Midterm 2

Midterm 2 - 5/8/09 Click to edit Master subtitle style...

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Unformatted text preview: 5/8/09 Click to edit Master subtitle style Midterm 2 Review 5/8/09 Price Elasticity of Demand law of demand says that consumers will buy more of a product when its price declines and less when its price increases Price elasticity of demand: the responsiveness of consumers to a price change. &#2; Relative (or simple) elastic: modest price changes cause very large changes in the quantity purchased &#2; Relative (or simple) inelastic: in whish substantial price changes cause only small changes in the amount purchased 5/8/09 Revenue and Costs &#2; P=TR-TC &#2; TR=PQ &#2; If TC<TR earns profit TC>TR earns loss TC=TR break even &#2; MR=P=AR=D &#2; Marginal Cost intersects ATC at its minimum &#2; Where MC=MR=P, profit level is maximized &#2; Shutdown point is where MC=AVC If MR=MC is below shutdown point, it will minimize losses by stopping productio &#2; Distance between AVC and ATC is fixed costs...
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This note was uploaded on 03/05/2008 for the course ARLT 100g taught by Professor 02:00-03:20pm during the Fall '07 term at USC.

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Midterm 2 - 5/8/09 Click to edit Master subtitle style...

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