Untitled Quiz

Positive and Normative Statements

• Positive statements describe observed behavior.
• Normative statements describe what ought to be.

Opportunity Cost

• The best alternative forgone when a choice is made.

Randomized Controlled Trials (RCTs)

• Experiments with randomized assignment, creating almost identical groups except for a randomly assigned element.

Coase Theorem

• Efficient resource allocation when transaction costs are low and property rights are clear.

Natural Experiments

• Economists use these to investigate causal relationships, focusing on naturally occurring divisions of groups rather than random assignment.

Cartels

• Cartels share the harms of monopolies without the potential gains from efficiency.

Homo Economicus

• A model describing humans as perfectly rational, materially self-interested, and having perfect self-control agents.

Binding Price Floors and Ceilings

• Price floors prevent sellers from charging below a set amount (e.g., minimum wage), potentially causing a surplus.
• Price ceilings prevent sellers from charging above a set amount (e.g., rent control), potentially causing a shortage.

Willingness to Pay (WTP) and Willingness to Accept (WTA)

• WTP = Marginal Benefit (MB)
• WTA = Marginal Cost (MC)

Utilitarianism

• Maximizes total societal well-being by summing individual utilities.
• May involve transferring resources between individuals to reduce one's loss and increase another's gain if the increase is larger than the loss.

Rawlsianism

• Prioritizes maximizing the well-being of the worst-off person in society.
• May not lead to absolute equality to incentivize productive behavior

Narrow Bracketing

• Focusing attention on immediate tasks and people, potentially overlooking broader, long-term, or less personally visible needs.

Negative Reciprocity

• The belief that harming someone who harms you is beneficial.
• Revenge

Pareto Efficiency

• No individual can be made better off without making someone worse off.
• Pareto efficient outcomes involve negative slope at an optimal point on a graph.

Utility and Income Relationships

• A 10% increase in income generally results in a similar increase in utility across different income levels.
• Additional income provides a larger boost to happiness for those with lower incomes compared to higher ones.

Libertarianism

• Prioritizes individual rights in policy evaluation.
• Generally supports taxes for essential societal functions like defense and courts, but may not support redistribution.

Shifts in Supply and Demand Curves

• Supply shifts based on technological advancements, producer goals, input prices, and seller expectations.
• Demand shifts based on consumer tastes, income, and buyer expectations, as well as related goods' prices and availability.
• Complementary goods shift together; substitute goods shift in opposite directions.

Mixed Strategies

• Optimal strategies often involve a mixed approach rather than solely relying on one approach.

Normal and Inferior Goods

• Normal goods have demand increasing with income; inferior goods have demand decreasing with income.

Invisible Hand

• Markets are self-regulating through self-interest driven optimization, competition, trust, and institutions.

Market Failures

• Occur when free markets fail to achieve socially efficient allocations.
  • Imperfect competition (monopolies, oligopolies)
  • Externalities (positive or negative effects on third parties)
  • Imperfect information
  • Imperfect rationality
  • Unjust outcomes

Imports and Exports

• Imports reduce domestic prices, benefiting consumers but hurting domestic producers.
• Exports raise domestic prices, benefiting domestic producers but hurting consumers.

Enrollment Types

• Different approaches to assigning individuals to programs or services, ranging from automatic enrollment to active choices.

Elasticities and Game Theory

• Elasticity is greater in narrower markets.
• Nash equilibrium is when each player's choices are optimal given the choices of other players (no incentive to deviation).
• Game theory analyzes strategic interactions using concepts like Nash equilibrium.

Taxes and Externalities

• Pigouvian taxes correct negative externalities by creating incentives for more efficient outcomes.
• Tax burdens are borne more by the inelastic side of a market.

Antitrust Laws

• Protect competition by preventing collusion and problematic mergers.

Comparative Advantage

• The ability of an economic actor to produce a good or service at a lower opportunity cost than another.

Monopsonies and Monopolies

• Monopsonists face a different form of market distortion from competitive markets, affecting employment, wages, and consumer surplus.

Maximizing Profits

• In competitive markets, marginal cost equals marginal revenue, which is equivalent to the price.
• In monopolistic markets, the marginal revenue is less than the price.

Wealth Distribution

• Different forms of economic resources, like wealth, income, and consumption, are unequally distributed across populations.

Game Theory Concepts

• Zero-sum games: One person's gain is exactly balanced by another's loss.
• Simultaneous games: Multiple players make choices simultaneously.
• Sequential games: Players make choices sequentially, considering each other's actions.
• Dominant strategies: Strategies chosen regardless of other players' choices.

Behavioral Economics Concepts

• Present bias: Preference for immediate rewards over future rewards.
• Economic agents are not always rational or purely self-interested.

Other Economic Concepts

• Consumption smoothing: Maintaining a consistent standard of living across time.
• Universal Basic Income (UBI): Policy providing a regular sum of money to all citizens.
• Adverse selection: Potential for those with higher risks being disproportionately represented in insurance markets.
• Moral hazard: Risk increases for individuals when costs of risk are not fully internalized, leading to inefficient consumption patterns.