Unit 1
When there is a limited amount of something.
What is scarcity?
A place where buyers and sellers interact with one another.
What is a market?
Total amount earned for selling a specific quantity of a product; P x Q.
What is total revenue?
Costs that do not change as output changes.
What are total fixed costs?
Total benefit among all agents in the market; consumer + producer surplus.
What is total surplus?
When someone can make a good or service at a lower opportunity cost.
What is comparative advantage?
As price decreases, quantity demanded increases. As price increases, quantity demanded decreases.
What is the law of demand?
There are two different types of this; TR - TC.
What is profit?
Difference between total revenue and total explicit costs.
What is accounting profit?
Time frame in which no resources are fixed and all resources are variable.
When someone can make more of a good or service with the same resource constraints.
What is absolute advantage?
As price decreases, quantity supplied decreases. As price increases, quantity supplied increases.
What is the law of supply?
Difference between total revenue and total costs (both implicit and explicit).
What is economic profit?
Change in total revenue for selling 1 more unit; MR=△TR/△Q.
What is marginal revenue?
What is elasticity?
The option that provides the greatest amount of net benefit.
The total surplus lost by not being at equilibrium.
What is deadweight loss?
Firms will maximize profit where MR = MC.
What is the profit maximization point?
As the industry grows, cost increases; the long-run supply curve is upward-sloping.
What is an increasing-cost industry?
Decisions are shaped by weighing incentives (that is, the costs versus benefits) of that decision.
What is the cost-benefit principle?
The change in total utility that comes from consuming 1 additional unit of a good or service; equal to △TU/△Q.
What is marginal utility?
How much the quantity demanded changes in response to a change in price.
What is the price elasticity of demand?
Average costs increase as output increase; businesses get decreasing amounts of output for each additional unit of input.
What are decreasing returns to scale?
The more of a variable resource (ie labor) we add to a fixed resource (ie capital), the more the marginal product will decrease.
What is the law of diminishing returns?
When the last dollar spent on each product yields the same amount of marginal utility.
When does a consumer maximize satisfaction?