Formulas To KnowChapter 11 NotesPublic Goods and Common Resources LectureChapter 14 NotesCost and Profit LectureChapter 15 NotesPerfect Competition LectureChapter 16 NotesMonopoly LectureChapter 17 NotesChapter 18 NotesMonopolistic Competition and Oligopoly LectureTest 3 Study Guide:Lecture and TextbookECO 2023Dr. McCalebTable 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 70Formulas To KnowReview from Midterm 1: - Slope of a Line:o M = Change in Y over change in X o M = ΔY/ΔXo 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 Costo When MB = MC- Marginal Benefit (MB):o MB = Change in Total Benefit/Change in Quantityo MB = ΔTB/ΔQ o MB = (TB2-TB1)/(Q2-Q1)- Marginal Cost (MC):o MC = Change in Total Cost/ Change in Quantityo MC = ΔTC/ΔQ o MC = (TC2-TC1)/(Q2-Q1)- When to increase the amount of an activity (Production Possibilities Frontier):o If Marginal Benefit > Marginal Costo If MB > MC - When to decrease the amount of an activity (Production Possibilities Frontier):o If Marginal Cost > Marginal Benefit o If MC > MB - Labor Force (LF):o = Employed + Unemployedo = E + U- Market Equilibriumo When the quantity demanded equals the quantity supplied. o Equilibrium: QD=QSMidterm 2:- Price Elasticity of Demand:o Elasticity (η) = % Change in Quantity Demanded / % Change in Priceo = %ΔQD / %ΔP-Midpoint Method to Calculating the Price Elasticity:o Percent Change in Quantity = [(New Quantity – Initial Quantity) / ((New Quantity + Initial Quantity) / 2)] x 100o %ΔQ = [(Q2 - Q1) / ((Q2 + Q1) / 2)] x 100o Percent Change in Price = [(New Price – Initial Price) / ((New Price + Initial Price) / 2)] x 100o %ΔP = [(P2 - P1) / ((P2 + P1) / 2)] x 100- Price elasticity of supply:71o Elasticity (η) = % change in quantity supplied / % change in priceo = %ΔQS / %ΔP- Cross elasticity of demand:o Elasticity (η) = % change in quantity demanded of a good / % change in the price of one of its substitutes or complements. o = %ΔQD / %ΔPS/C- Income elasticity of demand:o Elasticity (η) = % change in quantity demanded / % change in incomeo = %ΔQD / %ΔI- Total Revenue and the Price Elasticity of Demando 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 Demandedo ΔTR = ΔP + ΔQ- Consumer Surpluso Consumer Surplus (CS) = Marginal Benefit – Priceo CS = MB - P- Producer Surpluso Producer Surplus (PS) = Price – Marginal Costo PS = P – MC- Efficient Quantityo When Marginal Benefit = Marginal Costo When MB = MC- Market Equilibriumo When quantity demanded = quantity suppliedo Where QD = QS- Consumer Surpluso The marginal benefit from a good or service in excess of the price paid for it, summed over the quantity consumed o CS = MB / QD- Producer Surpluso The price of a good in excess of the marginal cost of producing it, summed over the quantity supplied. o PS = MC / QS- Total Surpluso The sum of producer surplus and consumer surplus. o TS = PS + CS- Deadweight Losso The Total Surplus of Efficient quantity and price (TSE) – the total surplus of the inefficient quantity and price (TSI)o TSE- TSI- Marginal Social Benefit72o The sum of the marginal private benefit and the marginal external benefit. o MSB = MB + MEB- Marginal Social Costo The sum of the marginal private cost and the marginal external cost. o MSC = MC + MECMidterm 3:- Individual Transferrable Quotas (ITQ)o The marginal private cost with the ITQ equals the marginal social cost and the equilibrium with the ITQ is efficiento MC + Price of ITQ = MSC- Private Property Rightso The marginal cost of fishing equals the marginal social cost. o S= MC = MSC- Economic Profito = Total Revenue minus the total costo = (Price x Quantity) – (explicit costs + implicit costs)o = (PQ)- (EC+IC)o = (PQ) – (Total Fixed Cost + Total Variable Cost)o = (PQ) – (TFC + TVC)- Total Costo = Explicit Costs + Implicit Costso = Total Fixed Cost + Total Variable Costo Opportunity Cost- Average Total Costo = Average Fixed Cost + Average Variable Costo = AFC + AVCo =Total Cost / Quantityo =TC / Q- Marginal Revenue Equals Priceo When an additional unit is sold, the increase in total revenue equals the price. o (ΔTR + ΔQ) = MR = P- Average Fixed Costo = Total Fixed Cost / Quantityo =TFC / Q- Average Variable Costo = Total variable cost / Quantityo = TVC / Q- Marginal Costo = Change in Total Cost / Quantityo = ΔTC / ΔQ7374Chapter 11 NotesCitation:Bade, Robin, and Michael Parkin. Foundations of Microeconomics. 6th ed. Boston: Pearson/Addison-Wesley, 2013. Print.ExcludableA 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. Non-excludableA good, service, or resource is non-excludable if it is impossible (or extremely costly) to prevent someone from enjoying its benefits (266). RivalA good, service, or resource is rival if its use by one person decreases the quantity available for someone else (266).Non-rivalA good, service, or resource is non-rival if its use by one person does not decrease the quantity available for someone else (266).Private GoodA 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 GoodsA 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. Common ResourcesA resource that can be used only once, but no one can be prevented from using what is available (267).Natural MonopolyA 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 ProblemA person who
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