Class 1 Flashcards
(22 cards)
What does MC stand for?
Marginal Cost
What does “AC” Stand for and what is the formula?
Average Cost- Equation is: Total Cost / Total Quantity
What does Total Cost / Total Quantity equal?
Average Cost
What does Pie mean?
Pie meants profits
What is the Profit Model?
Pie = (PQ) - (ACQ) = (P-AC)*Q
When does profit-maximizing occure?
When Marginal Revenue (MR) = Marginal Costs (MC)
What are the X and Y axis for a demand curve?
Price (Y) and Quantity (X)
A demand curve represents the relationship between…
the price charged and the quantity demanded
The demand curve represents the distribution of…
the willingness to pay.
What does “Fixed Costs” actually refer to?
Costs to produce like R&D costs. NOT ongoing costs to produce (double check this is right)
What does Fixed Marginal Costs mean?
**GET ANSWER FROM FLORIAN
What represent the parameters in a demand curve
“a” and “b”
What do “a” and “b” stand for in the linear equation
a = y intercept and b = slope
Constant Marginal Costs
**GET ANSWER FROM FLORIAN
Marginal Revenue means…
the CHANGE in revenue as the quantity changes. (The change here can also be called the “______” )
The Derivative in laymen’s teams means the…
Incremental CHANGE in either revenue or costs as the price and quantity change
Strategic Action Variable refers to
The variable in the equation you are trying to isolate for CHECK WITH FLORIAN
What do P* and quantity Q* refer to?
Optimal Price and Optimal Quantity
Producer surplus meaning
**GET ANSWER FROM TA
Deadweight Loss means
**GET ANSWER FROM TA
“consumer surplus” refers to
The difference between what the higher price WTP and the lower price customers are being charged. That difference added up is the total consumer surplus. Basically richer people that would be willing to pay more for something, but the company isn’t able to charge them because then their overall demand would drop. Top portion of the demand curve
