Exam 2 Flashcards
surplus
difference between the price at which the buyer or seller would be willing to trade and the actual price
consumer surplus
measure of consumers benefit from the purchase
producer surplus
measure of a producers benefit from the sale
total surplus
combined benefits that everyone receives from participating in an exchange of goods and services
meanings of efficiency (5)
1.) market is in EQ
2.) total surplus is maximized
3.) there is no under production
4.) there is no over production
5.) no one can be made better off without making someone else worse off
What is deadweightloss
the loss of total surplus that results when the quantity of a good that is bought
and sold below the market equilibrium
total surplus in the economy is reduced when __________ happens
deadweight loss
utility
measures the amount of satisfacti9on a person derives from something
marginal ultility
change in total utility from consuming an additional unit of a good/service
diminishing marginal ultility
additional utility gained from consuming excessive units of a good or service tends to be smaller than the utility gained from the previous
utility maximization
individuals maximize total satisfaction when consuming where marg ult. per dollar is equal for all goods/services
price ceiling
a maximum legal price set by the gov, below the equilibrium
non binding price ceiling
a price ceiling does not always affect the market outcome if the ceiling is set above the equilibrium price
price floor
minimum legal price, price set above the equilibrium, causes deadweight loss
ineffective price floor
a price floor does not always affect the market outcome if the floor is set below the equilibrium price
taxes
typically placed on sellers
tax incidence
the division of tax between buyers and sellers
tax wedge
difference between price paid by buyers and price recieved by sellers
tax causes _______
deadweight loss
a firms goal
maximize profit
accounting profit
TR- Firms explicit costs
Economic profit
TR-Explicit AND implicit costs
Short run
a time frame in which at least one or more resources used in production is fixed, other resources may be variable
long run
a time frame in which the quantities of all resources can be varied or change
total product
quantity of whats being produced
marginal product of labor
slope of total production curve, more workers added, marginal product starts to dimmish
law of diminishing marginal returns
output will eventually decrease as more of a variable input is used
How to find total cost
fixed costs + variable costs
fixed costs
costs that do not depend on the quantity of output produced
variable costs
depend on the quantity of output produced
Formula for AFC
ATC- AVC
costs that are fixed can be adjusted when
in the long run
fixed inputs cant be adjusted when
in the short run
what is the scale of production
the relationship between cost and output
what is the economies of scale
higher output lowers the minimum of the average total cost
what is the diseconomies of scale
higher output raises the minimum of the average total cost
what is constant return to scale
the minimum of the average total cost does not depend on the quantity of output
how is long run ATC constructed
combining all possible short run ATC curves
How are short run ATC curves identified
by changing the scale of production
economies of scale is found on what side of the graph
left side
diseconomies of scale is found on what side of the graph
right side
characteristics of a perfectly competitive market
buyers/sellers can’t affected, goods are standardized, and buyers and sellers have full info
market power
a buyer or seller has the ability to noticeably affect market prices
price taker
buyers and sellers who can’t affect their own prices
how to find average rev
Total revenue/ quantity
how ti find MR
change in TR/ quantity
what three elements equal eachother
price = AR= MR
Profit = (what formula)
TR - TC
