Test 3 Study Guide Lecture and Textbook ECO 2023 Dr McCaleb Table of Contents FORMULAS TO KNOW 71 CHAPTER 11 NOTES 74 PUBLIC GOODS AND COMMON RESOURCES LECTURE 76 CHAPTER 14 NOTES 80 COST AND PROFIT LECTURE 82 CHAPTER 15 NOTES 86 PERFECT COMPETITION LECTURE 88 CHAPTER 16 NOTES 92 MONOPOLY LECTURE 94 CHAPTER 17 NOTES 99 CHAPTER 18 NOTES 100 MONOPOLISTIC COMPETITION AND OLIGOPOLY LECTURE 101 70 Formulas To Know Review from Midterm 1 Slope of a Line o M Change in Y over change in X o M Y X o M Y2 Y1 X2 X1 Net Benefit NB o NB Total Benefit Total Cost o NB TB TC The optimal amount of any activity o Is when the Marginal Benefit is equal to the Marginal Cost o When MB MC Marginal Benefit MB o MB Change in Total Benefit Change in Quantity o MB TB Q o MB TB2 TB1 Q2 Q1 Marginal Cost MC o MC Change in Total Cost Change in Quantity o MC TC Q o MC TC2 TC1 Q2 Q1 When to increase the amount of an activity Production Possibilities Frontier When to decrease the amount of an activity Production Possibilities Frontier o If Marginal Benefit Marginal Cost o If MB MC o If Marginal Cost Marginal Benefit o If MC MB Labor Force LF o Employed Unemployed o E U Market Equilibrium o When the quantity demanded equals the quantity supplied o Equilibrium QD QS Midterm 2 Price Elasticity of Demand o Elasticity Change in Quantity Demanded Change in Price o QD P Midpoint Method to Calculating the Price Elasticity o Percent Change in Quantity New Quantity Initial Quantity New Quantity Initial Quantity 2 x 100 o Q Q2 Q1 Q2 Q1 2 x 100 o Percent Change in Price New Price Initial Price New Price Initial Price 2 x 100 o P P2 P1 P2 P1 2 x 100 Price elasticity of supply 71 o Elasticity change in quantity supplied change in price o QS P Cross elasticity of demand o Elasticity change in quantity demanded of a good change in the price of one of its substitutes or complements o QD PS C Income elasticity of demand o Elasticity change in quantity demanded change in income o QD I Total Revenue and the Price Elasticity of Demand o Total Revenue TR Total Expenditure TE Price P x Quantity Q o TR PQ or TE PQ o Change in Total Revenue Change in Price Change in Quantity Demanded o TR P Q Consumer Surplus o Consumer Surplus CS Marginal Benefit Price o CS MB P Producer Surplus o Producer Surplus PS Price Marginal Cost o PS P MC Efficient Quantity o When Marginal Benefit Marginal Cost o When MB MC Market Equilibrium o When quantity demanded quantity supplied o Where QD QS o The marginal benefit from a good or service in excess of the price paid for it summed over the o The price of a good in excess of the marginal cost of producing it summed over the quantity o The sum of producer surplus and consumer surplus o TS PS CS o The Total Surplus of Efficient quantity and price TSE the total surplus of the inefficient Consumer Surplus quantity consumed o CS MB QD Producer Surplus supplied o PS MC QS Total Surplus Deadweight Loss quantity and price TSI o TSE TSI Marginal Social Benefit 72 o The marginal private cost with the ITQ equals the marginal social cost and the equilibrium with o The sum of the marginal private benefit and the marginal external benefit o MSB MB MEB Marginal Social Cost o The sum of the marginal private cost and the marginal external cost o MSC MC MEC Midterm 3 Individual Transferrable Quotas ITQ the ITQ is efficient o MC Price of ITQ MSC Private Property Rights o The marginal cost of fishing equals the marginal social cost o S MC MSC Economic Profit o Total Revenue minus the total cost o Price x Quantity explicit costs implicit costs o PQ EC IC o PQ Total Fixed Cost Total Variable Cost o PQ TFC TVC Total Cost o Explicit Costs Implicit Costs o Total Fixed Cost Total Variable Cost o Opportunity Cost Average Total Cost o Average Fixed Cost Average Variable Cost o AFC AVC o Total Cost Quantity o TC Q Marginal Revenue Equals Price o When an additional unit is sold the increase in total revenue equals the price o TR Q MR P Average Fixed Cost o Total Fixed Cost Quantity o TFC Q Average Variable Cost o Total variable cost Quantity o TVC Q Marginal Cost o Change in Total Cost Quantity o TC Q 73 74 Chapter 11 Notes Citation Excludable Non excludable Rival Non rival Private Good Bade Robin and Michael Parkin Foundations of Microeconomics 6th ed Boston Pearson Addison Wesley 2013 Print A good service or resource is excludable if it is possible to prevent someone from enjoying its benefits 266 Something that you must pay for in order to consume it A good service or resource is non excludable if it is impossible or extremely costly to prevent someone from enjoying its benefits 266 A good service or resource is rival if its use by one person decreases the quantity available for someone else 266 A good service or resource is non rival if its use by one person does not decrease the quantity available for someone else 266 A good or service that can be consumed by only one person at a time and only by the person who has bought it or owns it 266 A private good must be excludable and rival Public Goods A good or service that can be consumed simultaneously by everyone and from which no one can be excluded 267 A public good must be non excludable and non rival A resource that can be used only once but no one can be prevented from using what is available 267 Common Resources Natural Monopoly A good that is non rival but is excludable is produced by a natural monopoly It is a firm that can produce at a lower cost than two or more firms can The Free Rider Problem A person who enjoys the benefits of a good or service without paying for it 269 75 The private market left on it own would provide too small a quantity of a public good To produce the efficient quantity government action is required The Principle of Minimum Differentiation The tendency for competitors to make themselves identical to appeal to the maximum number of clients or voters 274 The decision not to acquire information because the marginal cost of doing so exceeds the marginal benefit 274 Rational Ignorance The Tragedy of the Commons Production Quota Property Rights The overuse of a common resource that arises when its users have no incentive to conserve it and use it sustainably 278 An upper limit to the quantity of a good that may be produced in a specified period of time 283 A resource is given a maximized value by assigning ownership to it Individual Transferrable Quota A production limit assigned to an individual …
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