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the law of diminishing marginal utility
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the extra satisfacition from consuming a good decreases as more of a good is consumed, other things constant
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the substitution effect of an increase in the price of raisin bran refers to
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the fact that the higher price of raisin bran relative to its substitutes, such as cheerios, causes consumers to buy less raisin bran
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if callum is consuming his utility maximizing bundle and the price of one gapped rises, what happens to the marginal utility per dollar spent on this good (MU/P), and what should callum do?
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MU/P has decreased and callum should buy less of this good.
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if marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then marlowe
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should buy more apples and fewer oranges
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economists usually assume that people act in a rational, self-interested way. in explaining how consumers make choices, this means that economists believe
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consumers make choices that will leave them as satisfied as possible given their incomes, tastes, and the prices of goods and services available to them.
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the additional utility that george receives from consuming one more slice of pizza is called
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marginal utility
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total utility is maximized in the consumption of two goods by
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equating the marginal utility per dollar for each good consumed.
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the absolute value of the slope of the budget constraint is equal to
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the price of good on the horizontal axis divided by the price of the good on the vertical axis
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a consumers utility-maximizing combination of goods is given by the bundle that corresponds to the point on
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an indifference curve that is tangent to the budget constraint
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refer to figure 10.5. suppose the price of pizza increases while the price of hamburger remains constant. then the consumers
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budget constraint moves inward toward the origin on the pizza axis while the hamburger intercept remains the same
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golda rush quit her job at home depot. she gave up her salary of $40k/year, invested savings of $30k (which was earning 5% interest) and borrowed $10k from a close friend, agreeing to pay 5% interest per year. Golda spent $18k to rent hair salon, hired part-time worker for $12k, and incurred another $15k in expenses on equipment and hairdressing material. what is the amt of her explicit costs?
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45,500
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Vipsanas gyros house sells gyros. cost of ingredients to make a gyro is $2. vipsana pays employees $60/day. she also has incurred cost of $120 per day. calculate Vipsanas variable cost per day when she produces 50 gyros using two workers.
answer
60x2 workers= 120 + 50 gyros *$2 = $220
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Vipsanas gyros house sells gyros. cost of ingredients to make a gyro is $2. vipsana pays employees $60/day. she also has incurred cost of $120 per day. calculate Vipsanas total cost per day when she produces 50 gyros using two workers.
answer
602 + 502 + 120 = $340
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Vipsanas gyros house sells gyros. cost of ingredients to make a gyro is $2. vipsana pays employees $60/day. she also has incurred cost of $120 per day. calculate Vipsanas avg fixed cost per day when she produces 50 gyros using two workers.
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$120 / 50 = $2.40
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Vipsanas gyros house sells gyros. cost of ingredients to make a gyro is $2. vipsana pays employees $60/day. she also has incurred cost of $120 per day. calculate Vipsanas total cost per day when she produces 0 gyros and doesn't have any workers?
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$120 incurred cost
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law of diminishing marginal returns
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explains why the avg total cost and marginal cost curves are U-shaped in the short run.
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refer to 11.1 in a diagram that shows the marginal product of labor on the vertical axis and labor on the horizontal axis, the marginal product curve
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intersects the horizontal axis at a point corresponding to the 5th worker
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if we have info about worker's marginal products, then total and average product can be found by
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summing the marginal values to find the total and dividing it by the number of workers to get the average.
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marginal product of labor is calculated using the formula
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∆Q/∆L
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in the short run, if marginal product is at its maximum, then
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marginal cost is at its minimum
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which of the following is not a characteristic of a perfectly competitive market structure
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there are restrictions on exit of firms
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which of the following is not a characteristic of a monopolistically competitive market structure?
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each firm must react actions of other firms
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if, for the last unit of a good produced by a perfectly competitive firm, MR > MC then in producing it, the firm
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added more total revenue than added to total cost.
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refer to 12-2, why is the total revenue curve a ray from the origin
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because the firm can sell its product at a constant price
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for a perfectly competitive firm, which of the following is not true at profit maximization
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market price is greater than marginal cost
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a perfectly competitive firm earns a profit when price is
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above minimum average total cost
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all of the following can be used to compute average profit except
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marginal profit minus marginal cost
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for a monopolistically competitive firm, marginal revenue
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is less than the price
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if the demand curve for a firm is downward-sloping, its marginal revenue curve
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will lie below demand curve
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which of the following statements is true about marginal revenue
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if marginal revenue is negative, the additional revenue received from selling one more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price.
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for a monopolistically competitive firm
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P = AR > MR
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suppose a monopolistically competitive firm sells 25 units at a price of $10. calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9
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$4
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what is the profit-maximizing rule for a monopolistically competitive firm
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to produce a quantity such that marginal revenue equals marginal cost
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in the short run, a profit maximizing firm's decision to produce should be guided by whether
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its total revenue covers its variable cost
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suppose jason owns a small pastry shop. jason wants to maximize his profit, and thinking back to the microeconomics class he took in college, he decides he needs to produce a quantity of pastries which will minimize his average total cost. will jasons strategy necessarily maximize profits for his pastry shop?
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not necessarily. depending on demand, jason may maximize profit by producing a quantity other than that where average total cost is at a minimum
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if price exceeds average variable cost but is LESS than average total cost, a firm
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should stay in business for a while longer until its fixed costs expire.
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figure 13-9. which of the graphs depicts a monopolistically competitive firm that is minimizing its losses
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panel C (MC, MR, D, ATC)
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figure 13-9 which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profit?
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panel A (MC, MR, ATC, D)
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excess capacity is a characteristic of monopolistically competitive firms. what does excess capacity mean?
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it means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves.
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Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?
answer
allocative efficiency
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64) A perfectly competitive industry achieves allocative efficiency because
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goods and services are produced up to the point where the last unit provides a marginal
benefit to consumers equal to the marginal cost of producing it.
benefit to consumers equal to the marginal cost of producing it.
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