MICRO ECONOMICS

Micro Exam

Chapters 6 & 8

Marginal Product in Labor (MP)

change in output --------------------- change in labor

Average Product of Labor

output ---------------- # of workers

short run total cost (STC)

fixed cost + variable cost (fc) (tvc)

short run marginal cost (SMC)

change in short run total cost change in total variable cost --------------------------------- --------------------------------change in output change in output

average fixed cost (AFC)

fixed cost --------------- output

Short Run Variable Cost (SVC)

total variable cost ---------------------- output

Short Run Average Total Cost (SATC)

Average Fixed Cost + Short Run Average Cost Short run total cost ---------------------------output

Elasticity Equation

% Change in Quantity Demanded ----------------------------------- % Change in Price

Consumer benefit of trade

Max willing to pay - actual amount paid

Producer benefit of trade

Actual amount sold for - lowest price they would sell for

Maximum Price policy (Price Ceiling)

Regulates the max price the good can sell for

Minimum Price policy (Price Floor)

Regulates the minimum price the good can sell for

non-binding

The price ceiling or floor will not affect the market equilibrium

How much tax will be given to consumers

It depends on the price elasticity of demand high elasticity - less tax passed low elasticity - more tax passed

Spillover Cost

Free market equilibrium is inefficient supply curve shifts to the left

Spillover benefits

Causes the Demand curve to shift to the right will be more productive

Short run

You cannot change all factors of production

long run

you can change all factors of production

MP and AP graph

They will hit max, then go down due to diminishing returns

MC, AFC, SAVC, SATC,

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