question
Elasticity
answer
A measure of how responsive one variable, quantity, is when the other, price,
E = (%∆Quantity)/(%∆Price)
E = (%∆Quantity)/(%∆Price)
question
Total Revenue
answer
Price x Quantity
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Profit
answer
Total Revenue - Cost
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Explicit Costs $$
answer
Input costs that require an outlay of money by the firm
question
Implicit Costs non $$
answer
Costs that do not use money, opportunity cost
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Economic Cost
answer
Explicit + Implicit Costs
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Economic Profit
answer
Total Revenue - (Explicit Costs + Implicit Costs)
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Accounting Profit
answer
Total Revenue - Explicit Costs
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Marginal Product
answer
∆TP/∆L
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Average Product
answer
TP/L
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Fixed Costs
answer
Costs that do not change with the amount of output produced
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Variable Costs
answer
Costs that change with the amount of output produced
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Total Cost
answer
Fixed Costs + Variable Costs
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Average Fixed Cost
answer
Fixed Costs/Quantity
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Average Variable Cost
answer
Variable Costs/Quantity
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Average Total Cost
answer
Total Costs/Quantity; Average Fixed Costs + Average Variable Costs
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Marginal Cost
answer
∆TC/∆Q
question
Profit Maximizing Rule
answer
MR=MC
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Short-Run Operation Decisions: Price > ATC
answer
Gain Profits, keep producing
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Short-Run Operation Decisions: Price = ATC
answer
Zero Profits, keep producing
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Short-Run Operation Decisions: AVC ≤ P < ATC
answer
Loss, keep producing
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Short-Run Operation Decisions: Price < AVC
answer
Loss, shut down
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Total Profit
answer
Total Revenue - Total Cost
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Profit Per Unit
answer
Price - ATC
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Characteristics of a Perfect Competition
answer
a. Large # of Sellers
b. Standardized "same" product
c. Price Takers
d. Easy entry and exit
b. Standardized "same" product
c. Price Takers
d. Easy entry and exit
question
Characteristics of a Monopolistic Competition
answer
a. Single Seller
b. Product has no close substitutes
c. Price Makers
d. Barriers to entry
b. Product has no close substitutes
c. Price Makers
d. Barriers to entry
question
Characteristics of a Monopoly
answer
a. Relatively large # of sellers
b. Differentiated product
c. Some control of price
d. Easy entry and exit
b. Differentiated product
c. Some control of price
d. Easy entry and exit
question
Characteristics of a Oligopoly
answer
a. Few large producers
b. Standardized & Different Products
c. Price Makers
d. Entry Barriers
e. Mutually interdependent
b. Standardized & Different Products
c. Price Makers
d. Entry Barriers
e. Mutually interdependent
question
Shutdown in?
answer
short-run
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Exit in?
answer
Longrun
question
why does AFC decline on a graph?
answer
because you keep dividing and dividing
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why does marginal cost dip and then get aggressively high?
answer
as you produce more the costs go up
question
order of graph??
answer
MC (goes up highhh)
ATC ( looks like a U)
AVC (steadily increases)
AFC (declines steadily)
ATC ( looks like a U)
AVC (steadily increases)
AFC (declines steadily)
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