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ECO 2013 Lecture Notes - Lecture 3: Market Power, Transaction Cost, Opportunity CostExam

Course Code
ECO 2013
Eric Levy
Study Guide

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You can have a ___________________ advantage at everything, but you can't
have a __________________ advantage at everything.
_____________________ is spending all of your time producing a particular
_________________ increases total production.
________________ pioneered the trading system.
gains from trade
_____________________ is the improvement in outcomes that occurs when
producers specialize and exchange goods and services
when two producers differ in opportunity cost and they set a trading price that
falls between those opportunity costs
What constitutes for room for trade?
technology and number of workers/population
What are the two main factors that drive the change in the U.S. production
everyone gets more of the things they want than they would if they were self
How can trade be driven by self interest?
market economy
_____________________ is an economy in which private individuals, rather
than a centralized planning authority, make the decisions
_______________ is buyers and sellers who trade a particular good or service
standardized goods, full information, no transaction costs, participants are price
What are four important characteristics about a competitive market?
standardized good

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________________________ is a good or service for which any two units of
it have the same features and are interchangeable
transaction cost
___________________ is the cost incurred by buyer and seller in agreeing to
and executing a sale of goods or services
price taker
The term ___________________ means a buyer or seller cannot affect the
market price
if one producer raises their price then the consumer will go to another producer
Why can't there be a price taker in a competitive market?
_________________ describes how much of something people are willing
and able to buy under certain circumstances
quantity demand
_____________________ is the amount of a particular good that buyers will
purchase at a given price during a specified period
overall market demand
_____________________ is all the individual choices on when a consumer
was able to purchase a product during fluctuating price times
law of demand
___________________ is a fundamental characteristic of demand which
states, all else equal, quantity demanded rises as price falls
ceteris paribus
___________________ is the latin term for "all other things being the same"
ceteris paribus
The first requirement for the law of demand is the idea of
ceteris paribus
Economists rely on the idea of _____________________ to isolate the effect
of a single change in the economy.
because the impact of a change on a single variable is easier to predict
Why do economists frequently ceteris paribus in their analysis of the economy?
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