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### 41 Cards in this Set

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 Total Profits = total revenue - total costs Total Revenue = price per unit x # of units sold If Profits go up more resources are attracted to industry Q goes up If Profits go down resources leave industry Q goes down Voluntary Exchange = mutual gains for both parties percentage change change in x / base x Elasticity = % change in response variable/ % change in what caused the response Elastic Greater than one inelastic less than one unit elastic = 1 price elasticity of demand = % change in Q / % change in Price percentage change change in x / base x Elasticity = % change in response variable/ % change in what caused the response Elastic Greater than one inelastic less than one unit elastic = 1 arc price elasticity (Q1 - Q2) (P1 - P2) -------- / --------- (Q1 + Q2) (P1 + P2) if Price goes up than Total Revenue goes up elasticity is always Positive Income elasticity of demand >0 - normal good <0 - inferior good Cross price elasticity >0 - substitutes <0 - compliments =0 - unrelated Marginal Utility = change in total utility ----------------------- change in quantity as Marginal Utility goes down diminishing marginal utility Plot Marginal Utility at midpoints on graph Positive Economic Profits Incentive for more resources to enter market Zero Economic Profits No incentive for resources to leave or enter Negative Economic Profits incentive for more resources to leave Short Run one input held constant Long Run all inputs free to vary Fixed Inputs cannot be changed in a short period of time Variable Inputs inputs can be changed relatively quickly ex: unskilled labor Production Function relationships between inputs and outputs Average Product = Quantity / Labor Total Fixed Costs are CONSTANT - fixed costs do not vary TVC Price x Quantity MC = P Labor --------------- MP Labor MP Labor= Change in Q ----------- change in L AP Labor = Q / L AVC = TVC /Q ATC= TC / Q Averag Revenue = Product Price