The Impact of Microeconomics on Health Insurance in the US.
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the study of the behavior of individual decision making units is
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Microeconomics
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Health insurance should be provided to every citizen in a wealthy nation such as the US this statement is best described as.....
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normative
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according to the law of demand, as price rises
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quantity demanded decreases
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if the demand of sardines increases as income decreases then sardines are
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an inferior good
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according to the law of supply
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positive relationship between price and the quantity of a good supplied.
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economics deals primarily with the concept of
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scarcity
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in most societies, resources are allocated by
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the combined actions of millions of households and firms
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people face trade offs applies to
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individuals, families, and societies.
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efficiency means that society
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is getting the maximum benefits from its scarce resources
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circular flow daigram
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firms provide households with output
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a market includes
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buyers and sellers
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two goods are substitutes when a decrease in the price of one good
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decreases the demand for the other good
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if the demand for a good falls when income falls, then the good is
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normal good
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what is the primary cause of inflation
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an increase in the quantity of money
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an increase in the price of a good will
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increase quantity supplied
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elasticity is a measure of
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how much buyers and sellers respond to changes in market conditions.
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as price elasticity of supply increase, the supply curve
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becomes flatter
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positive statement
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attempts to describe the world as it is
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externalities
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when the production of consumption of a good affects bystanders
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market power
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a single buyer or seller has substantial influences on market price
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households
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buys and consumes goods and services
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firms
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produce and sells goods and services
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elasticity is the measure of
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how much buyers and sellers responds to changes in market conditions
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law of demand
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the claim that the quantity demanded of a good falls when the price of a good rises, other things equal
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marginal change
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small, incremental adjustment
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absolute advantage
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the ability to produce a good using fewer inputs than another producer
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demand schedule
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a table that shows the relationship between the price of a good and quantity demanded
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PPF
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a graph that shows the combination of 2 goods the economy can possibly produce given the available resources
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slope of PPF
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tells you the opportunity cost of one good in terms of the other
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what do trade offs reduce
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incentives, to work hard
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A binding price ceiling
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causes a shortage and is set at a price below the equilibrium price
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An outcome that can result from either a price ceiling or a price floor
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nonbinding price control
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price ceiling causes
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a shortage
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price floor causes
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a surplus
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if a price ceiling is not binding, then
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there will be no effect on the market price or quantity sold
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if a tax is imposed on a market with inelastic demand and elastic supply, then
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a buyer will bear most of the burden of the tax
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a minimum wage that is set below a markets equilibrium wage will
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have no impact on employment
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when a tax is levied on buyers of tea
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buyers or teas and sellers of tea are both worse off
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in a competitive market free of Gov regulations
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price adjusts until quantity demanded equals quantity supplied.
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On a graph, the area below a demand curve and above the price measures
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consumer surplus
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Producer Surplus
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the amount a seller is paid minus the cost of production
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Total Surplus
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the total value of the good to buyers minus the cost to sellers of providing the good.
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The benefit to buyers of participating in a market is measured by
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consumer surplus
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the decrease in total surplus that results from a market distortion, such as a tax, is called
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dead-weight loss
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the size of the dead weight that results from the tax is smaller....
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the smaller is the price elasticity of supply
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when a tax is imposed on a good,
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the equilibrium quantity of the good always decreases
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What is added to profit to obtain total revenue?
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total cost
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the amount of money that a firms cost (variable/fixed) depends on the
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time horizon under consideration
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when a firms long run average total costs do not vary as output increases, the firm exhibits
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constant returns to scale
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dairy farming exhibits the characteristics of
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free entry
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average revenue equals
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marginal revenue
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In a competitive market
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a firm has little ability to influence market prices.
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when a competitive firm doubles the quantity of output is sells its
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total revenue doubles
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A firm that exits its market( in the long run) has to pay
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nothing
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when firms have an incentive to exit a competitive market, their exit will lead to
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a raise in the profits of the firms that remain in the market
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in a perfectly competitive market, the process of entry and exit will end when
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economic profits are zero
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what is a characteristic of Monopoly?
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one buyer
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A monopolist faces a
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downward sloping demand curve
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Price discrimination is the business practice of
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selling the same good at different prices to different customers
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when a local grocery store offers discount coupons in the sunday paper it is most likely trying to
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price discriminate
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when a new firm enters a monopolistic competitive market, the individual demand curves faced by all existing firms in the market will..
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shift to the left
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under which of the following market structures would consumers likely pay the highest price for a product?
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monopoly
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a group of firms that act in unison to maximize collective profits is called
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cartel
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when collusion in an oligopoly breaks down then we should expect
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price to fall and quantity to rise
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Oligopoly
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a market structure in which a few firms dominate
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Game theory is important for the understanding of
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oligopoly
