Docstoc

concepts

Document Sample
concepts Powered By Docstoc
					Concepts For Micro Theory Supply and Demand
          demand vs. quantity demanded supply vs. quantity supplied movements along vs. shifts of S & D price ceiling, price floor economic shortage/surplus market & individuals' demand curves horizontal summation specific tax tax incidence elasticity of demand and supply

Consumer Theory
             consumption bundle preferences budget line indifference curve properties of indiff. curves slope down don't cross "moon" shaped tangency of budget line & indiff curve normal vs. inferior goods complementary vs. substitute goods derivation of demand curves endowment

Farm Programs
     deficiency payments loan program (CCC) food stamp program surplus and profit dead weight loss

The Firm
        Cost Curves and Profit Maximizing Output economic profits cost function, C(Q) marginal cost fixed vs. variable costs  c = vc + fc  ac = avc +afc producer's supply curve  mc above avc  why does p = mc? increasing, decreasing and constant costs u-shaped costs diagram

 

short-run vs. long-run supply long-run competitive equilibrium  profits are zero  p = mc  S=D

Deriving Cost Curves from Isoquants
       production function returns to scale isoquant isocost = expenditure lines tangency gives chosen inputs derive cost curve derive (conditional) factor demand

Monopoly
        marginal revenue for competitive firm causes of monopoly profit-maximizing P & Q for monopoly barriers to entry why MR=MC gives max profit What's Wrong With Monopoly deadweight loss of monopoly regulation of public utility

Market Failure and Welfare
         Willingness to Pay Surplus Deadweight loss Competition maximizes profits plus surplus allocation Pareto efficiency efficiency versus income distribution Public Good A competitive Equilibrium is a Pareto Optimum

Pollution
  Technology Based Effluent Standard  Isoquant diagram  price that achieves same level of pollution Major Water/Land/Air legislation and programs  Clean Air Act.  National Goals  State Plans to meet goals; stricter standards in dirtier places  Technology Based Effluent Standards --TBES--(Best Practicable, Available, Conventional Technology)  Point Source--TBES for new sources, existing sources in dirty areas, toxics  Non-point Source--rules for cars but not yet for trucks, trains, and boats  RECLAIM  Acid Rain 



CERCLA--Superfund  Fund to pay for cleanup of old wastes  Ability to sue for Natural Resource Damages  You Touched It, You're Responsible   Taxes vs. Standards: who gets the money/efficiency  Right amount of pollution: Between firms, between firms and consumers.  Diagram read from both sides  price of clean air/water is too low  results in too much of polluting input (isoquant diagram)  results in too much output  private marginal cost understates social mc  Property rights in Water  Appropriative: first in use, first in right  Equal sharing  Need for trade to get efficient allocations  Coase Theorem  is pollution independent of assignment of property rights  transaction costs  with high enough transactions costs it could be best to let the polluter pollute  The smoker and asthmatic: does income matter?  do property rights attenuate pollution Fishery  Increased growth = interest rate  Open access




				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:30
posted:11/10/2009
language:English
pages:3