TEST 21, 13, 14 - Assignment Essays

question

What two factors decide a consumer's choice of goods?

answer

1. Whatever their income will allow (budget constraint
2. Whatever better fulfills their preferences (utility per dollar)

question

Budget Constraint

answer

The curve representing consumer choices based on income and price of the goods

question

Indifference Curve

answer

The curve representing different bundles of goods that offer equal utility

question

Utility Maximization Rule

answer

MUx/Px = MUy/Py. Consumer utility is maximized when the last dollar spent on Good X generates the same utility as the last dollar spent on Good Y.

question

Marginal Utility

answer

The additional satisfaction gained by the consumption of each additional unit of the good

question

Diminishing Marginal Utility

answer

A rule stating that Marginal Utility decreases as more of the good is consumed.

question

Marginal Utility per Dollar

answer

MU/P. The satisfaction derived from the last dollar spent on a good.

question

Income Effect

answer

The change in consumption due to a shift to a new indifference curve due to a change in price or income.

question

Substitution Effect

answer

The change in consumption due to movement along an indifference curve due to the change in the price of one good relative to the price of another good.

question

Slope of the Budget Constraint is equal to ______

answer

The ratio of prices in the Consumption Possibilities Frontier

question

Three Rules of Indifference Curves

answer

1. Consumers have multiple indifference curves
2. Indifference curves never intersect
3. The goal is to consume on the highest Indifference Curve possible

question

Slope of an Indifference Curve=

answer

MUx/MUy

question

The point of tangency between the BC and IC represents

answer

The optimum

question

At the optimum, the slope of the _______________ = the slope of __________ or MUx/Px = MUy/Py, the point of Utility maximization

answer

Budget Constraint, Px/Py=MUx/MUy

question

Explicit Costs

answer

Costs paid with visible payment

question

Implicit Costs

answer

Costs involved with the opportunity costs

question

Normal Profit is when Economic Profit= __

answer

question

Accounting Profit - Economic Profit (@0)=

answer

Normal Profit

question

The Production Function

answer

Shows the relationship between Quantity of inputs and outputs

question

Total Product:

answer

Amount of outputs produced by a given amount of inputs

question

Marginal Product

answer

The added output produced with each added input

question

Total Cost Curve:

answer

Graph showing the relationship between amount of output and total cost.

question

Total Cost=

answer

Fixed Cost + Variable Cost

question

Law of Diminishing Total Product

answer

Later workers are less productive because they don't have access to equal resources

question

When MC < ATC, ATC is

answer

falling

question

When MC > ATC, ATC is

answer

rising

question

Rules for Perfect Competition

answer

1. Many buyers and sellers: All firms are "price takers" with no Market Power
2. No product differentiation: Each firms product is identical... perfect substitutes
3. No barriers to entry

question

MR DARP

answer

Marginal Revenue = Demand = Average Revenue = Price

question

If MR > MC, then the firm should

answer

Produce the good

question

A firm should produce the good up to the Quantity where,

answer

MR=MC

question

MR represents what in the graph

answer

Demand Curve

question

MC represents what in the graph

answer

Supply Curve

question

At Q* if P>ATC, the firm ______

answer

Profits

question

At Q* if P<ATC, the firm _______

answer

Loses Money

question

At Q*, if P=ATC, the firm _______

answer

Gets Zero Economic Profit and is at Long Run Equilibrium

question

Long Run Equilibrium

answer

When no firms want to join or leave the market

question

Profit=

answer

TR-TC or (P-ATC) x Q

question

TR+

answer

P x Q

question

TC=

answer

Fixed Costs + Variable Costs

question

AP=

answer

TR - EC

question

EP=

answer

TR - (EC + IC)

question

MC=

answer

ΔTC/ΔQ

question

AR=

answer

TR/Q

question

ATC=

answer

TC/Q or AFC+AVC

question

AVC=

answer

VC/Q

question

AFC

answer

FC/Q

question

Profit Maximization Equation

answer

MR=MC

1 of 47

question

What two factors decide a consumer's choice of goods?

answer

1. Whatever their income will allow (budget constraint
2. Whatever better fulfills their preferences (utility per dollar)

question

Budget Constraint

answer

The curve representing consumer choices based on income and price of the goods

question

Indifference Curve

answer

The curve representing different bundles of goods that offer equal utility

question

Utility Maximization Rule

answer

MUx/Px = MUy/Py. Consumer utility is maximized when the last dollar spent on Good X generates the same utility as the last dollar spent on Good Y.

question

Marginal Utility

answer

The additional satisfaction gained by the consumption of each additional unit of the good

question

Diminishing Marginal Utility

answer

A rule stating that Marginal Utility decreases as more of the good is consumed.

question

Marginal Utility per Dollar

answer

MU/P. The satisfaction derived from the last dollar spent on a good.

question

Income Effect

answer

The change in consumption due to a shift to a new indifference curve due to a change in price or income.

question

Substitution Effect

answer

The change in consumption due to movement along an indifference curve due to the change in the price of one good relative to the price of another good.

question

Slope of the Budget Constraint is equal to ______

answer

The ratio of prices in the Consumption Possibilities Frontier

question

Three Rules of Indifference Curves

answer

1. Consumers have multiple indifference curves
2. Indifference curves never intersect
3. The goal is to consume on the highest Indifference Curve possible

question

Slope of an Indifference Curve=

answer

MUx/MUy

question

The point of tangency between the BC and IC represents

answer

The optimum

question

At the optimum, the slope of the _______________ = the slope of __________ or MUx/Px = MUy/Py, the point of Utility maximization

answer

Budget Constraint, Px/Py=MUx/MUy

question

Explicit Costs

answer

Costs paid with visible payment

question

Implicit Costs

answer

Costs involved with the opportunity costs

question

Normal Profit is when Economic Profit= __

answer

question

Accounting Profit - Economic Profit (@0)=

answer

Normal Profit

question

The Production Function

answer

Shows the relationship between Quantity of inputs and outputs

question

Total Product:

answer

Amount of outputs produced by a given amount of inputs

question

Marginal Product

answer

The added output produced with each added input

question

Total Cost Curve:

answer

Graph showing the relationship between amount of output and total cost.

question

Total Cost=

answer

Fixed Cost + Variable Cost

question

Law of Diminishing Total Product

answer

Later workers are less productive because they don't have access to equal resources

question

When MC < ATC, ATC is

answer

falling

question

When MC > ATC, ATC is

answer

rising

question

Rules for Perfect Competition

answer

1. Many buyers and sellers: All firms are "price takers" with no Market Power
2. No product differentiation: Each firms product is identical... perfect substitutes
3. No barriers to entry

question

MR DARP

answer

Marginal Revenue = Demand = Average Revenue = Price

question

If MR > MC, then the firm should

answer

Produce the good

question

A firm should produce the good up to the Quantity where,

answer

MR=MC

question

MR represents what in the graph

answer

Demand Curve

question

MC represents what in the graph

answer

Supply Curve

question

At Q* if P>ATC, the firm ______

answer

Profits

question

At Q* if P<ATC, the firm _______

answer

Loses Money

question

At Q*, if P=ATC, the firm _______

answer

Gets Zero Economic Profit and is at Long Run Equilibrium

question

Long Run Equilibrium

answer

When no firms want to join or leave the market

question

Profit=

answer

TR-TC or (P-ATC) x Q

question

TR+

answer

P x Q

question

TC=

answer

Fixed Costs + Variable Costs

question

AP=

answer

TR - EC

question

EP=

answer

TR - (EC + IC)

question

MC=

answer

ΔTC/ΔQ

question

AR=

answer

TR/Q

question

ATC=

answer

TC/Q or AFC+AVC

question

AVC=

answer

VC/Q

question

AFC

answer

FC/Q

question

Profit Maximization Equation

answer

MR=MC

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