Term
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Definition
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Term
| What are 4 per-unit costs? |
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Definition
| Marginal, Average Fixed, Average Total, Average Variable |
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Term
| Which type of cost is zero when production is zero? |
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Definition
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Term
| Which type of cost is the same regardless of how much is produced |
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Definition
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Term
| what is the cost of producing one or more unit |
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Definition
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Term
| what is the relationship between MC and ATC |
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Definition
| they intersect at the lowest cost of production, which is the most efficient point on the Average Total Cost line |
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Term
| Give an Example of Diminishing Marginal Returns |
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Definition
| the benefit of one more one dollar to a preson with zero dollars is worth more economically than one dollar to a person with 100 |
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Term
| If a firm has fixed costs of $14,000, and at its current level of production it has total costs of $25,000, what are its variable costs? |
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Definition
| $11,000 – (FC –TC) (FC ± VC = TC) |
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Term
| If the firm above is producing 22,000 units of something, what is its AVC? |
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Definition
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Term
| when analyzing a market change, demand elasticity provides information on what? |
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Definition
| how much quantity responds to a change in price. not which direction or how fast quantity changes. |
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Term
| What characteristics in a market can make (PED) Price Elasticity of Demand greater (more elastic)? |
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Definition
1. Time (Long run, more elastic)
2. More Close Substitutes (more substitutes, more demand, more elastic)
3. Necessities vs. Luxuries (Luxuries are more elastic)
4. Larger or smaller percentage of total budget (double the price of salt, little change, Less Elastic)
5. Narrowly vs. Broadly defined (Narrow is more elastic)
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Term
| More competitors tend to make Demand (More) or (Less) Elastic? |
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Definition
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Term
| Necessities tend to have Demand that is (More) or (Less) Elastic? |
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Definition
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Term
| Having less time to adjust tends to make Demand (More) or (Less) Elastic? |
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Definition
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Term
In the following situations, which changes more-P or Q?
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Definition
Elastic Supply-Demand changes Quantity
Inelastic Supply-Demand changes Price (Something becomes more or less desirable)
Elastic Demand-Supply changes Quantity (It gets more expensive to MFR, make less)
Inelastic Demand-Supply changes Price (Cigarettes)
(Elastic is a fairly flat demand curve)
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Term
If price goes from $2-$3, what percent change is that?
40% (Difference/ Midpoint) ($1/$2.50) Then.... If Quantity Demanded goes from 100-200, what percent change is that?
67% Then..... What is the Price elasticity for the situation above?
1.675 (67/40)(Quantity/Price)
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Definition
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Term
Is this Elastic or Inelastic?
Elastic
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Definition
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Term
What does Income Elasticity measure? How much quantity demanded changes when income changes
What is the formula?
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Definition
Q Diff/Income Diff=Income Elasticity
Above 0= (Normal)
Below 0= (Inferior)
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Term
| What does X-Price elasticity measure? How much quantity changes when the price of another good changes What is the formula? |
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Definition
Q Diff/P Diff of Other Item
Above 0=Demand for my product goes up when their price goes up (substitutes)
Below 0=Inelastic (Demand for my product goes down when their product gets more expensive-complements)
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Term
| Who bears the larger portion of any tax? |
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Definition
| Depends on demand elasticity-who cares less about the price? Think cigarettes |
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Term
| Perfectly Competitive Market: |
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Definition
Number of sellers: Many
Products: One – Same
Entry/exit: Easy
P and Q: Quantity high, price low
Long-run profits: Nope
Key Concept-Price Taker: Whatever market price is, dictates what they charge
Examples: Wheat, Corn, Milk
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Term
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Definition
Number of sellers: One
Entry/exit: Impossible
P and Q: Price high Quantity Low
Long-run profits: Huge, Yes
Key Concept-Market Power: Can raise price without losing many customers
Examples: Cable, Power, And Water
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