Key Concepts
We have unlimited wants and limited resources
Scarcity
As price increases, the quantity decreases
Law of Demand
A point on the PPC curve represents
Efficient use of resources
The "Golden Rule" or Profit-Maximizing rule
MR = MC
The type of profit a firm earns when: Profit - (Explicit + Implicit costs) = 0
Normal Profit / Zero Economic Profit
Factor of Production that represents the effort workers use to produce goods.
As price increases, quantity also increases
Law of Supply
A point inside the curve represents
Inefficiency/unemploymnet
This type of market is identifiable by it's firms interdependence.
Oligopoly
If (given the same resources) Joe can either make 10 cakes or 5 pies, what is the per unit opportunity cost for Joe making cakes
1 cake costs 1/2 a pie
Factor of Production that represents the skills and experience of workers
Human Capital
Change this, and you will not shift the demand curve, you will just "slide" along it.
Price
A point outside the curve represents
unobtainable/impossible
_____ + AFC = ATC
AVC (Average Variable Cost)
In a perfectly Competitive Market for ice cream...
If the demand for ice cream increases, then the price __________ and the quantity ____________.
Price: Increases - Quantity: Increases
The person who combines the Factors of Production together, incentivized by profit.
Entrepreneur
When the price of one good drops, the demand for the other increases
Complementary Goods
IF the PPC is curved, this most represents what economic concept
Increasing Opportunity Cost
This type of cost in not present in the Long-Run
Fixed Cost
This combination of choices, utilized in payoff matrices, that represents what will occur if two firms do NOT collude.
Nash Equilibrium
Ceterus Paribus
"all other things being equal" in Latin
When the quantity supplied exceeds the quantity demanded
Surplus
If the PPC is a straight line, this most represents what economic concept
Constant Opportunity Cost
If a firm can vary it's prices to completely capture the consumer surplus as profit, then it is...
Perfectly Price Discriminating
A type of market in which their is only one buyer for a specific type of resource (such as labor).
Monopsony