Eco 10-15-07 - or treatments that have very little chance...

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Econ Notes 10/15/07 1. Average Product= Q/L a. Marginal Product curve, in terms of L, MP has a peak at the first inflection point for the L vs. Q curve i. Average product is increasing when marginal product is greater than the average product. b. Why do we care about MP curves? i. Firms want to operate on the downward sloping portions of the MP curve c. The Value of the Marginal Product i. VMP 1. P*mP 2. Value of each times number ii. If the value of all workers increases, the total curve will shift outward d. Why are athletes paid very little though there MP is high? e. What happens when we include Capital? Will wage be affected i. No, W= VmP f. Demand for capital is downward-sloping, similar to demand for labor i. Equilibrium Condition W=P*MP L a. V= P*MP K 2. Equilibrium Conditions a. MP K = MP L V N g. Oregon State Health Insurance i. Will not pay for very expensive treatments (P= high) ii.
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Unformatted text preview: or treatments that have very little chance for success (mp=low) h. Exmp: Battleships vs. Submarines i. In WWII, Subs were responsible for sinking 90% of all vessels 1. Why would we want battleships? a. Confusing the notions of average product vs. marginal product i. Marginal Product and Marginal Cost i. Inversely Related ii. Before we saw MC increase b/c 1. First use most efficient inputs (i.e. low cost) 2. Use least conducive to production last iii. Now, MC curves can be viewed as upward sloping because of diminishing marginal product (DMP) j. Other types of cost to be aware of i. Fixed Cost ii. Variable Cost iii. Average Fixed Cost 1. AFC= FC/Q iv. Average Variable Cost 1. AVC= VC/Q v. Total Cost 1. TC= Fixed Cost (TC) + Variable Cost (VC) vi. Average Total Cost 1. ATC=AC=TC/Q 2. ATC= AFC + AVC...
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This note was uploaded on 04/07/2008 for the course ECO 2302 taught by Professor Smith during the Spring '08 term at University of Texas at Dallas, Richardson.

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Eco 10-15-07 - or treatments that have very little chance...

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