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| | {{Economics_Lectures}} | | {{Economics_Lectures}} |
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| − | '''Next week: Midterm exam, about 30 multiple choice questions. Closed book. No penalty from wrong answers (the CLEP exam has no penalty for wrong answers either).''' | + | '''Next week: Midterm exam, about 30 multiple choice questions. Closed book. Answer every question, because there is no penalty for wrong answers (the CLEP exam has no penalty for wrong answers either).''' |
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| | The word "economy" is derived from the Greek word for "household", which is the most basic and perhaps the most efficient unit of an economy. Think of how there is division of labor among family members; diminishing marginal utility for activities; supply and demand for food in the refrigerator; both "long run" and "short run" decisions; economies of scale in buying dinner; and very few transaction costs within a family. The family or household unit may be the most efficient structure possible. | | The word "economy" is derived from the Greek word for "household", which is the most basic and perhaps the most efficient unit of an economy. Think of how there is division of labor among family members; diminishing marginal utility for activities; supply and demand for food in the refrigerator; both "long run" and "short run" decisions; economies of scale in buying dinner; and very few transaction costs within a family. The family or household unit may be the most efficient structure possible. |
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| | :At Q = 0, TC = TFC | | :At Q = 0, TC = TFC |
| | ::When quantity produced is 0, the total costs are total fixed costs. | | ::When quantity produced is 0, the total costs are total fixed costs. |
| − | :At Q = 1, MC = TVC
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| − | ::When quantity produced is 1, the marginal cost is total variable cost.
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| | :At all Q > 0, AVC = TVC / Q | | :At all Q > 0, AVC = TVC / Q |
| | ::Whenever quantity produced is greater than 0, average variable cost equals total variable cost divided by quantity. | | ::Whenever quantity produced is greater than 0, average variable cost equals total variable cost divided by quantity. |
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| | ::At any quantity, average total cost equals average variable cost plus average fixed cost. | | ::At any quantity, average total cost equals average variable cost plus average fixed cost. |
| | :TVC = sum of MC | | :TVC = sum of MC |
| − | ::Total variable cost equals the sum of Marginal Cost. | + | ::Total variable cost equals the sum of the Marginal Cost over all the units produced. |
| | :TFC = Q x AFC | | :TFC = Q x AFC |
| | ::Total fixed cost equals quantity times average fixed cost. | | ::Total fixed cost equals quantity times average fixed cost. |