Econ 3050

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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


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