Tiny Economics

Front 1

What is the Law of Demand?

Back 1

The law states that, all else being equal, as the price of a product increases, the quantity demanded lowers.

Front 2

What makes specialization from trade more efficient?

Back 2

Comparative Advantage

Front 3

Diminishing Marginal Productivity of a factor

Back 3

The more of a factor is employed (holding other factors equal) the marginal productivity falls

Front 4

To maximize profit, when are factors employed until?

Back 4

Factors are employed until their value of marginal product (P*MP) equals their unit cost.

For Labor: p*MPL = w
For Capital p*MPK = wage of capital

Front 5

Competitive Markets

Q = ?

Back 5

Sell as much output as they choose at a given price
Each firm sees a perfectly elastic demand curve at P (they don't control the price)

Produce Q where P = MC(Q)

Front 6

Costs on the "Intensive Margin"

Equation?

Back 6

When capitol is fixed, costs rise within the firm, as MP of labor falls

MC = w/MPL

Front 7

What happens if P < Min AVC

Back 7

the firm shuts down because when the price is lower than the minimum average cost of labor hiring anyone is a bad move.

Front 8

What happens if P < min ATC?

Back 8

In the short run they might produce, but in the long run the firm would shut down because by paying their fixed costs they are losing more than they are making.

Front 9

Economic effeciency under perfect competition:
output is most effecient

produce until
MV = ?

Back 9

MV = MC

Front 10

Positive Externality

Back 10

Benefits to society not realized by the decision maker.

Socially optimal output > PC output

Front 11

Negative Externality

Back 11

Costs to society that are not realized by the decision maker

Front 12

What quantity will a monopoly sell to?

Back 12

The quantity where their MR(Q) = MC(Q)
MV > MC
Output < Effeciency
Price > Efficient

Front 13

Price Descrimination
1st vs 2nd? vs 3rd degrees

Back 13

1st charge each consumer's MV for the good
3rd separate market into 2, set MR = MC in each market.

Front 14

Name three kinds of games

Back 14

Prisoner's Dilemma
Bertrand Competition Firms chose price
Cournot Competition Firms choose output

Front 15

to maximize profits (rents) what must you set p to?

Back 15

p = MC

Front 16

When does the Marginal Cost curve always cut through the Average cost curve?

Back 16

At the lowest point of both curves.

Front 17

Elastic Vs Inelastic

Back 17

Elastic = flat = large change in quantity with small change in price
Inelastic = steep small change in quantity with large change in price.