Managerial Economics: Summary for the Final Exam

Flashcards summarizing key concepts from Managerial Economics relevant for the final exam.

Market Equilibrium

The point where supply equals demand, resulting in a stable market price.

Demand Function

A mathematical expression of the relationship between quantity demanded and its determinants.

Price Elasticity of Demand

A measure of how much the quantity demanded responds to a change in price.

Substitutes

Goods that can replace each other; when the price of one rises, the demand for the other increases.

Complements

Goods that are consumed together; when the price of one rises, the demand for the other decreases.

Opportunity Cost

The value of the next best alternative that is forgone when making a decision.

Marginal Product

The additional output produced when one more unit of an input is used.

Average Total Cost (ATC)

The total cost divided by the quantity of output produced.

Perfect Competition

A market structure characterized by many firms, identical products, and no barriers to entry.

Monopoly

A market structure where a single firm dominates the market, selling a unique product with significant barriers to entry.

Agency Cost

The costs incurred from conflicts of interest between stakeholders, particularly between managers and shareholders.

Cross-Price Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good.

Income Elasticity

A measure of how the quantity demanded of a good responds to a change in consumer income.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive.

Consumer Surplus

The difference between what consumers are willing to pay for a good versus what they actually pay.

Isoquant

A curve that represents all the combinations of inputs that yield the same level of output.

Isocost Line

A line that represents all the combinations of inputs that can be purchased with a given budget.

Statistical Significance

The likelihood that a result or relationship is caused by something other than mere random chance.

Confidence Interval

A range of values derived from sample statistics that is likely to contain the value of an unknown population parameter.

Production Function

The relationship between the quantity of inputs used in production and the resulting quantity of output.

Long-run Average Total Cost (LATC)

The lowest average cost of production achievable when all inputs can be varied.