ECON 2000 1st Edition Lecture 15Outline of Last Lecture IV. Price Elasticity of Supplya. Law of supplyb. Production behaviorsc. Definitiond. Equation e. Factor that Influences Price of EsV. Short Runa. Definitionb. InelasticVI. Long Runa. Definitionb. ElasticOutline of Current LectureVII. Marginal reasoninga. Compares marginal benefit with marginal costb. MarginalVIII. Total Reasoning vs. Marginal Reasoninga. ExampleIX. Goal of firms is to maximize profita. Profit= Total Revenue – Total Costb. 2 variable for firmsX. Choosing pricea. Depends on market structureb. Perfect Competitionc. MonopolyXI. Choosing Quantitya. Engages in marginal reasoningb. Compares marginal Revenue with Marginal CostXII. Total Costa. Fixed costb. Variable CostXIII. Law of Decreasing Returnsc. DefinitionCurrent LectureThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.VII. Marginal reasoninga. Compares marginal benefit with marginal costb. Marginali. A specific part, not the whole thingii. Extraiii. AdditionalXIV. Total Reasoning vs. Marginal Reasoninga. Examplei. Say grandma wants you to eat another piece of her pie. You love her pie but cannot handle one more piece. She gets upset and believes you do not like her pie. She is confusing total reasoning with marginal reasoning. Total would be you do not like the pie at all. Marginal is that you no longer benefit from that additional piece. XV. Goal of firms is to maximize profita. Profit= Total Revenue – Total Costb. 2 variable for firmsi. What to charge1. priceii. What to produce2. QuantityXVI. Choosing pricea. Depends on market structureb. Perfect Competitioni. Price should be at market equilibriumc. Monopolyi. Firm can make priceXVII. Choosing Quantitya. Engages in marginal reasoningb. Compares marginal Revenue with Marginal Costi. MR > MC, the firm will produce itii. MR < MC, the firm will not produce it because there is a harm to profitiii. MR = MC, the firm will produce b/c profit is maximizedXVIII. Total Costa. Fixed costi. Does not change with productionii. Ex) salary wages, lease, rent, licensingb. Variable Costi. Does change with productionii. Ex) Utilities used in production process, shippingXIX. Law of Decreasing Returnsa. Definitioni. As a firm uses more of a variable factor of production, with a given quantity of fixed factors of production, the marginal product of the facto eventually
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