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Microeconomics Final Study Guide
Old stuff:
* Surplus
* Taxes
* Elasticity
* S & D curve
* What market is total surplus maximized in?
Ch. 13
The Costs of Production
* Input Labor (# of workers)
* Quantity of Output = Q
* Marginal product of labor = the increase in output that arises from an additional unit input = ΔQ/ ΔL
* Fixed cost = costs that do not vary with the quantity of output produced
* Variable cost = costs that do not vary with the quantity of output produced
* Total cost = the market value of the inputs a form uses in production
* Marginal cost = the increase in total cost that arises form an extra unit of production = ΔTC/ΔQ
* Average fixed cost = fixed costs divided by the quantity of output = FC/Q
* Average Variable cost = variable costs divided by the quantity of output = VC/Q
* Average Total cost = total cost divided by the quantity of output = TC/Q
* Explicit costs = annual labor + raw materials + interest on loan
* Implicit costs = foregone interest + foregone salary
* Variable costs = material + labor
* Fixed costs = interest bank loan + implicit costs
* Economic Profit = total costs includes implicit and explicit costs
* Accounting Profit = TC includes implicit and explicit costs
* Total revenus is the total cost + profit
* If the marginal prodcut is dimnishing it means that the firm is producing with a crowding effect. Marginal product means what each extra work adds to it
* Increasing marginal product decreasing marginal cost
* Decreasing marginal productincreasing marginal cost
* If marginal cost < average total cost, ATC starts decreasing; when they’re equal, the MC > ATC, so ATC is pulled up
* Given a problem: MC = ΔTC/ΔQ; do not accept the offer when the marginal benefit (price they’re WTP) < MC
Ch 14
Perfect competition characteristics: every firm is a price taker
* Many buyers & sellers
* Goods...