question
How to determine to produce another?
answer
is MR> MC
question
Production function? Ex of the inputs?
answer
Q = F (K,L)
K-> is capital (buildings)
L-> is labor
K-> is capital (buildings)
L-> is labor
question
PC : What happens in the long run
answer
goes back to 0
question
Monopoly:What happens in the long run
answer
zero or positive profit
question
Fixed costs are
answer
SUNK
doesn't apply to anything questions have to do with decision making, bc doesn't vary w/ output
doesn't apply to anything questions have to do with decision making, bc doesn't vary w/ output
question
MPL (3)
answer
change in Q/change in L
intersects APL @max
is the slope of TPL, increases until inflection point
intersects APL @max
is the slope of TPL, increases until inflection point
question
APL
answer
Q/L
question
TPL
answer
Q
question
Law of Diminishing Returns (3)
answer
MPL will eventually decline:
1) congestion
2) coordination of workers
3) exhaustion of specialization possibilities
"too many cooks in the kitchen"
1) congestion
2) coordination of workers
3) exhaustion of specialization possibilities
"too many cooks in the kitchen"
question
TC
answer
TFC+TVC
question
AVC (2)
answer
TVC/Q
W/APL
W/APL
question
AC
answer
TC/Q
question
AFC
answer
TFC/Q or ATC-AVC
question
MC (2)
answer
W/ MPL
TVC
TVC
question
MPL and MC relationship?
answer
they are inverses
question
APL and MPL graph?
answer
MPL intersects @max
question
Important diagram
answer
mem
question
What determines PC firm? (6)
answer
FBSLP
-Free Entry
-Buyer and Sellers are insignificant
-Standardized Product
-Large # of Buyers/Sellers
-Perfect Information (on products/prices)
-Free Entry
-Buyer and Sellers are insignificant
-Standardized Product
-Large # of Buyers/Sellers
-Perfect Information (on products/prices)
question
How does a PC firm effect profit?
answer
By changing Q
question
How to calculate max profit?
Max profit Rule?
Max profit Rule?
answer
profit= TR-TC or profit= (P-ATC)x Q
Rule:
if MR> MC = produce
if MR< MC = NO!
Rule:
if MR> MC = produce
if MR< MC = NO!
question
MR
answer
change in TR/change in Q
question
In PC: MR
answer
is constant
question
indivisible and divisible goods
answer
indivisible - P> MC
divisible- P= MC
divisible- P= MC
question
PC, optimal output?
answer
P=MC or MR=MC
question
How to determine if there is Profit/Loss?
answer
ATC>P = LOSS
ATC<P = PROFIT
ATC<P = PROFIT
question
PC and Monopoly: What to do if you make loss (negative #) in SHORT RUN?
answer
Shut Down Rule:
1) if P<AVC or TR<TC
2) -FC> profit
1) if P<AVC or TR<TC
2) -FC> profit
question
Supply Curve for PC
answer
anything below AVC= 0
above= MC
above= MC
question
Adam Smith (3)
answer
Invisible Hand theory
buyers/sellers= effieicent allocation resources
need entry and exit
buyers/sellers= effieicent allocation resources
need entry and exit
question
Implicit Costs
answer
OC
question
Explicit Costs
answer
direct purchases
question
Accounting Profit
answer
TR - explicit costs
question
Economic Profit
answer
accounting profit - OC
question
2 functions of price?
answer
rationing function of prices- scarce goods to those who pay most
allocative function of price- directs resources from overcrowded-> underserved
allocative function of price- directs resources from overcrowded-> underserved
question
PC/ Monopolistic Competition: responses to profit in LONG RUN
answer
if earning econ profit= attract resources
---> goes back to zero
---> Entry= shrink
if suffering econ profit= lose resources
---> goes back to zero
---> Exit= Balances
---> goes back to zero
---> Entry= shrink
if suffering econ profit= lose resources
---> goes back to zero
---> Exit= Balances
question
PC: Where is Long run Market Equilibrum?
answer
ATC=MC
question
Invisible Hand & Socially Optimal Outcome Best When?
answer
Societies MB = Societies MC
question
What do PC firms have?
answer
STRONG incentives to lower costs to earn profits to stay in biz
question
Welfare analysis
answer
change in CS or PS due to price cieling
question
Downsides to binding price cieling in housing market (2)
answer
expensive to operate
increase in demand eventually-> MORE shortage
increase in demand eventually-> MORE shortage
question
monopoly
answer
1 seller,
no close substitues
no close substitues
question
monopolistic competition
answer
many firms;
products are somewhat close substitues
products are somewhat close substitues
question
oligopoly
answer
small # of firms;
products are all close substitutes
products are all close substitutes
question
What is dif between imperfect markets and PC in terms of demand?
answer
able to raise price w/o losing all sales
question
TR for Monopoly/ PC: producing an addition unit...(3)
answer
quantity effect- TR increases
price effect- TR decrease
--> have to consider which has greater effect to mas profits
price effect- TR decrease
--> have to consider which has greater effect to mas profits
question
In a monopoly MR curve is __________________ the demand curve because ___
MR is ___
MR is ___
answer
BELOW
MR<P
Not a constant
MR<P
Not a constant
question
Monopoly Supply Curve
answer
doesn't exist, it sets the price!
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
