Econ 3050
Upward
Supply curve is usually sloped
Inelastic
< 1
Unit elastic
= 1
Elastic
> 1
Marginal revenue minus marginal cost equal zero (MR-MC=0)
A firm sets its output where
Participates in more than one successive stage of production
A firm that is vertically integrated
Long run
A horizon in which the manager can adjust all factors of production
Price takers
According to economists, competitive firms..
Downward
According to the law of demand, demand curves slope
Point elasticity
Along a line
Arc price elasticity formula
(Q2-Q1)/[(Q2+Q1)/2] _______________ (P2-P1)/[(P2+P1)/2]
2 steps to maximize profit
1. Output decisions 2. Shut down decision
Arc elasticity
Between two points
Remain constant as output is increased
Constant returns to scale exist when long run average costs
Law of demand
Consumers demand more of price is lower
Marginal cost
Difference of total cost
Total cost
Fixed cost + variable cost
Short run costs
Fixed cost + variable cost = total cost AFC + AVC = AC
Average fixed cost
Fixed cost/ output (q)
Present value
Fv/(1+i)^t
Corporation
Governance structure where owners are not personally liable
100/(1+0.05)^7
If interest rate is 5 percent, $100 received at the end of seven years is worth how much today?
Compliments
If the cross price elasticity between goods A and B is negative, we know the goods are
Positive
If the last unit of input increases total product, we know that the marginal product is
Elasticity
Measures the responsiveness of one variable such as quantity demanded to a change in another variable such as price
Sink cost
Past expenditure that can't be recovered
Profit
Revenue - cost
Supply curve
Shows the quantity supplied at each possible price, holding constant the other factors that influence firms supply decisions
The goals of the owner and manger are aligned
The agency problem can be avoided if
Variable cost
Total cost (c) -fixed cost (f)
Average cost
Total cost (c) / output
Marginal product is zero
Total product begins to fall when
Opportunity cost
Value of the best alternative
Average variable cost
Variable cost/ output
Foregone profits of producing a different good or service
Which of the following is an implicit cost to a firm that produces a good or service
Rewritten elasticity formula
🔼Q P ___. _ = b* P/Q 🔼P Q
Elasticity formula
🔼Q/Q / 🔼P/P