Topic 1 Flashcards
Where do monopolies price / where is profit maximized?
MR = MC
Where do firms price in a perfectly competitive market?
D = MC
Where do consumer co-ops price?
Coop: sells at MC = D b/c goal is to maximize member welfare
Where do producer co-ops price?
Q & P @ MC = MVP
What’s the difference between quantity demanded and demand?
QD = a single point along the demand curve
D = the curve itself
What is the formula for elasticity?
What is the formula for cross-price elasticity?
How do we know from the cross-price elasticity if something is a compliment or substitute?
n >0 for substitutes
n < 0 for compliments (because regular n would also be < 0)
What are the 3 MR formulas?
What’s the difference between economic and accounting profits?
Economic profit takes opportunity cost into account.
How do we find the aggregate demand for private goods?
Horizontal summation: add all the Q together holding P constant.
How do we find the aggregate demand for public goods?
Vertical summation:
add all the P together holding Q constant.
What is the supply curve?
MC above AC
Is LRAC (long run average cost) above or below SR AC?
By definition LRAC < SRAC because it’s composed of the minimums of each SR AC
When n<-1, will increasing price increase or decrease profit?
Increasing price when demand is more than unit elastic will lower profits.
