cumulative part

• you will be able to produce and consumer more if you specialize on your comparative advantage
• price ceiling is below the equilibrium price
• price floor is above the equilibrium price
• if the substitution effect dominates, it will affect wages and quantity
• if income decreases, the demand of an inferior good will increase leading price and quantity to go up
• an inferior good is when you buy less of something when your income is high
• scarcity is when limited resources prevent someone from doing everything they would like
• marginal cost is the wage paid
• declining output prices is when as your produce more, the price at which you cab sell your output falls
• substitution effect: high wages mean selling labor is more valuable
• income effect: high wages mean you need to sell less of your labor
• when the substitution effect dominates - the individual labor supply is upward slopping
• when the income effect dominates - the individual labor supply curve is downward slopping
• at low wages, the substitution effect dominates
• at high wages, the income effect dominates
• price of imported goods = world price + trade cost

  • a price cut
• price of exported goods = world price - trade cost

  • a price raise
• arguments for limiting trade:

  • national security
  • infant industries
  • unfair competition
  • domestic regulations
  • saving jobs
• if insurance companies only sell to high - cost buyers (averse selection of buyers) it can cause market - unraveling
• solutions to moral hazard:

  • monitoring
  • rewards
  • skin in the game
  • selection
• examples of imperfect competition:

  • many firms selling differentiating goods
  • few firms selling differentiating goods
  • a monopoly selling its good
• making a product that is only slightly different from your competitors is most likely to maximize your market share when two firms engage only is "non - price competition"
• grim trigger strategy - when everyone cooperates you'll cooperate, but if anyone has defected you'll defect
• tit for tat - strategy in a repeated game where one side tries to gain an advantage over the other side
• the addition to subsidies will affect a firm's production and profits by rising its quantity and prices in the short run
• constant returns to scale are when the company's long run average inputs and outputs are proportional to each other
• natural monopoly - market in which it is the cheapest for a single business to service the market
• imperfect competition - market featuring a few sellers but with sufficient limited competition that they have market power
• monopolistic competition - a market structure with many small businesses competing each other each selling differentiating products
• efficiency of price discrimination:

  • increases quantity you sell
  • helps solve the underproduction problem
• quota is below equilibrium quantity
• mandate is above the equilibrium quantity
• economic burden reflects whose surplus is affected by taxes
• statutory burden reflects who remits tax dollars to the government
• binding price ceiling leads to low price and quantity
• absolute advantage is being able to do a task using fewer inputs
• comparative advantage is the ability to do a task at a low opportunity cost
• quantity falls and price becomes ambiguous when you're in a monopolistic competitive firm and new firms come in competition for consumers and employers
• quantity becomes ambiguous and price rises when a minimum wage is implemented on firm with an inelastic demand labor as an input and whom sell normal goods
• when wages increase, the substitution effect dominates income effect