lecture 1 Flashcards
what is a model
simplified representation of reality
what is ppc
production possibility curve
what does the possibility curve represents?
it captures maximum output possibilities for 2 or more good given a set of input if inputs are used efficiently
what does inputs are used efficiently mean?
there is no time waste
true or false: all the points on the ppc are efficient
true
where on the ppc graph oh does it show inefficient production point?
all the points below
where on the ppc graph oh does it show unattainable production point?
all points outside the ppc
what is absolute advantage?
when a producer can provide a good or service in greater quantity for the same cost or same quantity at a lower cost than its competitors.
what is comparative advantage?
company’s ability to produce a good or service at a lower opportunity cost compared to another producer.
what is a market?
set of
all the consumers and suppliers who are willing to
buy and sell that good or service at a given price.
what is market equilibrium?
Market Equilibrium occurs when the price and the
quantity sold of a given good is stable.
what are he characteristics of a perfectly competitive market?
- many buyer and s
- same product everywhere (homogenous goods)
-No Externality( external factor)
-good are excludable and rival
-full information- (everyone has assess to the same info)
-free entry and exit
what is Marginal Benefit?
the additional benefit arising from a unit increase in a particular ac
what is Marginal Cost?
the cost added by producing one additional unit of a product or service.
when marginal benefits >_ Marginal cost, what should happen?
GO! take acton
when marginal benefits< Marginal cost, what should happen?
Don’t take the action
what does the cost benefit principle state?
states that an action
should be taken if the marginal benefit is greater
than the marginal cost.
what is economic surplus?
is the
difference between the marginal benefit and the
marginal cost of taking that action.
what is the Quantity Supplied by a supplier represents?
quantity of a given good or service that
maximizes the profit of the supplier.
true or false, maginal cost= opportunity cost
true
what does the supply curve represents?
the relationship between the price o a good or service d the quantity supplied of that good or service
what are sunk costs?
once paid it can not be recovered
what are fixed cost?
costs that dont vary
what are variable costs?
cost tends to varies
formula for total cost?
fixed cost + variable cost
how to find the average variable cost?
Variable cost / Quantity
how to find the Average Total cost?
total cost / Quantity
How to find the marginal cost?
change in total cost / change in quantity
Y does the graph for the marginal cost graph decrease initially
The decreases is due to the addition of a worker which helps to increases the quantity, and this allows one worker to specialise on one task, improving efficiency.
Y does the graph for the marginal cost graph increases towards the end
when we increases the quantity we need to increase the number of workers which may cause collisions between worker in the work space as time would be wasted as machines would be used by someone else causing the marginal cost to increases and the next new person cannot produce as much quantities causing the MC to increase
where does the ATC cut the MC graph?
The ATC graph intersects the MC graph at the lowest point so when the ATC vertex is the lowest it intersects with the MC graph
what is lower the ATC or AVC
AVC is lower than the ATC
where does the AVC cut the MC graph?
The AVC graph intersects the MC graph at the lowest point so when the AVC vertex is the lowest it intersects with the MC graph
when should they shut down in the short term?
when price is below the min of the AVC
when should they shut down in the Long term?
when the price is min of the ATC
what shifts the supply curve to the right
- price of input decreases
- Advancement in technology
-drop in demand of other products - increases no. of suppliers
