...?
people spend a large share of their income on the product
What distinguishes a competitive price searcher from a price taker market?
Firms in price-searcher produce differentiated prices
Why do economists generally criticize high barriers to market entry?
the ability of consumers to discipline producers is weakened
What would reduce the likelihood of effective collusion among oligopolistic producers?
low entry barriers into the market
resources made by man through his abilities and skill, would help man's daily activities become easy Ex:buildings, technology
Why does the government sometimes provide public goods?
free-riders make it difficult for private markets to supply the efficient quantity