Page 903 - Krugmans Economics for AP Text Book_Neat

GLOSSARY G-7

loanable funds market a hypothetical lump-sum taxes taxes that don’t marginal rate of substitution (MRS) the
market in which the demand for depend on the taxpayer’s income. ratio of the marginal utility of one
funds is generated by borrowers and (pp. 211, 508) good to the marginal utility of anoth-
the supply of funds is provided by macroeconomic policy activism the use er. (p. 794)
lenders. The market equilibrium deter- of monetary policy and fiscal policy to marginal revenue the change in total
mines the quantity and price, or inter- smooth out the business cycle. revenue generated by an additional
est rate, of loanable funds. (p. 277) (p. 346) unit of output. (p. 537)
loan-backed securities assets created macroeconomics the branch of marginal revenue curve a graphical rep-
by pooling individual loans and selling economics that is concerned with resentation showing how marginal rev-
shares in that pool. (p. 227) the overall ups and downs in the enue varies as output varies. (p. 538)
long run the time period in which all economy. (p. 5) marginal revenue product of labor
inputs can be varied. (p. 542) marginal analysis the study of marginal (MRPL) equals the marginal product
long-run aggregate supply curve a decisions. (p. 3) of labor times the marginal revenue
graphical representation of the rela- marginal cost curve a graphical repre- received from selling the additional
tionship between the aggregate price sentation showing how the cost of output. The marginal revenue product
level and the quantity of aggregate out- producing one more unit depends on of land and the marginal revenue
put supplied if all prices, including the quantity that has already been product of capital are equivalent con-
nominal wages, were fully flexible. The produced. (p. 538) cepts. (p. 700)
long-run aggregate supply curve is marginal social benefit of a good or
vertical because the aggregate price marginal cost pricing occurs when reg- activity the marginal benefit that
level has no effect on aggregate out- ulators set a monopoly’s price equal to accrues to consumers plus the mar-
put in the long run; in the long run, its marginal cost to achieve efficiency. ginal external benefit. (p. 738)
aggregate output is determined by the (p. 757)
economy’s potential output. (p. 184) marginal external benefit the addition marginal social benefit of pollution the
to external benefits created by one additional gain to society as a whole
long-run average total cost curve a from an additional unit of pollution.
graphical representation showing more unit of the good. (p. 738) (p. 724)
the relationship between output and marginal external cost the increase in marginal social cost of a good or activity
average total cost when fixed cost has external costs created by one more
been chosen to minimize average unit of a good. (p. 739) the marginal cost of production plus
total cost for each level of output. marginal factor cost of labor (MFCL) the marginal external cost. (p. 739)
(p. 561) the additional cost of hiring an addi- marginal social cost of pollution the
long-run industry supply curve a tional worker. The marginal factor additional cost imposed on society as
graphical representation that shows cost of land and the marginal factor a whole by an additional unit of pol-
how quantity supplied responds to price cost of capital are equivalent concepts. lution. (p. 724)
once producers have had time to enter (p. 700) marginal utility the change in total
or exit the industry. (p. 603) marginal private benefit the marginal utility generated by consuming one
long-run macroeconomic equilibrium a benefit that accrues to consumers of a additional unit of a good or service.
situation in which the short-run good, not including any external ben- (p. 513)
macroeconomic equilibrium is also on efits. (p. 738) marginal utility curve a graphical rep-
the long-run aggregate supply curve; so marginal private cost the marginal resentation showing how marginal util-
short-run equilibrium aggregate output is cost of producing a good, not includ- ity depends on the quantity of a good
equal to potential output. (p. 194) ing any external costs. (p. 739) or service consumed. (p. 513)
long-run market equilibrium an marginal product the additional marginal utility per dollar the addi-
economic balance in which, given suf- quantity of output produced by tional utility from spending one more
ficient time for producers to enter or using one more unit of that input. dollar on a good or service. (p. 518)
exit an industry, the quantity supplied (p. 543) marginally attached workers nonwork-
equals the quantity demanded. (p. 602) marginal productivity theory of income ing individuals who say they would
long-run Phillips curve a graphical rep- distribution every factor of production like a job and have looked for work in
resentation of the relationship is paid its equilibrium value of the mar- the recent past but are not currently
between unemployment and inflation in ginal product. (p. 692) looking for work. (p. 120)
the long run after expectations of marginal propensity to consume (MPC) market basket a hypothetical consump-
inflation have had time to adjust to the increase in consumer spending tion bundle of consumer purchases of
experience. (p. 336) goods and services, used to measure
when income rises by $1. Because
long-term interest rate the interest rate consumers normally spend part but changes in overall price level. (p. 142)
on financial assets that mature a num- not all of an additional dollar of dis- market economy an economy in which
ber of years into the future. (p. 270) posable income, MPC is between 0 decisions of individual producers and
long-term reputation allows an indi- and 1. (p. 159) consumers largely determine what,
vidual to assure others that he or she marginal propensity to save (MPS) the how, and for whom to produce, with
isn’t concealing adverse private infor- increase in household savings when little government involvement in the
mation. (p. 784) disposable income rises by $1. (p. 159) decisions. (p. 2)