Chapters 5 and 6 Econ
Consumer surplus formula
(BxH)/2 (triangle)
According the the rational spending rule, an individual should allocate his or her income across good 1 and 2 so that....
(MU1/P1)=(MU2/P2)
Firms will shut down if:
-If the firms revenue is less than the firms variable cost at all levels of output -If the price is less than the average variable cost even when the firm produces at the level of output that minimizes average variable cost.
Supply curves are upward sloping in part because as price rises
-firms with a higher opportunity cost of producing the product will be willing to start supplying the product -Individual suppliers already in the market will be willing to turn to more costly production techniques to supply more of the product
Total Cost/quantity=
ATC
Economist assume that people
Allocate their income between different goods and services to make themselves as happy as possible
The difference between a buyers reservation price for a product and the price the buyer actually paid is know as....
Consumer surplus
An input used in the production of a good or service
Factor of production
An input whose quantity cannot be altered in the short run is a ________ factor of production
Fixed
A firms profit maximizing level of output will not change when the firms _____ changes
Fixed cost
If a firm is profitable, then at its profit maximizing level of output, its total revenue:
Is greater than its total cost
The additional utility gained from consuming an additional unit of a good is....
Marginal Utility
The number written on the price tag is a goods....
Nominal Price
The affordable combination of goods that yields the highest total utility for a consumer in known as the ____________ of goods.
Optimal Combination of goods
Firms in a perfectly competitive market maximize their profits by choosing the level of output such that
P=MC
A firm that has no influence over the price at which is sells its products
Price Taker
According to the _________________, spending should be allocated across goods so that the marginal utility per dollar is the same for each good.
Rational Spending Rule
When the price of a good or service goes up, consumers will tend to
Switch to less expensive substitutes
States that people do less of what they want to do as the cost of doing rises.
The law of demand
Captures the tendency for the additional utility gained from consuming an additional unit of a good to diminish as consumption increases beyond some point.
The law of diminishing marginal utility
According to the rational spending rule, spending should be allocated across goods so that...
The marginal utility per dollar is the same for each good
Total consumer surplus in a market is
The total amount that consumer should be willing to pay, in aggregate, for the right to participate in that market
A firm is profitable if its total revenue exceeds its
Total Cost (TR>TC=Profitable)
The sum of all the payments made to the firms fixed and variable factors of production is the firms....
Total cost
True or False: Economist believe that are preferences for different goods and services can be influenced by our culture
True
The process whereby people allocate their income between different goods and services in order to maximize their total satisfaction is known as....
Utility Maximization
A firms _______ cost is the sum of all payments the firm makes to inputs whose quantities can be altered in the short run
Variable Cost
Provided people have achieved bare subsistence levels of consumption, economist speak mainly in terms of peoples....
Wants
An imperfectly competitive firm has
at least some control over price
In perfectly competitive markets, firms choose
how much to produce but not the price of their product
The difference between the total revenue of a firm and all cost incurred by the firm is called...
profit
The dollar price of a good relative to the average dollar price of all other goods is the ___________ of a good
real price
