When to stop hiring workers
MRP=MRC
MPP x P
Marginal Revenue Product (MRP)
TR – TC
Profit
P > ATC
Economic Profit
P < ATC
Economic Loss
MR > 0
Demand is Elastic (TR is declining)
MR > 0
Demand is elastic (TR is rising)
MR = 0
Demand is unit elastic (TR is at a maximum)
∆ TR / ∆ Input
Marginal Revenue Product (MRP)
∆ TC / ∆ Input
Marginal Resource Cost (MRC)
∆ Price
Movement Along the Curves
∆ Non-Price Determinant
Shift of a Curve
P Increases, TR increases
Demand is inelastic
P increases, TR decreases
Demand is elastic
P decreases, TR decreases
Demand is inelastic
P decreases, TR increases
Demand is elastic
Ways for the government to correct positive externalities
Pay a subsidy equal to the marginal external benefit
Ways for the government to correct negative externalities
Taxation, regulation, and stronger environmental policies
Justification for government regulation of a monopoly
to protect the interests of consumers
Definition of inferior goods
a good whose demand drops when people's incomes rise
Definition of normal goods
experience an increase in demand with a rise in a consumer's income
What would cause the PPC to shift inward and outward.
things that change the output of an economy (advances in technology, changes in resources, more education or training)
When Cross Price Elasticity of Demand is Negative
Compliment
When Cross Price Elasticity of Demand is Positive
Substitute
When Income Elasticity of demand is negative
Inferior Good
When income elasticity of demand is positive
Normal Good
Price elasticity of demand is greater that 1
Elastic
Price elasticity of demand is less than 1
Inelastic
Cross price elasticity of demand
Change in qd of good x/change in price of good y
Income Elasticity of demand
Change in qd of good x/change in income
Price elasticity of demand
(Change in qd/midpoint of qd)/(Change in price/midpoint of price)
Graphs go from….
Inelatic to Unit Elastic to Elastic
Allocatively efficient point
MB(D)=MC
Profit Maximizing Point
MR=MC
Revenue Maximizing Point
MR=0
Point where profit=0
Price=ATC
Productively Efficient Quantity
MC=ATC
Absolute Advantage
When you can produce more than another country in a good
Comparative Advantage
When your opportunity cost is lower than another country
Three Economic Questions
Who to produce for, What to produce, how to produce them
Utility Maximization Rule
MUx/Px = MUy/Py
Diseconomies of scale
the stage of output where as a firm’s output increases, its LRATC curve increases, this is the upward sloping part of LRATC
Economies of scale
as firm’s output increases its LRATC decreases, this is the downward slopping part of the LRATC
Regressive Tax
tax where the tax burden falls as income rises, increases income inequality
Proportional Tax
same tax rates for everyone regardless of income
Progressive Tax
tax that results in higher taxes as income increases
optimal hiring point
MRP = MFC
in a monopsony the MPC is ___ S
above