Term
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Definition
| maximize utility given a budget |
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Term
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Definition
| Line describing limit to consumption possibilities given income and prices |
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Term
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Definition
| utility from one more unit of good = (change in U/ change in Q) |
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Term
| Law of Diminishing Marginal Utility |
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Definition
| MU always eventually decreases |
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Term
If (MUx/Px) > (MUy/Py), then Qx __.
increase or decrease |
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Definition
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Term
If (MUx/Px) < (MUy/Py), then Qy __.
increase or decrease |
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Definition
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Term
| If (MUx/Px)=(MUy/Py), then ___. |
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Definition
| max utility (when spend all income) |
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Term
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Definition
change in Qd from change in "purchasing power" or "real income"
(change to a new IC) |
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Term
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Definition
| change in Qd from a change in "relative prices" (change in slope of a budget line) |
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Term
| max utility is wher marginal rate of subtitution (MRS) = |
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Definition
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Term
| for normal goods, income and substitution effects __. |
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Definition
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Term
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Definition
| if income effect > substitution effect for an inferior good |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| revenue > opportunity cost - value of best alternative |
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Term
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Definition
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Term
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Definition
revenue < opportunity cost - value elsewhere
-firms exit |
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Term
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Definition
revenue = opportunity
"normal" profit |
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Term
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Definition
| any period where at least one input is fixed |
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Term
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Definition
| any period of time where all inputs are variables |
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Term
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Definition
| change in output from one additional unit of labor |
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Term
| Law of Diminishing Return |
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Definition
| marginal product always eventually declines |
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Term
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Definition
| output per worker, (Q/L)= slope of line from (0,0) to total product curve |
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Term
If Marginal Product (MP) > Average Product (AP), then AP ___.
increase or decrease |
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Definition
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Term
If Marginal Product (MP) < Average Product (AP), then AP ___.
increase or decrease |
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Definition
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Term
If Marginal Product (MP) = Average Product (AP), then AP ___.
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Definition
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Term
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Definition
| costs that do not vary with output |
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Term
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Definition
| costs that do vary with output |
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Term
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Definition
| fixed cost / quantity, (FC/Q) |
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Term
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Definition
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Term
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Definition
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Term
If Marginal Cost (MC) > Average Total Cost (ATC), then ATC ___.
increase or decrease |
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Definition
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Term
If Marginal Cost (MC) < Average Total Cost (ATC), then ATC ___.
increase or decrease |
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Definition
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Term
If Marginal Cost (MC) = Average Total Cost (ATC), then ATC ___.
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Definition
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Term
| MP curve increases, MC curve __. |
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Definition
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Term
| AP curve increases, AV curve __. |
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Definition
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Term
| max MP is same point as... |
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Definition
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Term
| max AP is same point as... |
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Definition
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Term
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Definition
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Term
Perfect Competition:
Characteristics |
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Definition
1. Lots of firms
2. Producing goods that are perfect substitutes
3. No barrier to enter or exit |
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Term
| Firm concentration ratio: |
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Definition
| percent of sales accounted for by 4 largest firms |
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Term
| Herfindohl-Herschman Index (HHI) |
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Definition
| sum of squared market shares of all firms (up to 50) |
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Term
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Definition
-no single firm has control over market price -demand facing each firm is horizontal
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Term
| If MR > MC, then __ q to max profit. |
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Definition
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Term
| If MR < MC, then __ q to max profit. |
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Definition
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Term
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Definition
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Term
ATC < P = profit __ 0.
<,>,= |
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Definition
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Term
ATC > P = profit __ 0.
<,>,= |
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Definition
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Term
ATC = P = profit __ 0.
<,>,= |
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Definition
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Term
| changing fixed costs changes... |
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Definition
total cost
(NOT marginal cost) |
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Term
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Definition
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Term
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Definition
| cannot cover cost. shut down point. |
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Term
Perfect competition:
Max profit where P __ MR. |
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Definition
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Term
Perfect Competition:long run
profit __ 0 |
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Definition
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Term
Perfect competition:
production or allocative efficiency? |
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Definition
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Term
Monopoly:
characteristics |
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Definition
one firm
no close substitutes
barriers to entry |
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Term
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Definition
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Term
Monopoly: long run
profit __ 0 |
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Definition
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Term
Monopoly:
production or allocated efficiency? |
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Definition
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Term
Monopolistic Competition:
Characteristics |
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Definition
lots of firms
slight differentiation in products
no barriers to entry or exit |
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Term
Monopolistic Competition:
max profit, P __ MR |
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Definition
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Term
Monopolistic Competition: long run
profit __ 0 |
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Definition
profit = 0
P=ATC
does not = min ATC |
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Term
Monopolistic Competition:
production or allocative efficiency? |
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Definition
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Term
Oligopoly:
Characteristics |
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Definition
small # firms
could be related or differentiated
significant barriers to entry |
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Term
Oligopoly: Kinked Demand
1.competitors match price __, but not price ___.
2. max profit where MR__MC |
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Definition
1. decrease, increase
2. =
-MR has a gap!!
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Term
Oligopoly: Game Theory
characteristics: |
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Definition
-strategies
-rules
-payoffs
dominant strategy equilibrium
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Term
Oligopoly: Game Theory
Nash Equilibrium |
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Definition
| no best strategy. best option is whichever the other chose |
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