ECO182 Midterm study guide - ECO 182LD Spring 2014 Prof...

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ECO 182LDSpring 2014Prof. Alex AnasIntro to MicroeconomicsMidterm ExamStudy GuideKey TermsAverage cost pricing ruleSetting a firms regulations to where it can produce at the price in which quality = average costAverage fixed costAFC = TFC/QAverage product of labortotal product/ marginal product of laborAverage total costATC = TC/Q = AFC + AVC
Average variable costThe variable cost per unit of outputBehavioral economicsThe study of situations in which people make choices that do not appear to be economically rational due to human reasoningBounded rationalityDecision making that's rational, but limited (bounded) by an individual's ability to process informationBounded self-interestThe limited self-interest that results in sometimes suppressing ourown interests to help others.Bounded will-powerThe less-than-perfect will-power that prevents us from making a decision that we know, at the time of implementing the decision, we will later regret.Budget lineThe limits of a households consumption choices (limited by income and price of goods + services)
Budget line equation(Ps)(Qs)+(Pm)(Qm), Expenditure= incomeCapture theoryRegulation serves the self-interest of the producer, who captures the regulator and maximizes economic profitChange in real incomeBudget line slope stays constant, shift of budget line left or rightChange in relative priceChanges the slope of the budget lineCommand systemAllocates resources by the order (command) of someone in authority.Constant returns to scaleThe property whereby long-run average total cost stays the same as the quantity of output increases
Consumer equilibriumTotal utility is maximized when all income is spent and MU/price $ is equal for all goods consumed.consumption choicesAll things we can afford to buy, limit showed by budget lineConsumption possibilitiesDifferent way one can consume within their own budget lineCorporationA business owned by stockholders who share in its profits but are not personally responsible for its debtsDiminishing marginal rate of substitutionDecreasing satisfaction or usefulness as additional units of a product are acquired (your desire for a product decreases as you consume more)Diseconomies of scalewhen an increase in output leads to an increase in long-run average costs.
Economic depreciationThe change in the market value of capital over a given period.Economic efficiencyProducing a given output at the lowest possible costEconomic profitTotal revenue - Total cost (opportunity cost of production)Economic profitA firm's total revenue minus its explicit and implicit costsEconomics of scalefactors that cause a producer's average cost per unit to fall as output risesEconomics of scopeEconomies in which materials and processes employed in one product can be used to a make other, at a lower cost then otherwise.
ElasticityA measure of how much one economic variable responds to changes in another economic variable.

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