What is a Gini coefficient, and how is it interpreted on the Lorenz curve?

A measure of income inequality equal to area A (between line of equality and Lorenz curve) divided by total area under equality line (A + B); ranges from 0 (perfect equality) to 1 (perfect inequality).

What is the Tragedy of the Commons and which category of goods does it affect?

The overconsumption and degradation of common-pool resources (rivalrous but non-excludable goods, e.g., ocean fisheries, shared grazing land) due to absent individual ownership incentives.

Distinguish between demand-pull inflation and cost-push inflation.

Demand-pull inflation occurs when aggregate spending outpaces aggregate productive capacity ('too much money chasing too few goods'); cost-push inflation is triggered by negative supply shocks that spike input costs.

How does monopolistic competition differ from perfect competition in the long run?

Firms produce differentiated products and face downward-sloping demand curves, resulting in excess capacity and markup over marginal cost (P > MC), even though free entry drives economic profits to zero (P = ATC).

State the short-run shutdown rule for a competitive firm.

The firm should shut down operations if the market price falls below Average Variable Cost (P < AVC), losing only fixed costs.

How is the official Unemployment Rate calculated in labor economics?

Unemployment Rate = (Number of Unemployed / Labor Force) * 100, where Labor Force = Employed + Unemployed actively seeking work.

Why do perfectly competitive firms earn zero economic profit in the long run?

Free entry and exit: positive economic profits attract new entrants (increasing industry supply and driving price down), while losses prompt exits (decreasing supply and driving price up) until P = min ATC.

Define Gross Domestic Product (GDP) using the expenditure approach formula.

GDP = C + I + G + NX (Consumption + Gross Private Domestic Investment + Government Purchases + Net Exports [Exports - Imports]).

What are the four primary defining characteristics of a perfectly competitive market?

Large number of small buyers and sellers, homogeneous/standardized products, free entry and exit, and perfect information.

What is a Pigouvian tax, and how does it correct a negative production externality?

A per-unit tax set exactly equal to the marginal external damage (marginal external cost) at the socially optimal output level, internalizing the externality and shifting PMC up to SMC.

Distinguish between first, second, and third-degree price discrimination.

1st degree: charging each consumer their exact reservation price (extracting all consumer surplus); 2nd degree: charging different prices based on quantity purchased; 3rd degree: charging different prices to distinct consumer groups based on elasticity of demand.

What is the defining structural feature of an oligopoly?

Mutual interdependence among a small number of dominant firms, where each firm's pricing and output decisions directly affect its competitors' payoffs.

How do adverse selection and moral hazard differ in asymmetric information theory?

Adverse selection occurs pre-contract when hidden characteristics cause unobserved undesirable parties to participate; moral hazard occurs post-contract when hidden actions/lack of monitoring induce risky behavior.

What is the Free-Rider Problem in public goods provision?

Because public goods are non-excludable, individuals have an incentive to consume without contributing to costs, causing private markets to under-provide or fail to provide the good.

What is the Labor Force Participation Rate formula?

Labor Force Participation Rate = (Labor Force / Civilian Non-Institutional Working-Age Population) * 100.

What is a negative externality, and why does a free competitive market overproduce the good?

A cost imposed on a third party not involved in the transaction; private marginal cost is less than social marginal cost (PMC < SMC), leading to market overproduction and deadweight loss.

What transactions are explicitly excluded from GDP calculations to avoid double counting or non-productive distortions?

Intermediate goods, secondhand/used goods sales, purely financial transactions (stocks/bonds transfers), transfer payments (social security), and non-market/underground economic activities.

Define public goods and contrast them with private goods using rivalry and excludability.

Public goods are non-excludable (impossible to prevent non-payers from consuming) and non-rivalrous (one person's use does not diminish availability to others); private goods are both excludable and rivalrous.

What is the kinked demand curve model in oligopoly, and what price behavior does it explain?

It assumes rivals match price cuts but ignore price increases, producing a discontinuous marginal revenue curve and explaining price rigidity (stickiness) in oligopolistic markets.

What is the Natural Rate of Unemployment (NAIRU)?

The Non-Accelerating Inflation Rate of Unemployment, representing the baseline level of frictional and structural unemployment present when cyclical unemployment is zero and inflation is stable.

What is the GDP Deflator, and how is it calculated?

A price index measuring the average price level of all domestically produced final goods and services: GDP Deflator = (Nominal GDP / Real GDP) * 100.

State the Fisher Equation relating nominal interest rate, real interest rate, and expected inflation.

i ≈ r + π^e (Nominal Interest Rate ≈ Real Interest Rate + Expected Inflation Rate), or exactly (1 + i) = (1 + r)(1 + π^e).

Why is a firm in a perfectly competitive market a price taker, and what is the shape of its individual demand curve?

Because its output is negligible relative to the entire market; its individual demand curve is perfectly elastic (horizontal) at the market price, where P = MR = AR.

What is a natural monopoly, and what cost condition causes it?

An industry where a single firm can supply the entire market at a lower average total cost than two or more firms, caused by substantial economies of scale spanning total market demand.

What is the Coase Theorem, and under what conditions does private bargaining solve externalities efficiently?

If property rights are clearly assigned and transaction costs are negligible, private parties can bargain to achieve an efficient resource allocation regardless of initial rights distribution.

What is Okun's Law in macroeconomic analysis?

An empirical relationship observing that for every 1% cyclical increase in the unemployment rate above its natural rate, an economy's GDP falls roughly 2% below its potential GDP.

What profit-maximizing output condition applies to all firms with market power, and how is the price determined?

The firm produces where MR = MC, and then charges the highest price consumers are willing to pay for that quantity off the demand curve (P > MC).

What is the marginal propensity to consume (MPC) and marginal propensity to save (MPS)?

MPC = ΔConsumption / ΔDisposable Income; MPS = ΔSaving / ΔDisposable Income; by definition, MPC + MPS = 1.

How does Nominal GDP differ from Real GDP?

Nominal GDP evaluates economic output using current-year prices, whereas Real GDP adjusts for price changes by valuing output at constant base-year prices, measuring actual physical volume change.

What is the Consumer Price Index (CPI), and what are its main measurement biases?

A weighted basket index tracking changes in prices paid by urban consumers for fixed goods; key biases include substitution bias, quality change bias, and new product introduction bias.

Why is a pure monopoly a price maker, and why does its marginal revenue curve lie below its demand curve?

The monopolist faces the downward-sloping market demand curve alone; to sell an additional unit, it must lower the price on that unit and all prior units, so MR < P.

What are the three main classifications of unemployment?

Frictional (transitional job search time), Structural (mismatch between worker skills/location and employer requirements), and Cyclical (resulting from macroeconomic downturns).

Macroeconomía — Intermedio (B1/B2) 2: Market Structures, Market Failures & Macroeconomic Aggregates

[Español] Macroeconomía: Competitive and non-competitive market structures, externalities, public goods, GDP accounting, inflation mechanics, and unemployment dynamics

Level: intermediate
Languages: es → es
Cards: 32
Markdown: Macroeconomía — Intermedio (B1/B2) 2: Market Structures, Market Failures & Macroeconomic Aggregates (.md)

Flashcards (32)

#	Front (Term / Question)	Back (Definition / Answer)
1	What is a Gini coefficient, and how is it interpreted on the Lorenz curve?	A measure of income inequality equal to area A (between line of equality and Lorenz curve) divided by total area under equality line (A + B); ranges from 0 (perfect equality) to 1 (perfect inequality).
2	What is the Tragedy of the Commons and which category of goods does it affect?	The overconsumption and degradation of common-pool resources (rivalrous but non-excludable goods, e.g., ocean fisheries, shared grazing land) due to absent individual ownership incentives.
3	Distinguish between demand-pull inflation and cost-push inflation.	Demand-pull inflation occurs when aggregate spending outpaces aggregate productive capacity ('too much money chasing too few goods'); cost-push inflation is triggered by negative supply shocks that spike input costs.
4	How does monopolistic competition differ from perfect competition in the long run?	Firms produce differentiated products and face downward-sloping demand curves, resulting in excess capacity and markup over marginal cost (P > MC), even though free entry drives economic profits to zero (P = ATC).
5	State the short-run shutdown rule for a competitive firm.	The firm should shut down operations if the market price falls below Average Variable Cost (P < AVC), losing only fixed costs.
6	How is the official Unemployment Rate calculated in labor economics?	Unemployment Rate = (Number of Unemployed / Labor Force) * 100, where Labor Force = Employed + Unemployed actively seeking work.
7	Why do perfectly competitive firms earn zero economic profit in the long run?	Free entry and exit: positive economic profits attract new entrants (increasing industry supply and driving price down), while losses prompt exits (decreasing supply and driving price up) until P = min ATC.
8	Define Gross Domestic Product (GDP) using the expenditure approach formula.	GDP = C + I + G + NX (Consumption + Gross Private Domestic Investment + Government Purchases + Net Exports [Exports - Imports]).
9	What are the four primary defining characteristics of a perfectly competitive market?	Large number of small buyers and sellers, homogeneous/standardized products, free entry and exit, and perfect information.
10	What is a Pigouvian tax, and how does it correct a negative production externality?	A per-unit tax set exactly equal to the marginal external damage (marginal external cost) at the socially optimal output level, internalizing the externality and shifting PMC up to SMC.
11	Distinguish between first, second, and third-degree price discrimination.	1st degree: charging each consumer their exact reservation price (extracting all consumer surplus); 2nd degree: charging different prices based on quantity purchased; 3rd degree: charging different prices to distinct consumer groups based on elasticity of demand.
12	What is the defining structural feature of an oligopoly?	Mutual interdependence among a small number of dominant firms, where each firm's pricing and output decisions directly affect its competitors' payoffs.
13	How do adverse selection and moral hazard differ in asymmetric information theory?	Adverse selection occurs pre-contract when hidden characteristics cause unobserved undesirable parties to participate; moral hazard occurs post-contract when hidden actions/lack of monitoring induce risky behavior.
14	What is the Free-Rider Problem in public goods provision?	Because public goods are non-excludable, individuals have an incentive to consume without contributing to costs, causing private markets to under-provide or fail to provide the good.
15	What is the Labor Force Participation Rate formula?	Labor Force Participation Rate = (Labor Force / Civilian Non-Institutional Working-Age Population) * 100.
16	What is a negative externality, and why does a free competitive market overproduce the good?	A cost imposed on a third party not involved in the transaction; private marginal cost is less than social marginal cost (PMC < SMC), leading to market overproduction and deadweight loss.
17	What transactions are explicitly excluded from GDP calculations to avoid double counting or non-productive distortions?	Intermediate goods, secondhand/used goods sales, purely financial transactions (stocks/bonds transfers), transfer payments (social security), and non-market/underground economic activities.
18	Define public goods and contrast them with private goods using rivalry and excludability.	Public goods are non-excludable (impossible to prevent non-payers from consuming) and non-rivalrous (one person's use does not diminish availability to others); private goods are both excludable and rivalrous.
19	What is the kinked demand curve model in oligopoly, and what price behavior does it explain?	It assumes rivals match price cuts but ignore price increases, producing a discontinuous marginal revenue curve and explaining price rigidity (stickiness) in oligopolistic markets.
20	What is the Natural Rate of Unemployment (NAIRU)?	The Non-Accelerating Inflation Rate of Unemployment, representing the baseline level of frictional and structural unemployment present when cyclical unemployment is zero and inflation is stable.
21	What is the GDP Deflator, and how is it calculated?	A price index measuring the average price level of all domestically produced final goods and services: GDP Deflator = (Nominal GDP / Real GDP) * 100.
22	State the Fisher Equation relating nominal interest rate, real interest rate, and expected inflation.	i ≈ r + π^e (Nominal Interest Rate ≈ Real Interest Rate + Expected Inflation Rate), or exactly (1 + i) = (1 + r)(1 + π^e).
23	Why is a firm in a perfectly competitive market a price taker, and what is the shape of its individual demand curve?	Because its output is negligible relative to the entire market; its individual demand curve is perfectly elastic (horizontal) at the market price, where P = MR = AR.
24	What is a natural monopoly, and what cost condition causes it?	An industry where a single firm can supply the entire market at a lower average total cost than two or more firms, caused by substantial economies of scale spanning total market demand.
25	What is the Coase Theorem, and under what conditions does private bargaining solve externalities efficiently?	If property rights are clearly assigned and transaction costs are negligible, private parties can bargain to achieve an efficient resource allocation regardless of initial rights distribution.
26	What is Okun's Law in macroeconomic analysis?	An empirical relationship observing that for every 1% cyclical increase in the unemployment rate above its natural rate, an economy's GDP falls roughly 2% below its potential GDP.
27	What profit-maximizing output condition applies to all firms with market power, and how is the price determined?	The firm produces where MR = MC, and then charges the highest price consumers are willing to pay for that quantity off the demand curve (P > MC).
28	What is the marginal propensity to consume (MPC) and marginal propensity to save (MPS)?	MPC = ΔConsumption / ΔDisposable Income; MPS = ΔSaving / ΔDisposable Income; by definition, MPC + MPS = 1.
29	How does Nominal GDP differ from Real GDP?	Nominal GDP evaluates economic output using current-year prices, whereas Real GDP adjusts for price changes by valuing output at constant base-year prices, measuring actual physical volume change.
30	What is the Consumer Price Index (CPI), and what are its main measurement biases?	A weighted basket index tracking changes in prices paid by urban consumers for fixed goods; key biases include substitution bias, quality change bias, and new product introduction bias.
31	Why is a pure monopoly a price maker, and why does its marginal revenue curve lie below its demand curve?	The monopolist faces the downward-sloping market demand curve alone; to sell an additional unit, it must lower the price on that unit and all prior units, so MR < P.
32	What are the three main classifications of unemployment?	Frictional (transitional job search time), Structural (mismatch between worker skills/location and employer requirements), and Cyclical (resulting from macroeconomic downturns).