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27 Cards in this Set
- Front
- Back
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the marginal utility of a good declines as more of it is consumed in a given time period.
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law of diminishing marginal utility
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indicates the responsiveness of consumers to a change in the price of a product
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elasticity of demand
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if demand is less than one the products demand is
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inelastic
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if the demand is greater than one the demand is
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elastic
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calculate the change in demand and change in quantity
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new minus the old over the old
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how do you comput elasticity?
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change in demand over change in price
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the market value of all resources used to produce a good or service
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total cost
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the increase in total cost asscoiated with a one unit increase in production
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marginal cost
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the selection of the short run rate of output
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production decision
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costs of production don't change when rate of output is altered (plant equipment and rent)
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fixed costs
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costs of production that change when the rate of output is altered (labor, material costs)
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variable costs
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why is the lowest point on the atc curve important
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shows where we minimize land, labor, and capital used per unit of output
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a payment made for the use of a resource
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explicit costs
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accounting cost =
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just explicit cost
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economic cost =
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explicit costs + implicit cost
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total revenue minus total costs.
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accounting profit
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total revenue minus economic costs (implicit costs + explicit costs)
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economic profit
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what is the implication of the long run?
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all costs are variable costs in the long run.
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a period of time long enough for all the resources used in production to be changed.
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long run
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a period of time during which the quantity and quality of some resources used in production cannot be changed
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short run
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in the------- business owners must attempt to make the best possible use of the factory and equipment he has acquired.
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impication of short run
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the number and relative size of firms in an industry
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market structure
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characteristics of perftly competitve firms
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no market power, price takers, perfectly elastic demand curve
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never produce a unit of output that costs more than it brings in
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profit maximization rule
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if marginal revenue is less than marginal costs then producing -----output will increase profits
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less
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if marginal revenue is greater than marginal costs then producing------ouput will increase profits
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more
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long run outcomes of perfectly competitive firms.
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they will create a normal profit,
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