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chapters 7, 10-12

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Buying at a low price in one market and selling at a high price in another Drives prices towards each other   Arbitrage  
a way to measure opportunity for arbitrage in markets   Purchasing Power Parody  
when marginal cost does NOT equal marginal benefit is there a chance for arbitrage   Yes  
When world price is higher who is in favor of free trade?   Producers  
When world price is lower who is in favor of free trade?   Consumers  
What is a tax on imports?   A Tariff  
What is consumer surplus?   The area below the demand curve but above the going price, aggregated over all trades made  
What is producer surplus?   The area above the supply curve but below the going price, aggregated over all trades made  
Foreign sellers selling to the U.S are...   Importers  
What is forgone interest?   Funds used to buy capital that could have been used for some other purpose, and in their next best use, they would have earned interest  
Quantity Produced (Q) / Labor (L) =   Average Product  
change in Q / change in L =   Marginal Product (MP) [decreasing function of L]  
Marginal product of an additional worker is less than the marginal product of the previous worker   Diminishing Marginal Returns  
MP X price sold for =   Marginal Revenue Product (MRP) or Value of MP (VMP)  
Total Variable Cost (TVC) + Total Fixed Cost (TFC) =   Total Cost (TC)  
change in TC / change in Output (Q) =   Marginal Cost (MC)  
TC / Q =   Average Total Cost (ATC)  
Fixed Cost (FC) / Q =   Average Fixed Cost (AFC)  
What is the benchmark used to measure other markets?   Perfect Competition  
The time frame in which the quantity of at least one factor of production is fixed   Short Run  
The time frame in which the quantities of ALL factors of production can be varied   Long Run  
A past expenditure on a plant that has NO resale value ex) car will not be worth as much if you try to resell it (depreciation)   Sunk Cost  
cost of land, capital, and entrepreneurship cost that you will incur without producing a single product (when output is zero)   Fixed Cost  
Double all inputs and output more than doubles cost per unit gets smaller   Increasing Returns to Scale  
double all inputs and output also doubles   Constant Returns to Scale  
double all inputs and output less than doubles cost per unit gets larger   Decreasing Returns to Scale  
Diminishing marginal returns is a long run or short run concept   Short Run Concept  
Decreasing returns to scale is a long or short run concept   Long Run Concept  
Smallest output at which long run average cost reaches its lowest level   Minimum Efficient Scale  
Price X Quantity =   Total Revenue (TR)  
Cost X Quantity =   Total Cost (TC)  
TR - TC =   Total Profit (TP)  
The break even point is the...   Lowest Possible ATC  
The shut down point is the...   Minimum AVC  
When MC increases the MP...   Decreases  
Marginal Benefit (MB) is...   The Market Price  
Profit maximizing output is when...   MC = MB  
Characteristics of perfect competition are...   many buyers and sellers no restrictions to entry and exit from the market identical products no firm has an advantage over another well informed buyers and sellers  


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Created by: Allison Monkman Allison Monkman on 2012-03-20

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