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Econ November Exam Formulas
Terms in this set (63)
per unit tax * quantity imported
Individual firms quantity of output
TFC (total fixed cost) + TVC (total variable cost)
Average Total Cost
TC (total cost) / q
Change in TC / slope of TC curve
Average Fixed Cost
TFC / q
Average Variable Cost
TVC / q
Marginal Variable Cost
Change in TVC / change in q
Where does MC cross the AVC and ATC curves?
At their lowest points
P * q
TR / q = P
Change in TR / change in q = P
(P-ATC) * Q
TR - TC
What is the profit maximizing condition of a firm?
Pick the quantity for which MR = P = MC
What happens if a firm's P > ATC
Firm earns profit
What happens if a firm's P < ATC
Firm suffers losses
What happen's if a firm's P > AVC
It will continue to produce the same level of output in the short run despite the losses
What happen's if a firm's P < AVC
It will shut down and produce nothing
What is a firm's short run supply curve?
the MC curve above the minimum level of AVC
What is the industry's short run supply curve?
Horizontal sum of all the firm's supply curves
When does exit in the long run occur?
When P < ATC
What do firms produce at in the long run?
Their minimum ATC
When ATC is rising, then MC must be...
Less than ATC
What is the relationship between P, MR, and MC for a profit-maximizing monopolist?
P > MR and MR = MC
If a small country that currently exports a good experiences a technology advance in the production of that good only in that country will cause what?
Will increase exports from that country
If a firm is producing where P > ATC > MC > MR then the firm is producing ___ output and making _____
Too much; profits
What is NOT a good example of a public good provided by the city of Madison?
Thanksgiving dinner for the homeless
In a competitive industry, entry and exit cause the long run industry quantity supplied to be ______ responsive to price changes than in the short run quantity supplied
Average Tax Rate
Total taxes paid / total income
Marginal Tax Rate
Amount that taxes increase from an additional dollar of income
tax for which high income and low income taxpayers pay the same fraction of income
A tax for which high income taxpayers pay a smaller fraction of their income than do low income taxpayers
A tax for which high income taxpayers pay a larger fraction of their income than do low income tax payers
Equity of the tax system
whether the tax burden is distributed fairly among the population
input costs that require an outlay of money by the firm
input costs that do not require an outlay of money by the firm
total revenue - total cost, including both explicit and implicit costs
total revenue - total explicit cost
the increase in output that arises from an additional unit of input
Diminishing marginal product
the property whereby the marginal product of an input declines as the quantity of the input increases
if the impact on a bystander is adverse
If the impact on a bystander is beneficial
The free rider problem results from what?
Pigouvian taxes, such as a carbon tax...
are used to enhance economic efficiency
Diminishing marginal product serves to have what effect on the shape of the production function?
The slope of the production function decreases as the quantity of the input increases
If, in order to sell more, a firm must reduce the price on all previous units sold, one can conclude that marginal revenue will...
Be less than average revenue
The tragedy of the commons refers to goods that are...
Rivalrous but not excludable
Why does accounting profit exceed economic profit?
Because of opportunity cost
How does a natural monopoly arise?
There are economies of scale over the relevant range of output
In a progressive income tax system of the kind we have in the US...
Marginal and Average Tax Rates increase with income
What curves shift if there is a tax on the production of a good?
MC, ATC, and AVC
Comparing perfect price discrimination to perfect competition once can conclude that...
producer surplus is lower and consumer surplus is higher under perfect competition
goods that are both excludable and rival in consumption
goods that are neither excludable nor rival in consumption
goods that are rival in consumption but not excludable
goods that are excludable but not rival in consumption
the property of a good whereby a person can be prevented from using it
rival in consumption
the property of a good whereby on person's use diminishes other people's use
what are examples of private goods?
ice cream cones
congested toll roads
what are examples of common resources?
fish in the ocean
congested non toll roads
what are examples of club goods?
uncontested toll roads
what are examples of public goods?
uncontested non toll roads
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