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36 Cards in this Set
- Front
- Back
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Maximum amount of money a consumer will give in exchange for a quantity of some commodity
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Total Utility
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Maximum amount of money a consumer will pay for an additional unit of some commodity
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Marginal utility
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Observation that additional units of a given commodity generally have decreasing value for a consumer
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The "law" of diminishing marginal utility
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Method for calculating choices that best promote the decision maker's objective
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Marginal Analysis
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Difference between total utility and total expenditures for a given quantity of some commodity
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Consumer's surplus
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Quantity demanded declines when consumer real income rises
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inferior good
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Horizontal summation of individual demand curves
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Market demand curve
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Observation that a lower price generally increase the amount of a commodity that people in a market are willing to buy.
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The "law" of demand
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Ratio of percent change in quantity demanded to percent change in price
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Price Elasticity of Demand
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A change in price leads to a more than proportionate change in quantity demanded
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Elastic Demand Curve
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A change in price leads to a less than proportionate change in quantity supplied.
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Inelastic demand curve
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A change in price accompanied by an equal proportionate change in quantity demanded
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Unit-elastic demand curve
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ratio of percentage change in quantity demanded to percentage change in income
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income elasticity of demand
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An increase in price of one good decreases the demand for the other
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complements
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An increase in the price of one good increases the demand for the other
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substitute
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Ration of percentage change in quantity demanded of one product to the percent change in the price of another
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cross elasticity of demand
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decsion that best serves the objectives of the decision maker, whatever those objectives may be
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optimal decision
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period of time during which none of a firm's commitments will have ended.
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short run
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period of time long enough for all of a firm's commitments to end.
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long run
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Costs which do not change when output rises or falls
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fixed costs
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costs that change as the level of production changes
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variable costs
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Graph of output generated by various quantities of one input holding other inputs fixed.
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Total Physical Product
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Increase in output that results from an additional unit of a given input, holding all other inputs constant
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Average Physical Product
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Increase in output that result from an addition unit of a given input, holding other inputs constant
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Marginal physical product
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Dollar value of output produced by an extra unit of input
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Marginal revenue product
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Increase in output greater then the proportionate increase in all inputs.
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Economies of Scale (increasing)
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Difference between total revenue and total costs
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Total Profit
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Net earnings minus a firm's opportunity cost of capital
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Economic Profit
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Price of output times quantity sold
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Total Revenue
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Total revenue divided by quantity of output
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Average revenue
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Addition to total revenue when producing one more unit of output
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Marginal Revenue
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Addition to profit by producing an additional unit of output
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Marginal profit
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Many small firms selling an identical product
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Perfect competion
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Agent or firm too small to affect the market price
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price taker
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Costs that depends upon the quantity of output
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variable cost
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The portion of the marginal cost curve that exceeds average variable cost
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Firms supply curve
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