Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

econ > midterm 2 > Flashcards

midterm 2 Flashcards

(48 cards)

Start Studying
1
Q

ATC

A

ATC(q) = TC(q)/Q

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

AVC

A

AVC(q) = VC(q)/Q

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

AFC

A

AFC(q) = FC(q)/Q

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

MC, marginal cost

A

MC(q) = TC(q) - TC(q-1)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

FC

A

FC= TC-VC

always same.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

VC

A

VC = TC-FC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

TC

A

TC= FC+VC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Diseconomies of scale

A

as you Increasing output there are increases LR AC. slope upwards.

decreasing returns of sale.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Economies of Scale

A

as you increasing output you reduces LR AC

slope downwards
increasing returns of sale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Constant Returns of Scale

A

Straight line ________

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

TR, total revenue

A

TR(q) = P * q

amount paid to a firm for selling a particular quantity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

AR, average revenue

A

AR(q) = TR(q) / q =P

AR is always price.

average amount paid to a firm per unit sold.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

MR, marginal Revenue

A

MR(q) = TR(q) - TR(q-1) = P

MR is always price

additional amount paid to a firm for selling one more unit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Profit

A

Profit(q) = TR(q) - TC(q)

Profit = (P - ATC) * Q

Profit will increase by MR(q) - MC(q)
Produce as long as MR(q) ≥ MC(q)
Profit is maximized at q where MR(q) = MC(q)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

PC

Long Run exit if

A

TR < TC
P < ATC

Total Profit < 0
AR < AC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

PC

Short Run shut down if

A

P same as AR < AVC
Total Profit < -FC

still have to pay FC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

PC

Short Run: P and MC determine..

A

P and MC –> determine firm q

If MR > MC, the firm should increase its output.
If MC > MR, the firm should decrease its output.
At the profit-maximizing level of output, MR = MC.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

PC

Short Run: P and AC determine..

A

P and AC –> determine average profit –> times by q to get total profit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

PC

Long run: Profit (or loss)

A

–> firms enter (or leave) in the long run –> increases (or decreases) industry supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

PC

Long run: continues until profit=..

21
Q

PC

Long Run: what occurs where MC = AC

Study These Flashcards
A

MC = AC –> LR market price

22
Q

PC

Costs in the SR

Study These Flashcards
A

only some variable inputs can be adjusted. fixed inputs cannot change.

23
Q

PC

Costs in the LR

Study These Flashcards
A

you can change fixed inputs.

PRATC = minimum of all SRATC

24
Q

PC

AC curve: SR and LR

Study These Flashcards
A

SR: U shaped. MC crosses at lowest point.

LR: not always a U-shape.

25
PC | Profit maximization
Should I produce to the qth unit? - producing it raises revenue by MRq - Producing it raises costs by MCq - So profit will increase by MRq - MCq Produce it as long as MRq >= MCq Profit is maximized at q where MRq = MCq
26
Profit maximization in PC
MRq = P - so max profit occurs at q where MCq = P - the firms MC curve is the firms supply curve (with a caveat on shutting down.) - Leave the industry (in the long run) if profits are negative
27
homogenous product.
A homogeneous product is one that cannot be distinguished from competing products from different suppliers. product has essentially the same physical characteristics and quality as similar products from other suppliers. One product can easily be substituted for the other.
28
Perfectly Competitive market
- Many sellers and many buyers - free entry - price Takers - homogenous products 0 Profits a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
29
Monopolistically competitive market
- Many sellers and many buyers (brand loyalty) - free entry - price Makers - differentiated products 0 Profits a market structure in which many firms sell products that are similar but not identical
30
Oligopoly
- Few sellers and many buyers - barriers to entry - price Makers - homogenous products 0 Profits - monopoly profits a market structure in which only a few sellers offer similar or identical products
31
monopoly
- One sellers and many buyers - barriers to entry - price Makers - N/A to homogenous products monopoly profits a firm that is the sole seller of a product without any close substitutes
32
natural monopoly
a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms
33
compared to a perfectly competitive firm, a monopolist produces..
more DWL, less CS
34
Monopoly | maximum profit
maximized at Q where MRq = MCq | -but MR is not longer constant
35
Externalities Costs and Benefits MPC, MEC, MSC, MPB, MEB, MSB
- marginal private cost (MPC): MC to the actor making the choice - Marginal external cost (MEC): MC imposed on others. - Marginal Social Cost (MSC): MPC + MEC - Marginal Private Benefit (MPB): benefit to the actor (individual demand curve) - Marginal external benefit (MEB): benefits that spill over to others. - Marginal Social Benefit (MSB) = MPB + MEB
36
Public Goods: - non-excludable: - non-rival: - public goods: - common resource:
- non-excludable: firm cannot prevent individuals from using their good - non-rival: one person's use of the good doesn't diminish another's ability to use it. - public goods: a good that is non-excludable and non-rival - common resource: a good that is non-excludable and rival
37
Market Failure in Public Goods
Non-excludable : free riders people benefit from it but do not pay for it market demand will not reflect true marginal value (external benefits) Non-Rival: Zero marginal cost of use. Efficient price of use if 0. Competitive market will not survive.
38
Tragedy of commons
depletes the natural resource faster than optimal.
39
Solution to market failure in common resources.
private owner will charge for use. | in comp market, price will equal the marginal cost.
40
Govt Failures | Bureaucracy
process is slow and the result may not reflect society's preferences
41
Govt Failures | Rent Seeking
People will seek special advantages from gov't
42
Govt Failures | Limitations on information
gov't cant always discern true preferences, costs
43
Govt Failures | Restrictions on choice
Regulation only limits choice, and we value freedom
44
Adverse selection
when only the worst outcomes are left in market
45
Moral Hazard
when the agent's actions are inefficient due to limited information.
46
Rational Ignorance
search for more information until the MC = expected marginal benefit
47
Risk Premium
higher return on risky investment or lower price on risky products.
48
Solutions to public goods
technical solutions public financing complementary goods

econ (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions