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Micro Test 2
Second Micro Test Flash Cards
| Term | Definition |
|---|---|
| Excise Tax | tax on a good or service (dollar amount per unit) |
| Tax Incidence | Who really pays the burden of a tax (more inelastic=higher burden) |
| Proportional tax | everyone pays the same percentage of income |
| Regressive tax | larger percentage of income paid by lower income earners |
| Autarky | country does not trade with other countries |
| Factor endowments | mix of available factors of production |
| factor intensity | measure of which factor is used in greatest proportion in the production of a good |
| hecksher-ohlin theorem (difference in factor endownment) | A country has comparative advantage in a good whose production is intensive in the factor that is abundant (lots of labor=advantage in production that requires lots of labor |
| Sources of comparative advantage | differences in climate, differences in technology, differences in factor endowments |
| Tariff | tax on import (raises price for domestic consumer) |
| Consumer surplus, producer surplus | exports increase producer surplus and decrease consumer surplus total |
| surplus increases | net gain to economy tariffs increase producer surplus, decrease consumer surplus, increase government revenue and result in deadweight loss |
| explicit costs | actually laying out money (direct costs) |
| implicit costs | does not require outlay of money, measured by the dollar value of benefits that are forgone (indirect costs, opportunity costs) |
| Accounting Profit | revenue-explicit-depreication |
| Economic Profit | revenue-explicit-depreciation-implicit |
| Marginal Cost | additional cost incurred by producing one more unit of that good or service |
| Marginal Benefit | additional benefit derived from producing one more unit of that good or service |
| Behavioral Economics | brand of economics that combines economic modeling with psychology (people make less than perfect economic decisions) |
| Common mistakes in decision making | misperceving opp costs, being overconfident, having unrealistic expectations about future, countering dollars unequally, being loss averse, having a bis towards status quo |
| Utility | measure of satisfaction the consumer derives from consumption of bundle of goods and services |
| Principle of diminishing marginal utility | each successive unit of good or service consumed adds less to total utility than did the previous |
| Budget Line | shows the consumption bundles available to a consumer who spends all income |
Created by:
sshaw1
Popular Economics sets