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Getting the most out of your scarce resources
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| Distributing prosperity fairly among society's members |
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| Whatever must be given up to obtain it |
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Systematically and purposefully sound in order to best achieve an objective
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Incremental adjustments to an existing plan; not "all or nothing"
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| Something that induces a person to act; The prospect of a reward or nothing |
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| Self-sufficient versus specialization |
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Group of buyers and sellers
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Best economy because it allows individuals to specialize and consequently be more efficient
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allow individuals to own and control scarce resources
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| Refers to a situation in which the market on its own fails to produce an efficient allocation of resources |
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| Impact of one person's actions on the well-being of a bystander |
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| ability of a single person to unduly influence market prices |
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| Gross amount a firm receives by selling a good |
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| Includes only the EXPLICIT cost of a firms decision |
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| Includes both EXPLICIT cost and IMPLICIT cost |
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Does not include an outlay of money by firm;
Includes Opportunity cost/gain |
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Required an outlay of money by firm
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| Relationship between quantity of inputs used to make a good and quantity of output of that good |
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| An increase in output that arises caused by an additional unit of input |
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| Diminishing Marginal Product |
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| Property by which marginal product of an input declines as the input decreases |
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| Costs that do not vary with the quantity of output produced |
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FC/Q
(fixed Cost/ Quantity)
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| Costs that vary with the quantity of output produced |
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VC/Q
(variable cost/ quantity) |
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TC/Q
(Total Cost/ Quantity)
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| Increase in TC from an extra unit of production |
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| Quantity of output that minimizes average total cost |
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| It depends on the firm or who you are talking about |
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Definition
| When does LONG RUN began? |
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| Long-run average total cost |
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| tells us how costs vary with scale; the size of a firms operations |
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| property whereby long-run average total cost falls as the quantity of output increases |
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| property whereby long-run average total cost rises as the quantity of output increases |
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| constant returns to scale |
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| property whereby long-run average total cost stays the same as the quantity of output changes |
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| Competitive Market Characteristics |
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Definition
Many Buyers and Many Sellers
(atomistic)
Goods are largely the same
(identical goods)
Firms can freely enter and exit |
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Total Revenue divided by the quantity sold
(Total revenue/ Quantity) |
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Change in total revenue from an additional unit sold
(change in Total Revenue/ Quantity) |
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| Profit Maximizing level of production |
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Definition
(P=)MR=MC
(Rational People think at the Margin)
MR>MC implies ^Q implies ^Profit
MR<MC implies fall in Q implies ^Profit |
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Definition
Short-run decision not to produce anything because of market conditions
(TR<VC)
(TR/Q<VC/Q)
(Profit<AVC) |
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| A cost that has already been committed and cannot be recovered |
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Long-run decision to leave the Market
(TR<TC)
(TR/Q<TC/Q)
(Profit<ATC) |
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Decision to get into a market
(Profit> ATC) |
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Sole seller of a good w/out close substitutes
(Market Power- ability to influence price)
(Price Makers) |
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| A single firm can produce the entire market quantity at a lower ATC than could several firms |
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| Deadweight loss from monopoly |
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| Area between Monopoly Quantity and Efficient Quantity |
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| selling the same good at different prices to different buyers depending on their WTP |
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situation in which economic actors interacting with each other, each chooses their best strategy given the strategies all other players have chosen
(no incentive to deviate)
(mutual best response) |
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strategy that is best for a player in a game regardless of the strategies chosen by other players
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| a reoccurring sequence or pattern in a game |
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| Solve end of game, work your way back to the beginning |
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