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diminishing marginal utility
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the marginal utility of a good or service declines as its available supply or consumption increases
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when theres a decrease in the budget, the budget line shifts
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leftward
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when theres an increase in the budget, the budget line shifts
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rightward
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when the price of one good rises, the other prices remain the same what happens to the possibilities and which way does the line move?
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possibilities shrink, line moves inward
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when the price of one good falls, the other prices remain the same what happens to the possibilities and which way does the line move?
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possibilities expand, line moves outward
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relative price
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the price of one good in comparison with the price of other goods
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A consumer faces the following situation. Her marginal utility of a luxury good with a price of $100 is 100 units. An alternative good has a marginal utility of 40 units and a price of $50. What should she do if she wishes to increase her total utility?
You Answered
You Answered
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purchase more of the luxury goods and fewer of the alternative goods.
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marginal utility
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change in total utility from one unit to another
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marginal utility per dollar
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the marginal utility from a good that results from spending one more dollar on it
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marginal product
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total product B- total product A
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average product
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total product/units of labor
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total variable cost per day
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cost per unit* total quantity of output
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average fixed cost
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fixed cost/ quantity of output / time period
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average variable cost
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variable cost (usually given in question) divided by the quantity of output
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average total cost
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total cost divided by the quantity of output
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marginal cost
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change in total cost / change in quantity
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when marginal product exceeds average product, then
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average product is rising
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The Long Run Average Cost Curve
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shows the lowest average cost at which it is possible to produce each output when the firm has had sufficient time to change both its plant size and labor employed.
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When a firm increases its plant size and labor employed by the same percentage, and its output increases by a smaller percentage and the average total cost increases, we say:
Correct!
Correct!
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Diseconomies of scale exist.
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When a firm is operating on the downward-sloping portion of its long-run average cost curve, then it is experiencing:
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Economies of scale
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Perfect Competition Characteristics
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firms are price takers, no barriers to entry, many buyers and sellers, perfect information, market outcome is efficient
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compared to perfect competition, a monopoly:
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produces less quantity, assigns higher prices, produces less efficient outcome, exists because of barrier of entry, has goods with no substitutes
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The total revenue test using the price elasticity of demand
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explains why monopolies will only operate on the inelastic portion of their demand curves.
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Firm A, a monopoly, earns an economic profit. Firm A, therefore, produces where ____ is less than market price.
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average total cost
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The marginal cost curve intersects the ________ curves at their ________ points.
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average total cost and average variable cost; minimum
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A perfectly competitive firm should shut down in the short-run if price falls below the minimum of
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average variable cost
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marginal rate of substitution
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the rate at which a consumer would be willing to trade off one good for another
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