Utility Max
If a consumer allocates their budget so that the marginal utility per dollar spent on each good is equal, they are said to be maximizing this.
What is total utility?
A cost that increases when the firm increases its output and decreases when the firm reduces its output
What is a Variable Cost
OTS: Go draw, TC, TFC, TVC
This type of market features many sellers offering identical products.
What is Pure Competition?
Also known as Non-Price Competition, firms might spend money on their product to help it stand out with consumers.
What is advertising or marketing.
This is the term for the situation where neither player in a non-cooperative game can improve their outcome by changing their strategy, given the strategy of the other player.
What is Nash equilibrium?
This is the term for the additional satisfaction a consumer gets from consuming one more unit of a good.
What is marginal utility?
Differing types of costs that are used in calculating Accounting Profit and Economic Profit, and when added together, equal economic costs.
What are Implicit and Explicit costs?
This can help a purely competitive firm figure out if it should produce, its production amount (if so), and its economic profit (loss).
What is MR.DARP?
OTS: Draw MR.DARP
This market structure features a few dominant firms whose pricing and output decisions are highly interdependent, often leading to tacit collusion or price rigidity.
What is an oligopoly?
This term refers to a strategy that leads to the best outcome for a player, regardless of what the other player does.
What is a dominant strategy?
If a consumer reallocates spending to get more marginal utility per dollar from good B than good A, this will happen to total utility.
What is it increases?
While Accounting profit (aka net income) is the profit on accounting statements and is equal to TR - Explicit Costs, this type of profit accounts for implicit costs and is equal to TR - Explicit costs - Implicit Costs.
What is Economic Profit
In perfect competition, this is the shape of the demand curve faced by an individual firm.
What is perfectly elastic (horizontal)?
OTS: Draw the market and the firm for the PC market model (All colors and axis labels must be correct)
This term refers to the gap between minimum ATC output and the profit maximizing output.
What is Excess capacity?
OTS: NOW GO DRAW IT
In game theory, what is required to result in the cooperative dominant strategy that is still legal under US law?
Credibility
A school needs to decide between increasing the number of counselors or upgrading the computers in the computer lab, but it can't afford both options, so it needs to decide which one to choose. What is this an example of?
What is scarcity and choice?
What is this an example of? "You have your last $10 and you really want this shirt but if you buy it you wont be able to eat that day"
What is Marginal Analysis (or Considering Opportunity Cost)
In the short run, a perfectly competitive firm will continue producing as long as price covers this.
What is average variable cost?
If a monopolistically competitive firm is covering its variable costs, but not its total costs in the long run, should it stay in the industry or leave
What is Go or Leave the industry
OTS: Go draw a GO/Leave SITUATION ON THE BOARDS
In this game theory experiment, two rational agents can either cooperate for mutual benefit or betray their partner for individual gain.
What is the Prisoners' Dilemma?
OTS: Sketch out a Prisoner's Dilemma for how Coke and Pepsi think about the price for their signature 12oz products. (Consider profits and market share)
This tech company maximized its utility so much that it was officially deemed a monopoly this term. Plus, if you know how to explain why, there will be a question on the final exam.
What is Google?
What is the minimum level of profit a business needs to make to be competitive in a market and want to keep doing that business?
Normal Profit
In the long run, economic profits in a perfectly competitive market trend toward this value due to free entry and exit.
What is zero?
For MonoComp firm, looking at a graph at what intersection do we find the profit maximization point?
What is MR = MC
In a sequential game, the firm that moves first can sometimes secure this advantage by acting before its rivals.
What is first-mover advantage?