microeconomics chapter 2

what does the totl variable cost curve look like

increases upward

if the price elasticity is less than one, the demand is

inelastic

when the demand is ______ consumers are less responsive to change

inelastic

when the elasticity is less than one, the demand is

inelastic

equation for price elasticity of demand

% change in quantity demanded / % change in price

marginal cost is equal to what

(change in total cost)/change in output

what is the marginal product

(change in total product)/(change in labor

what is the marginal product

(change in total product)/(change in labor)

what is the average fixed cost

(total fixed cost)/output

what is the average variable cost

(total variable cost)/output

what is the marginal social cost

The full cost to society of an economic transaction, including private and external costs.

what does the marginal cost curve look like

U-shaped

what does the average total cost curve look like?

U-shaped, above the average variable cost

which is most elastic, a car, a cup of coffee, or a candy bar

a car is the most elastic

economies of sale

a condition in which the long-run average total cost of production decreases as production increases

constant returns to scale

a condition in which the long-run average total cost of production remains constant as production increases

price elasticity of demand

a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price

pollution is

a negative externality

revenue minus the explicit cost of production is

accounting profit

what are the effect of a price floor

all consumer lose some producers lose some producers benefit society is worse off

what does the average fixed cost curve look like

always declines with the quantity produced

elasticity can apply to

any two variable

fixed costs

are costs that do not change with production

the are btween the average total cost and average variable cost is the

average fixed cost

average total cost

average fixed cost + average variable cost

when looking at a graph, how is economic surplus found

by adding together the area of the consumer surplus and producer surplus

variable costs

change with the amount of output that a firm produces

diseconomies of scale

condition in which the long-run average total cost of production increases as production increases

who always loses with a binding price floor

consumers always lose

the marginal cost curve is

decreasing for low levels of output, then begins increasing.

what does the average fixed csot curve look like

donward sloping

if there are more substitutes for a good, then it will be more

elastic

the more a good or service is considered a luxury, the more _____ its demand will be

elastic

when customers have relatively more time to adjust, the demand becomes relatively more

elastic

when there are more substitutes for a good or service, then the demand is more

elastic

economic surplus is maximized at

equilibrium

economic costs is equal to

explicit costs plus implicit costs

what is marginal cost

extra cost

what is the average fixed cost

fixec cost / unit of output

elastic curves tend to be _______ than inelastic curves

flatter

total cost

implicit plus explicit costs

allocative efficiency

in which consumer surplus and producer surplus are maximized

is public school a private or public good

is a private good

what does the total fixed cost curve look like

is s horizontal line

items are more elastic when the proportion of income to buy these items is

larger

when demand is inelastic, consumers are ---- responsive to changes in price

less

when demand is inelastic, consumers are ______ responsive to changes in price

less

what does the total fixed cost curve look like

looks like a horizontal line

allocative efficiency occurs when

marginal benefit equals marginal cost

marginal cost equation

marginal cost = (change in total cost)/change in output or marginal cost = (change in variable cost)/change in output

the average total cost and average variable cost both intersect the

marginal cost curve

the additional output produced as a result of utilizing one more unit of a variable resources is

marginal revenue

______ defiition influences the number of substitutes

market

rivalry in consumption

means that if i consume it, you cant

excludability

means that people can be prevented from consuming the good

the avc and the mc curves intersect at the

minimum avc

explicit costs

monetary payments

zero accounting profit means that the economic profit is

negative

pollution is an example of an

negative externality

public goods are

nonrivalrous and nonexcludable

public goods are characterized by

nonrivalry and nonexcludability

what is the economies of scale

output increases while the long-run average total cost decreases

what is the total revenue?

price x quantity sold

what is the definition of total revenue

price*quantity sold

when running the business we should consider the

private and external market costs

who always loses with a binding price ceiling

producers always lose

competitive markets reduce limited resources through

productive and allocative efficiency

producing output at the lowest possible production per unit is

productive efficiency

private vs external cost

provate cost is what we pay to run our business/company. External cost is the cost to other people, like pollution

what are examples of fixed costs

rental payment and insuracen premiums

a private good is characterized by

rivalry and excludability

a private good is characterized by

rivalsry and excludability

what does the graph of the variable cost curve look like

slopes upward (increases)

what does the graph of the total cost look like

slopes upward and is above the variable cost curve

what is the private plus external marginal cost

social marginal cost

what are the effects of the price ceiling

some consumers low some consumers benefit producers all lose and society is worse off

total cost of production equation

tcp = tfc + tvc

What is producer surplus?

the amount a seller is paid for a good minus the seller's cost of providing it

what is a positive externality

the benefit that a third party enjoys from the consumption or production of a good or service

what is the consumer surplus

the difference between what people were willing to pay and what they actually paid for a good

what is a property right

the exclusive right to determine how a resource is used

prodictive efficiency

the firms supplies the most goods possible at the least price.

what is diseconomies of scale

the long run average total costs increases with additional output

minimum efficiency scale

the lowest level of output at which the long-run average total cost is minimized

we should clean up pollution when

the marginal benefit is greater than or equal to the marginal cost

the marginal cost curve shows the relationship between

the marginal cost and the output

what is the minimum efficiency scale

the minimum amount of output necessary to acheive the lowest possible long term average total cost

explicit costs

the monetary payments made so a business can function

what is the social supply curve

the new supply curve that results when we factor in the effect of negative externalities, such as pollution. placed above the old supply curve

implicit costs

the opportunity costs of owned resources

implicit costs

the oppurtunity cost of using the resources that we already have

what is constant returns to scale

the property whereby long-run average total cost stays the same as the quantity of output changes

diseconomies of scale

the situation in which a firm's long-run average costs rise as the firm increases output

what is the short run

the time period in which at least one input is fixed

total product is defined as

the total amount of output produced with a given amount of resources

A firm is planning to increase output in the long run from 100 units to 200 units. The long run average total cost falls from $25 to $20. What can be said about this level of output?

this is an economies of sale

when positive externalities exist

too little is produced price doesnt reflect value

when positive externalities are present

too little is produced and the price doesn't reflect the value of what is produced

average total cost

total cost/ output

the distance between the total cost and the total variable cost is the

total fixed cost

total cost for a firm

total fixed cost plus total variable cost

total product

total output

What is total product?

total output produced by the firm

accounting profit

total revenue - explicit costs

economic profit

total revenue minus total cost, including both explicit and implicit costs

economic profit

total revenue-economic costs

what is an accounting profit

total revenue-explicit costs

the vertical difference between the average _______ cost curve and the average _______ cost curve should get smaller as more output is produced

total, variable

t or f, the total variable cost curve is below the total cost curve

true

average variable cost

tvc/ the output

what does the average varuable csot curve look like

u-shaped

where is the optimal level for cleaning up polluation

where the marginal benefit and marginal cost curves intersect