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| | ===Medium=== | | ===Medium=== |
| | | | |
| − | consumer surplus (savings by consumers who would pay more than the market price for a good) | + | *consumer surplus (savings by consumers who would pay more than the market price for a good) |
| − | | + | *indifference curve |
| − | indifference curve | + | *fixed costs (FC) |
| − | | + | *variable costs (VC) |
| − | fixed costs (FC) | + | *average total cost (ATC) (this is all the costs divided by the quantity of output Q) |
| − | | + | *average variable costs (AVC) (total variable costs divided by the quantity of output Q) |
| − | variable costs (VC) | + | *total costs (TC = TVC + TFC) |
| − | | + | *elastic demand |
| − | average total cost (ATC) (this is all the costs divided by the quantity of output Q) | + | *inelastic demand |
| − | | + | *price elasticity of demand (percent change in quantity demanded divided by percent change in price, dropping the negative sign) |
| − | average variable costs (AVC) (total variable costs divided by the quantity of output Q) | + | *marginal cost (MC = change in total cost (TC) due to producing one more unit of output Q) |
| − | | + | *total fixed costs (TFC) do not change as more is produced, thus MC = change in TVC due to one more output Q) |
| − | total costs (TC = TVC + TFC) | + | *marginal revenue (MR) |
| − | | + | *alternative definition of the “long run”: enough time to adjust all inputs in order to produce a given Q at the lowest possible cost |
| − | elastic demand | + | *variable inputs (inputs that are increased to produce more Q in the short run) |
| − | | + | *fixed inputs (inputs that cannot be increased in the short run to produce more Q) |
| − | inelastic demand | + | *returns to scale (increasing, decreasing or constant? Look at whether output Q increases for increase in input I) Note that "economies to scale" is the same as "increasing returns to scale." |
| − | | + | *income effect |
| − | price elasticity of demand (percent change in quantity demanded divided by percent change in price, dropping the negative sign) | + | *substitution effect |
| − | | + | *inferior good (a good that sees a decrease in demand when income increases, and vice-versa) |
| − | marginal cost (MC = change in total cost (TC) due to producing one more unit of output Q) | + | *marginal product (increase in output due to additional input: Q = sum MP) |
| − | | + | *law of diminishing marginal return |
| − | (note: total fixed costs (TFC) do not change as more is produced, thus MC = change in TVC due to one more output Q)
| + | *perfect competition (know the conditions for it) |
| − | | + | *In a perfectly competitive market ... |
| − | marginal revenue (MR) | + | ::the increase in profit from an additional Q = P - MC |
| − | | + | ::the firm increases Q only if P > MC |
| − | alternative definition of the “long run”: enough time to adjust all inputs in order to produce a given Q at the lowest possible cost | + | ::the optimal level of Q is where P = MC |
| − | | + | ::the company stays in business in the short run at level Q only if P equals or exceeds AVC |
| − | variable inputs (inputs that are increased to produce more Q in the short run) | + | ::otherwise the company changes Q until it equals or exceeds AVC |
| − | | + | ::if no such Q exists then the company is better off shutting down |
| − | fixed inputs (inputs that cannot be increased in the short run to produce more Q) | |
| − | | |
| − | returns to scale (increasing, decreasing or constant? Look at whether output Q increases for increase in input I) Note that "economies to scale" is the same as "increasing returns to scale." | |
| − | | |
| − | income effect | |
| − | | |
| − | substitution effect | |
| − | | |
| − | inferior good (a good that sees a decrease in demand when income increases, and vice-versa) | |
| − | | |
| − | marginal product (increase in output due to additional input: Q = sum MP) | |
| − | | |
| − | law of diminishing marginal return | |
| − | | |
| − | perfect competition (know the conditions for it) | |
| − | | |
| − | In a perfectly competitive market ... | |
| − | :the increase in profit from an additional Q = P - MC | |
| − | :the firm increases Q only if P > MC | |
| − | :the optimal level of Q is where P = MC | |
| − | :the company stays in business in the short run at level Q only if P equals or exceeds AVC | |
| − | :otherwise the company changes Q until it equals or exceeds AVC | |
| − | :if no such Q exists then the company is better off shutting down | |
| | | | |
| | ===Equations of Medium Difficulty=== | | ===Equations of Medium Difficulty=== |
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| | :TVC = Q x AVC | | :TVC = Q x AVC |
| | :TC = Q x ATC | | :TC = Q x ATC |
| | + | :MC = W / MP (where W is wage per unit of labor, and labor is the only input) |
| | + | :AVC = W / AP when labor is the only input and W is the wage or cost of the labor |
| | | | |
| | ===Honors=== | | ===Honors=== |
| | | | |
| − | price discrimination | + | *price discrimination |
| − | | + | *cross-elasticity of demand (percent change in demand for good X divided by percent change in price for good Y) |
| − | cross-elasticity of demand (percent change in demand for good X divided by percent change in price for good Y) | + | *income elasticity of demand (percent change in demand for good X divided by percent change in income) |
| − | | + | *law of equiproportional marginal benefit |
| − | income elasticity of demand (percent change in demand for good X divided by percent change in income) | + | *condition for reducing production (MC>MR) |
| − | | + | *condition for shutting down (P<AVC in short run or P<ATC in long run) |
| − | law of equiproportional marginal benefit | + | *Coase theorem |
| − | | + | *mathematical solutions and specific calculations |
| − | condition for reducing production (MC>MR) | |
| − | | |
| − | condition for shutting down (P<AVC in short run or P<ATC in long run) | |
| − | | |
| − | Coase theorem | |
| − | | |
| − | mathematical solutions and specific calculations | |
| | | | |
| | ===Equations of Honors Difficulty=== | | ===Equations of Honors Difficulty=== |
| | | | |
| − | :MC = W / MP (where W is wage per unit of labor, and labor is the only input)
| |
| − | :AVC = W / AP when labor is the only input and W is the wage or cost of the labor
| |
| | :long run average costs (LRAC) are never more than short run average costs (SRAC) for a given Q. Why? See the alternative definition of “long run” in “Medium” list above | | :long run average costs (LRAC) are never more than short run average costs (SRAC) for a given Q. Why? See the alternative definition of “long run” in “Medium” list above |
| | :LRAC = P x (I / Q), where I is input and Q is output and P is price of the input | | :LRAC = P x (I / Q), where I is input and Q is output and P is price of the input |