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Econ 206 Exam 2
Ch 6-9
| Question | Answer |
|---|---|
| Total Revenue (TR) | p X Q |
| Marginal Revenue (MR) | change in TR / change in Q |
| The Shut Down Price | Dollar Amt where MC=AVC |
| Economic surplus= | consumer surplus + producer surplus |
| Marginal Utility | the additional satisfaction you get from one more unit of commodity |
| we assume _________ marginal utility | diminishing, due to less happiness per additional increment of commodity |
| MUc/Pc=MUb/Pb OR MUc/MUb=Pc/Pb | maximizing utility when these = each other |
| If price of C goes up, then MUc/MUb=Pc/Pb | you can only change the price, can't change the Marginal Utility, will rise until reaches equilibrium |
| Substitution effect | the reaction to the change in relative prices, when relative price of good falls this increases the quantity demanded |
| Income effect | the reaction to change in real income, when price of good falls, this raises real income. if the good is normal good , then more of it will be bought |
| For normal good | the two effects reinforce each other |
| with inferior good | the two effects move in opposite directions |
| TP total product = | output produced |
| AP Average Product of labor | the output per unit of labor |
| MP marginal product of labor | the amt. of output gained per additional unit of labor |
| AP=TP/L | Average Product of labor equation |
| MP= Delta TP/ Dlta L | Marginal product of labor equation |
| in the short run, amount of capital is | fixed |
| on graph of AP and MP, AP raises when : | MP is above it |
| on graph of AP and MP, AP falls when: | MP is below it |
| on graph of AP and MP, AP peaks when: | MP=AP |
| with dept you ____ | dont own |
| with equity you ____ | own |
| two types of profits | accounting profits and implicit profits |
| Accounting profits= | revenue - explicit costs |
| Implicit costs are the | opportunity costs of the owners time and money |
| ATC= | TC/Q |
| AFC= | TFC/Q |
| AVC= | TVC/Q |
| MC= | Delta TC/ Delta Q |
| TC = | TFC + TVC |
| ATC also = | AFC +AVC |
| Marginal Cost is | the additional cost per additional unit of output |
| where ATC and MC cross | the capacity output level of the firm |
| In the long run: MPk/Pk=MPx/Px | where there are no fixed factors of production. When the rich side changes, the left side must change too. |
| increasing returns to scale | if the output increases by a greater % than the inputs |
| Constant returns to scale | if output increases by the same % as the inputs |
| decreasing returns to scale | if output increases by a smaller % than the input |
| Marginal revenue - MR= Delta TR/ Delta Q | change in revenue per extra unit of output |
| perfect competition MR=price (p) | a price taker, and the price doesn't change when it sells more output |
| If firm sets its own price MR=? | MR does not = p |
| firms are | free to enter and leave the industry |
| consumers are | well informed |
| all firms in industry are selling a ________ product | homogeneous product |
| there are ______ small firms | many |
| if consumers are well informed, firms are selling a homogeneous product, and there are many small firms, then the individual firm acts as a ________ | price taker |
| in the short run in a competitive market ____ can be made | profits |
| monopoly | business that has market to them selves |
| monopoly does not have a | supply curve |
| since priced monopolist would charge______ for all units | the same price for all units |
| lost economic surplus is the area of the triangle | below the demand curve, above the MC curve |
| price discrimination upon units of output |
Created by:
ali2000k
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