ECON exam 2

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1. price of elasticity of demand
a measure of the responsiveness of the quantity demanded to changes in price
2. elastic demand
the price elasticity of demand is greater than one, so the percentage change in quantity exceeds the percentage change in price
3. inelastic demand
the price elasticity of demand is less than one so the percentage change in quantity equals the percentage change in price
4. unit elastic demand
the price elasticity of demand is one, so the percentage change in quantity equals the percentage change in price
5. perfectly inelastic demand
the price elasticity of demand is zero
6. formula for the Price Elasticity of Demand (Ed)
Ed= |% change in quantity demanded &divide; % change in price|
7. total revenue
the money a firm generates from selling its product
8. income elasticity of demand
a measure of the responsiveness of demand to changes in consumer income
9. formula for Income Elasticity of Demand (Et)
Et= % change in quantity demanded &divide; % change in income
10. cross-price elasticity of demand
a measure of the responsiveness of demand to changes in the price of another good
11. formula for Cross-Price Elasticity of Demand (Exy)
Exy= % change in quanitity of X demanded &divide; % change in price Y
12. price elasticity of supply
a measure of the responsiveness of the quantity supplied to changes in price
13. formula for Price Elasticity of Supply (Es)
Es= % change in quantitiy supplied &divide; % change in price
14. perfectly inelastic supply
the price elasticity of supply equals 0
15. perfectly elastic supply
the price elasticity of supply is equal to ∞
16. Utility
the satisfaction experienced from consuming a good
17. Util
one unit of utility
18. marginal utility
the change in total utility from one additional unit of a good
19. law of diminishing marginal utility
as the consumption of a particular good increases, marginal utility decreases.
20. budget line
the line connecting all the combinations of two goods that exhaust a consumer's budget
21. budget set
a set of points that includes all the combinations of two goods that a consumer can afford, given the consumer's income and the prices of the goods
22. equimarginal rule
pick the combinations of two activites where the marginal benefit per dollar for the first activity equals the marginal benefit per dollar for the second activity
23. substitution effect
the chnage in quantity consumed that is caused by a change in the relative priece of the good, with real income held constant
24. income effect
the change in quantity consumed that is caused by a change in real income, with relative prices held contant
25. economic profit
total revenue minus economic cost
26. economic cost
the opportunity cost of thte inputs used in the production process, equal to explicit cost plus implicit cost
27. explicit cost
a monetary payment
28. implicit cost
an opportunity cost that does not involve a monetary payment
29. accounting cost
the explicit cost of production
30. accounting profit
total revenue minus accounting cost
31. marginal product of labor
the change in output from one additional unit of labor
32. diminishing returns
as one input increases while the other inputs are held fixed, ouput increases at a decreasing rate
33. total-product curve
a curve showing the relationship between the quantity of labor and the quantity of output produced, ceteris paribus
34. Fixed cost (FC)
cost that does no vary with the quantity produced
35. variable cost (VC)
cost that varies with the quantity produced
36. Short-run total cost (TC)
the total cost of production when at least one input is fixed; equal to fixed cost plus variable cost
37. average fixed cost (AFC)
fixed cost divided by the quantity produced
38. average variable cost (AVC)
variable cost divided by the quantity produced
39. Short-run average total cost (ATC)
short-run total cost divided by the quantity produced; equal to AFC plus AVC
40. Short-run marginal cost (MC)
the change in short-run total cost resulting from a one unit increase in output
41. long-run total cost (LTC)
the total cost of production when a firm is perfectly flexible in choosing its inputs
42. long-run average cost (LAC)
the long-run cost divided by the quantity produced
43. constant returns to scale
a situation in which the long-run total cost increases proportionately with output, so average cost is constant
44. long-run marginal cost (LMC)
the change in long-run cost resulting from a one-unit increase in output
45. indivisible input
an input that cannot be scaled down to produce a smaller quantity of output
46. economies of scale
a situation in which the long-run average cost of production decreases as output increases
47. minimum efficient scale
the ouput at which scale economies are exhausted
48. diseconomies of scale
a situation in which the long-run average cost of production increases as output increases
49. perfectly competetive market
a market with many sellers and buyers of a homogeneous product and no barriers to entry
50. price taker
a buyer or seller that takes the market price as given
51. firm-specific demand curve
a curve showing the relationship between the price charged by a specific firm and the quantity the firm can sell
52. break-even price
the price at which economic profit is zero; price equals average total cost
53. shut-down price
the price at which the firm is indifferent between operating and shutting down; equal to the minimum average variable cost
54. sunk cost
a cost that a firm has already paid or committed to pay, so it cannot be recovered
55. short-run supply curve
a curve showing the relationship bwtween the market price of a product and the quantity of output supplied by a firm in the short run
56. short-run market supply curve
a curve showing the relationship between the market price and quantity supplied in the short run
57. long-run market supply curve
a curve showing the relationship between the market price and quantity supplied in the long run
58. increasing-cost industry
an industry in which the averge cost of production increases as the total ouput of the industry increases; the long-run supply is positively sloped
59. constant-cost industry
an industry in which the average cost of production is constant; the long-run supply curve is horizontal
 Author: tenorsextets ID: 128284 Card Set: ECON exam 2 Updated: 2012-01-29 02:27:10 Tags: microeconomics Folders: Description: stuff Show Answers: