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### 24 Cards in this Set

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 6 steps to decesion making 1.problem 2.objective 3.alternatives 4.consequences 5.decide on choice 6.subject to decesion to ongoing review private sector decesisons private sector firms maxamize their value public sector decesions more complicated due to multiple and conflicting objectives total revenue(TR) = Price * Quantity PQ Cost(C) function of quantity f(Q) profit TR-TC what Q do you produce at in marginal analysis where MR = MC demand is function of (11) 1.P= price 2.P subs S= price of substitute 3.P sub C= price of compliment 4.Y= income 5.P raised to O= price of comp 6.A= advertising 7.A raised to O= advertising of comp 8.N= population 9.C sub p= consumer preference 10.P sub E = price expectations 11. taxes Elasticity (E sub P) (% Change in Q) / (% change in price) elasticity 1.Ep < -1 = elastic 2.-1 < Ep < 0 = inelastic 3.Ep = -1 unitary elastic relationship between elasticity and TR Ep < -1(elastic) and P goes up then total revenue will go down all functions of demand shifts D except for what price...which moves it along the demand curve optimal pricing P = [Ep/(1+Ep)](MC) -which means that optimal markup depends on the elasticity t-statistic want this great than 2 so we can say that its different than zero -the coefficient / standard error R-squared goodness of fit line. the higher the better. F-statistic also a goodness of fit test that moves with R-squared -R-squared / (1 - R-squared) production functions Q = f(L,K,M) -labor -capital -material production in the SR only one input can be changed, which is usually L productions in the LR all inputs can vary the production process can have(3) 1.increasing returns to scale 2.decreasing returns to scale 3. constant returns to scale MPsubL...marginal product of labor (change in Q)/ (change in L) MRPsubL...marginal revenue product of labor (MR)/ (MPsubL)...this shows what hiring one additional labor will do TC of budget line (PsubL*L) +(PsubK*K) straight line budget constraint to minimize cost set with budget constraint (MPsubL)/(MPsubK)...the most output given out budge constraint