It determines how much output a firm can get from any combination of inputs

help organize production information by identifying all input combinations that generate the same output

• describe the cost trade-offs associated with each possible budget level
• it is all the budget allocations that cost the same

describes input combinations for which the last dollar spent on each good increases utility by the same amount

MU1/P1=MU2/P2 

are forward looking costs

Economic cost=accounting cost+ opportunity cost-sunk cost 

the set of all affordable bundles whose cost equals income

I= p1q1+p2q2 

a way of measuring benefit of any combination of goods

•  a systm of quantifying the benefits one gets from a bundle of choices

• it is a system to ran alternative bundles

organizes information about different combinations of goods that give the same benefit

• are the curves that compare benefit
• each point on the curve the benefit is the same (hence the name "indfference curves") 

is what a firm gets after everyone else is satisfied

Economic Profit= Revenue-Economic Cost 

Average Total Cost

When the price of one good goes up the demand for its substitute increases.

Exp. hondas and toyotas 

a good is nonexcludable if no one can be excluded from benefitin from the good once it is produced

exp. public radio 

Are goods that are nonexcludable to some degree

Examples: 

Commons are public rival goods.

(This means they are somewhat nonexcludable and rival) 

People who have incentive to pay less than their marginal value

(others pay for the public good, so you don't have to) 

refers to the overuse of a common good or resource

(The each use of a common public good reduces the amount that others can use and derive benefit from it) 

A country has a comparative advantage of producing if it has the lowest marginal cost of production.

Countries tend to have the comparative advantage in producing good in which they have a large endowment of the intensive inputs of production.

when the price of one complement goes up  the demand for the complement goes down

exp. hamburger patties and buns 

Under the same conditions as the First Welfare Theorem

• every pareto efficient allocation can be achieved through market equilibrium
• given the proper redistribution of resources prior to trade

are restrictions on the amount of a good or service that is traded in a market

acts the same way that a floor does 

is determined by price sensitivity of buyers and sellers in a market.

It is independent of the legal incidence.

It is how the tax burden is distributed amongst buyers and sellers.  

tells the relationship between change in firms' prices and change in revenue.

It depends on if you are at an elastic or inelastic point on the demand curve.