question
Budget Lines
answer
Line describing the limits to consumtion possibilities
question
Budget line equation
answer
Income= (price of good x)(quantity of good x) + (price of good y)(quantity of good y)
question
Utility
answer
Unit of happiness
question
Marginal utility
answer
Additional utility of one more unit
question
Marginal utility equation
answer
(Change in utility)/(change in quantity)
question
Consumer equilibrium
answer
Maximizes utility
question
Consumer equilibrium equation
answer
(Mu of x)/(P of x= (Mu of y)/(P of y) (big chart w q, u, mu, etc)
question
Which is more valuable of water or diamonds?
answer
Total utility of water is greater than total utility of diamonds BUT marginal utility of water is greater than marginal utility of diamonds
question
Indifference curve
answer
Curve of a combination of goods amount which a consumer is indifferent (tangent to budget line)
question
Marginal Rate of Substitution
answer
Rate at which a consumer is willing to give up good x for an additional unity of y (|slope|)
question
Marginal Rate of Substitution equation
answer
Relative price of a good at the best alt point
question
Substitution effect
answer
Focuses on the change in slope from changes in relative prices
question
Income effect
answer
Focuses on the decrease in purchasing power from higher prices that encourages the customer to purchase less of a normal good
question
Inferior good
answer
higher amount of income reduces quantity demanded BUT the decrease in price actually INCREASES the quantity on the x-axis consumption
SUBS EFFECT > INCOME EFFECT
SUBS EFFECT > INCOME EFFECT
question
Giffen good
answer
Higher amount of income reduces quantity demanded BUT the decrease in price actually DECREASES consumption of the good on the x-axis
SUBS EFFECT < INCOME EFFECT
SUBS EFFECT < INCOME EFFECT
question
Economic profit equation
answer
Revenues - opp cost
question
Short run
answer
Any period of time when at least one input is fixed
question
Long run
answer
Any period of time where all inputs are variable
question
Marginal Product of Labor
answer
Additional output produced by one more unit of labor
question
Marginal Product of Labor equation
answer
(Change in Q)/(Change in L)
question
Law of Diminishing Return
answer
Marginal Product of Labor eventually falls as labor increases
question
Average Product of Labor equation
answer
Q/L
question
Variable cost equation
answer
Wage*labor
question
Total Cost equation
answer
FC+VC
question
Average Fixed Cost Equation
answer
FC/Q
question
Average variable cost equation
answer
VC/Q OR wage*APL
question
Average Total Cost Equation
answer
TC/Q OR AFC+AVC
question
Marginal Cost Equation
answer
(Change in TC/Change in Q) OR (Change in VC/Change in Q) OR wage/MPL
question
Total Revenue Equation
answer
P*Q
question
Marginal Revenue Equation
answer
(Change in TC) / (change in quantity)
question
Profit equation
answer
TR-TC OR q(p-ATC)
question
TR>VC
answer
Stay in business
question
P>AVC
answer
Stay in business
question
TR<VC
answer
Shut down
question
P<AVC
answer
shut down
question
TR=VC
answer
Shut down point (indifference)
question
P=AVC
answer
Shut down point (indifference)
question
Long Run Average Cost Curve
answer
Lots of ATC curves
question
economies of scale
answer
the property whereby long-run average total cost falls as the quantity of output increases
question
Diseconomies of scale
answer
the property whereby long-run average total cost falls as the quantity of output increases
question
Concentration ratio
answer
Top 4 percents of firms added up
question
HHI
answer
sum of squared market shares (first 50)
question
HHI<1500
answer
unconcentrated
question
1500<HHI<2500
answer
Moderately concentrated
question
2500>HHI
answer
Concentrated
question
Perfect Competition 3 Traits
answer
Lots of firms
Products identical (perfectly elastic)
No barriers to entry
Products identical (perfectly elastic)
No barriers to entry
question
Monopoly three traits
answer
One firm
No close substitutes
Barriers to entry
No close substitutes
Barriers to entry
question
Monopolistic Competition three traits
answer
Lots of firms
Differentiated products
No barriers to entry
Differentiated products
No barriers to entry
question
Perfect competition long run profit is
answer
Equal to zero
question
Monopoly long run profit is
answer
Able to be positive
question
Monopolistic Competition long run profit it
answer
Equal to zero
question
Perfect Competition maximizing profit
answer
MR (same as P*)= MC
question
Monopoly maximize profit
answer
MR=MC
question
Monopolistic Competition maximizing profit
answer
MR=MC
question
Perfect Competition production efficiency
answer
Minimum of LRAC
question
Monopoly production efficiency
answer
NO
question
Monopolistic Competition Production Efficiency
answer
NO
question
Perfect Competition allocative efficiency
answer
MB=MC
question
Monopoly allocative efficiency
answer
NO
question
Monopolistic Competition allocative efficiency
answer
NO
question
Rent Seeking Behavior
answer
Act of obtaining special treatment to create or maintain monopoly profit
question
Rent
answer
Any payment to resource above the opportunity cost
question
Perfect Competition CS/PS
answer
Normal just like last exam
question
Monopoly CS/PS
answer
CS is smaller triangle on top, PS is the rest minus the triangle to the left of where D and MC curve are equal
question
Regulation of Natural Monopolies
answer
1) MC pricing: change price equal to MC (profit is less than 0)
2) Avg cost pricing: charge price equal to Avg cost (profit is greater than 0)
2) Avg cost pricing: charge price equal to Avg cost (profit is greater than 0)
question
Perfect Price Discrimination
answer
Charge price based on willingness to pay
TR DOES NOT EQUAL P*Q IT EQUALS ALL DIFF PRICES ADDED UP
MR=Price
TR DOES NOT EQUAL P*Q IT EQUALS ALL DIFF PRICES ADDED UP
MR=Price
question
Charge different prices for different quantities
answer
Buy one get one half iff
question
Charge different prices to different groups
answer
Student discount
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
