question
Water is cheap, but you must have water to survive. Diamonds are expensive, but you don't have to have them. Why?
answer
Diamond Water Paradox: Value in exchange (Price) increases as Marginal Utility Increases. Also, Price decreases as MU decreases as TU increases.
question
Diamond-Water Paradox
answer
bases price on marginal utility, not total utility.
question
What economist was involved with the Diamond-Water Paradox
answer
Adam Smith
question
How is the price of a good determined?
answer
price is based on marginal utility
question
How do we measure utility?
answer
utils
question
How do we calculate utility?
answer
marginal utility and total utility
question
law of diminishing marginal utility
answer
as quantity increases, your marginal utility decreases. in other words, the more you have, the less satisfaction it brings you
question
what kind of relationship does the units consumed have with marginal and total utility?
answer
-Q increases, TU increases
-Q increases, MU decreases
-MU decreases, TU increases
-Q increases, MU decreases
-MU decreases, TU increases
question
True or False? You can tell how much utility someone will get from a product without asking them.
answer
False
question
What is the objective for most firms
answer
Profit Maximization
question
How do we calculate profit?
answer
TR-TC=Profit
question
How do we calculate total revenue?
answer
PxQ=TR
question
What is an implicit cost
answer
trade off, implied costs
question
What is an explicit cost?
answer
something you turn over actual money for, actual costs
question
what is a fixed cost
answer
unchanging regardless of how much you produce, only exists in short run
question
what is a variable cost
answer
a cost that varies with changes in the level of output, exists in long and short run
question
What is MPP
answer
marginal physical product
question
What does the law of diminishing marginal returns say?
answer
more labor means less return per laborer
question
What is the only reason an employer will hire if the MPP is decreasing
answer
to meet a quota
question
what are marginal costs
answer
additional costs of producing one more unit
question
what are sunk costs and what do economists say to do with them
answer
sunk costs means they bring zero utility, so you should disregard them and move on.
question
What are the costs of production in the long run
answer
all variable
question
what is the LRATC
answer
long run average total cost (made up of a bunch of short run curves)
question
Economies of scale
answer
ATC increases as Q falls
question
constant returns of scale
answer
ATC is constant as Q increases
question
Diseconomies of scale
answer
ATC increases as Q increases
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline