Friday, January 13, 2012

Terms to Remember

Economic Efficiency = Maximization of AGGREGATE CS and PS

Market Failure= Situation when an unregulated competitive market is inefficient because prices fail to provide proper signals to consumers and producers

1. Externality= Action taken by either producer/consumer which affects orther p/c but is not accounted for by the market price (eg: Cost to society of environmental pollution of a chemical plant)

2. Lack of info= Consumers lack infor about the quality or nature of a product and so can't make utility-maximizing purchasing decisions

Perfectly Competitive Markets

Short Run (keywords: price taker, max-prof)

Long Run (keywords: max prof, normal prof/breakeven/zero-econ prof)

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