question
Equilibrium
answer
the price where the market is in balance because every seller can find a buyer and vice versa
question
Minimim Efficient Scale
answer
-smallest level of output where a firm can minimize long-run average costs
question
marginal revenue formula
answer
delta total revenue / delta quanity
question
Income Elasticity
answer
sensitivity of demand for a product relative to changes in income/price
question
elasticity formula
answer
deltaQ / Q over deltaP / P
question
should managers consider sunk costs
answer
no. present and future profitability only
question
what is the inverse formula of marginal cost
answer
marginal product
question
average fixed cost formula
answer
total fixed cost/output
question
average variable cost formula
answer
variable costs / output
question
where does marginal cost intersect avc?
answer
where AVC is minimum
question
Profit formula
answer
total revenue - total cost
P(Q) - C(Q)
P(Q) - C(Q)
question
2 ways governments create monopolies
answer
accreditation and patents
question
where monopolies exist on terms of elasticity
answer
elastic
question
where on the elasticity curve are sale maximized
answer
unitary
question
demand definition
answer
solution to the producer problem
question
why demand slopes downward
answer
diminishing marginal utility
question
factors that influence demand curve
answer
price, cost of subs, price of comps, advertising, environmental factors
question
elasticity formula
answer
(delta Q / delta P) × (P / Q)
question
income elasticity of demand formula
answer
(delta Q / Q) / (delta I / I)
question
procyclical elasticity vs 0
answer
greater than zero because both income and quantity increase
question
draw graph with atc, afc, avc, mc. where are the key interestions?
answer
avc and atc both intersect marginal cost at their minimums
question
marginal cost
answer
the cost of producing one more unit of a good
question
consumer problem
answer
in a world of scarce resources and uncertainty, a rational consumer will maximize utility (buy the right mix of stuff with limited money)
question
demand
answer
solution to the consumer problem
question
indifference curve assumptions (2)
answer
people dislike extremes
more is better than less
more is better than less
question
in perfect competition, which factor of q is a given
answer
K (price). labor is variable
question
average product formula
answer
Q / L
question
marginal product formula
answer
delta Q / delta L
question
marginal cost formula
answer
change in total cost / change in quantity
question
supply curve definition
answer
horizontal sum of MC above AVC
question
when in short term should firm shut down
answer
when AVC is less than Price
question
what is the areas of a supply/demand graph left of supply/demand intersection, and above and below that price
answer
consumer surplus above
provider surplus below
provider surplus below
question
where is profit maximized
answer
MR=MC
question
why is marginal revenue always lower than demand?
answer
because sellers in single-price environments can't meet maximum price that some consumers are willing to pay
question
does an elastic good have a steep slope or shallow slope
answer
shallow
question
does the elastic range of a graph have a steep slope or shallow slope?
answer
steep
question
cost plus pricing
answer
adding a standard markup to the cost of the product
question
why are there no profits in long run monopolistic competition?
answer
competitors will imitate (like whole foods)
question
market demand curve
answer
horizontal sum of individual demand curve
question
determinants of own price elasticity
answer
substitutes, price v budget, time period for price adjustment
question
cross price elasticity of demand
answer
ratio of price change in one good vs another
question
can indifference curve intersect?
answer
no. one combination of goods can only have one level of utility
question
demand is a solution
answer
slope of budget constraint = slope of indifference curve
question
f in the production function
answer
technology
question
law of diminishing returns
answer
the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline
question
what should price equal in perfect competition
answer
where MC = atc. where profit is 0.
question
deadweight loss
answer
the total loss of producer and consumer surplus from underproduction or overproduction
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