# Shared Flashcard Set

## Details

Microeconomics Midterm 2
Microeconomics... ... Midterm 2...
26
Economics
11/17/2010

Term
 Explicit Costs
Definition
 Involves actually laying out money. (materials, physical price)
Term
 Implicit Costs
Definition
 Does not involve laying out money. (Measured in Dollar Terms) (Opportunity Cost)
Term
 Explicit Cost (For making a chair)
Definition
 Price of materials (wood, nails, glue). Cost of labor.
Term
 Implicit Costs (For making a chair)
Definition
 What's your Opportunity Cost? What's the next best thing you could've been doing?
Term
 Total Opportunity Costs =
Definition
 Explicit Cost + Implicit Costs
Term
 Accounting Profit =
Definition
 Total Revenue - Explicit Cost
Term
 Economic Profit =
Definition
 Total Revenue - Explicit Costs- Implicit Costs
Term
 Marginal Analysis
Definition
 Cost of producing one more unit.
Term
 Product X = 100 Total Cost = \$10Product 2X = 101 Total Cost = \$11Marginal Analysis Between X and 2X =
Definition
 \$1
Term
 Sunk Cost
Definition
 A cost that is incurred and non recoverable.(Remember JT Concert example) (Does not factor into your OC)
Term
 Net Present Value =
Definition
 \$ X (1/((1+r)^t) = Real Value
Term
 In a Discrete Setting (Only buy whole Units)
Definition
 Marginal Benefit has to be greater than or equal to Marginal Cost
Term
 In a Continuous Setting
Definition
 Marginal Benefit = Marginal Cost
Term
 Marginal Net Benefit =
Definition
 Marginal Benefit - Marginal Cost
Term
 Total Net Benefits =
Definition
 All Marginal Net Benefits Added up.
Term
 Properties of all Indifference curves
Definition
 Never Cross. Farther out from origin indicates higher utility.Downward slopingConvex
Term
 Optimal Consumption =
Definition
 - (MUa)/(MUb) = - (Pa)/(Pb)
Term
 Cannot Tell the price with indifference curves they will try to trick you by...
Definition
 giving you a straight indifference curve.
Term
 Production Function
Definition
 relationship between quantity of inputs and quantity of outputs.
Term
 Fixed Input
Definition
 an input whose quantity doesn't change with quantity of output.
Term
 Variable Input
Definition
 an input that changes with the number of outputs.
Term
 Long Run
Definition
 time period in which all inputs are variable.
Term
 Short Run
Definition
 time period in which some inputs are variable whilst others are fixed.
Term
 Marginal Product
Definition
 Additional quantity of output produced by using one more unit of that input.
Term
 Optimal Point is where...
Definition
 Marginal Revenue = Marginal Cost
Term
 4 Things for Perfect Competition to Occur
Definition
 1: Many (Infinite) Buyers and Sellers2: All firms are price takers (Can't set their own price)3: homogenous products4: Free entry and exit into industry
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