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Micro Practice Test 2
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Terms in this set (28)
Equilibrium Price
Set Supply = Demand and solve for P
Perfect Subsitutes
Lines with a slope of -1
Fixed Ration
Lines that run at right angles
Cobb Douglass
Left half of a U
Possible to have diminishing marginal Product and increasing returns to scale
true
Price Elasticity of Demand =1
Change in Price has no effect on Revenue
PED >1: Raise Prices
Revenue goes Down
PED < 1: Raise Prices
Revenue Goes up
Expected Percentage Rate of Return
rf+B(rm-fr)
Move left along demand curve
price elasticity increases
Excises Tax
Tax on Seller
Sales Tax
Tax paid by buyer
Price Elasticity of Demand
(dQ/dp)*(p/Q)
Price with Tax
Set Demand = Supply, but alter one of the Prices to be (p+t)
Expected
Sum of probability times value
Technical Rate of Subs
-Partial of X1/-Partial X2
Production Function: Exponents > 1
increasing returns to scale
production function: Exponents <1
decreasing returns to scale
production function: Exponents =1
constant returns to scale
Utility : exponents >1
risk seeking
Utility: exponents <1
risk adverse
Total Return on something you use
is more than the just the financhial falue
If price elasticity is .5
Low on the curve, decrease out put, lose revenure
Bond
100/(1+r)+ (150)/(1+r)^3
Marginal product of input of x1
take partial derivative with respect to X1
Dead weight loss
(1/2)
(Price)
(Change in Quanity)
Consol
= X/R
Sell
Rate of Return = interest Rate
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