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Terms in this set (43)
Marginal Cost formula
change in total costs / change in quantity
change in TR / change in quantity (output)
change in TC / change in quantity (output)
change in TP / change in quantity (output)
The firm increases production as long as....
MR > MC or MP > 0
The firm contracts production as long as....
MR < MC or MP < 0
The firm achieves profit maximization where
MR = MC or MP = 0
Competitive markets imply
P = MR
Profit maximization for competitive firms requires
P = MC
A good is rival (subtractable) in consumption when the use by one person diminishes the use by another person.
A good is excludable when consumers can be prevented from using the good.
rival and excludable
- Food, Computer
-A cup of coffee (most commonly traded
Open access Goods (common pool resources)
rival but not excludable
- Fisheries, Forests, Oil fields, Groundwater basins
excludable but not rival
- Pay cable television, UGA PAWS wifi
nonrival and nonexcludable
- Clean air, Clear water, Tornado siren, Public parks, National
defense, Street lighting
Most Environmental goods are either
public goods or open access goods
The interaction between buyers and sellers to exchange a well defined good or service.
Buyer's purchasing decision is represented by
Seller's producing decision is represented by
A demand function...
maps the quantity demanded (QD)to the market price (P).
Law of Demand says a
a rise in Price is associated with a fall in the quantity demanded
Caution: in Economics, demand curve is plotted as an...
inverse demand function, as a tradition.
How to graph the demand function
Price = vertical
Demand = horizontal
Demand curve is also referred as the
Marginal Benefit (MB) curve in our class.
the additional benefit consumer (or certain group of societal members) obtains from consuming (receiving) one additional unit of good.
Law of Supply says there is a
positive relationship between the price and the quantity supplied of a good.
Supply curve is also referred as the firm's
Marginal Cost (MC) curve
Firm's supply curve, or the marginal cost (MC) curve, shows that firm's additional cost
increases for each additional unit of good produced
Average Fixed Cost =
AFC = FC/𝑞
Average Variable Cost =
VC / q
Average Total Cost =
total cost function / q
How to find marginal cost?
the derivative of the total cost formula
Disequilibrium occurs if the market is
off the equilibrium.
If actual price is below its equilibrium level, there will be a Shortage
The excess demand of a commodity equals to (QD - QS)
If actual price is above its equilibrium level, there will be a
The excess supply of a commodity equals to (QS - QD)
At the market level, allocative efficiency requires that resources be allocated such that marginal benefits to society are equal to marginal costs incurred.
The additional _________ society places on the good is equivalent to the additional value of the _________ given up to produce it
value, resources (MB=MC)
MB = MC is different than the firm's profit maximizing condition
At the firm level, firm produces at where MR=MC (marginal revenue equals marginal cost) to maximize firm's profit.
Consumer surplus (CS)
Consumer surplus (CS) is the net benefit to buyers estimated by the excess of marginal benefit (MB) of consumption over market price (P), aggregated over all units purchased.
Producer surplus (PS)
Producer surplus (PS) is the net gain to sellers of a good estimated by the excess of the market price (P) over marginal cost (MC), aggregated over all units sold.
If consider only consumer and producer, the society's Total surplus (TS) equals
CS + PS.
Deadweight Loss (DWL)
is the net loss of consumer and producer surplus due to an allocative inefficiency.
THIS SET IS OFTEN IN FOLDERS WITH...
Environmental Economics Ch 14, 15, 16 ECON 2100 Zh…
ECON 2100 Sustainability (CH. 20/21)
ECON 2100 Test 3 (Ch6 Tietenberg)
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