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### 25 Cards in this Set

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 An increase in the price of a good increases the opportunity cost of consuming a good A consumer maximizes her utility by setting the marginal utility of a product A divided by the price of product A equal to the marginal utility of product B divided by the price of product B the law of diminishing marginal utility states that as a consumer consumes more of a product, the consumer gets progressively less satisfaction out of each incremental unit of the good Suppose you are eating hot dogs. The marginal utility of the first hot dog is 15 utils, the MU of the second is 12 utils and the third hot dog brings your total utility up to 35 utils. What was the marginal utility of the third hot dog? 8 utils The utility generated by consuming a good is The satisfaction or pleasure the consumer experiences when he or she consumes the good Katie's demand curve for ice cream cones assumes that the only variables that change are the price of ice cream cones and the quantity of ice cream cones demanded by Katie Tim's marginal utility of beer is 12 utils and his marginal utility of pretzels is 5 utils. The price of beer is \$4 and the price of pretzels is \$1, and Tim is spending all of his money. Tim can increase his utility by buying less beer and more pretzels. to solve this divide utils by price of product A consumer maximizes utility by choosing a combination of goods such that the marginal rate of substitution is equal to the price ratio Increases in utility are represented by moving to an indifference curve to the northeast In the short-run, _____ factors of production are fixed, while in the long-run, ______ of them are. some;none What is this an example of: the number of professional baseball teams increases by two long-run adjustment Diminishing marginal returns imply that marginal costs are increasing What is the ultimate goal of a firm? To maximize its profit, where profit=(total revenue-total cost) Marginal cost is defined as the change in total variable cost resulting from a one unit increase in the change in quantity Average variable cost is defined as total variable cost divided by quantity Average fixed cost is defined as total fixed cost divided by quantity Average total cost is defined as total cost divided by quantity Average variable cost equals Average total cost minus average fixed cost Average fixed costs in the short-run increases as the quantity produced increases In the long run, total fixed costs (there are no fixed costs in the long run) The short-run average total cost curve is U-shaped because average fixed costs ____ and average variable costs _____ eventually as quantity produced increases. decrease; increase (also the average variable cost curve will get close to the average total cost curve because average fixed costs are disappearing) The marginal cost curve intersects the short-run average total cost curve where average total costs are minimized in the short-run To minimize average total costs, a firm should always increase output when marginal cost is less than average total costs The long-run average cost of production is defined as total cost divided by the quantity of output the firm chooses when it can choose a production facility of any size Suppose that Gigantic Company is increasing in size. As Gigantic company grows, the coordination of work teams is becoming more difficult because of increased bureaucracy. It is likely that continued growth will result in: diseconomies of scale