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| | *a "transaction cost" is not the overall cost of the transaction. It is the portion of the overall cost that is due to "friction", or the time and expense of obtaining what you really want from the transaction. Examples include tips, taxes, commissions, salesmen, broker fees, gas to drive there, etc. | | *a "transaction cost" is not the overall cost of the transaction. It is the portion of the overall cost that is due to "friction", or the time and expense of obtaining what you really want from the transaction. Examples include tips, taxes, commissions, salesmen, broker fees, gas to drive there, etc. |
| | *a "variable cost" is not a cost that varies with demand. It is a cost of a firm that varies with output. It is a cost that grows bigger as the number of units made grow bigger, such as electricity for staying open later, printing charges for making more copies of lectures, gas costs for taking more taxicab rides, etc. | | *a "variable cost" is not a cost that varies with demand. It is a cost of a firm that varies with output. It is a cost that grows bigger as the number of units made grow bigger, such as electricity for staying open later, printing charges for making more copies of lectures, gas costs for taking more taxicab rides, etc. |
| − | "Returns to scale" is in the "long run" and has nothing to do with "marginal" effects. There are not "diminishing" returns to scale like "diminishing marginal utilitym" which suggests a rapidly declining rate. Instead, there are "decreasing" returns to scale. | + | *"Returns to scale" is in the "long run" and has nothing to do with "marginal" effects. There are not "diminishing" returns to scale like "diminishing marginal utilitym" which suggests a rapidly declining rate. Instead, there are "decreasing" returns to scale. |
| | *In calculating overall utility, keep in mind in which order someone chooses to maximize his marginal utility. Exam questions might ask how someone specifically spent his third hour of time based on assumptions about how the utility for different activities diminish over time. | | *In calculating overall utility, keep in mind in which order someone chooses to maximize his marginal utility. Exam questions might ask how someone specifically spent his third hour of time based on assumptions about how the utility for different activities diminish over time. |
| | *the concept of "marginal product" is specific to an input, as in "marginal product of labor," which is the additional overall output (product) produced due to an additional unit of that input (labor). | | *the concept of "marginal product" is specific to an input, as in "marginal product of labor," which is the additional overall output (product) produced due to an additional unit of that input (labor). |