UA EC 110 - MICRO EXAM 3 OUTLINE (4 pages)

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MICRO EXAM 3 OUTLINE



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MICRO EXAM 3 OUTLINE

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Pages:
4
School:
University of Alabama
Course:
Ec 110 - Prin of Microeconomics

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EXAM 3 OUTLINE Ch 13 Production and Costs 1 2 3 4 5 6 7 Def and Concepts i REMEMBER THAT THE COST OF SOMETHING IS WHAT YOU GIVE UP TO GET IT THIS IS TRUE NO MATTER IF THE COSTS ARE IMPLICIT OF EXPLICIT ii PROFIT TOTAL REVENUE TOTAL COST iii TOTAL REVENUE THE AMOUNT A FIRM RECIEVES FROM THE SALE OF ITS OUTPUT iv TOTAL COST THE MARKET VALUE OF THE INPUTS A FIRM USES IN PRODUCTION v RATIONAL PEOPLE THINK AT THE MARGIN vi IF THE COST OF ADDITION MC IS LESS THAN THE REVENUE THAT WOULD BE MADE FROM SELLING IT THE PROFIT RISES IF MORE IS PRODUCED vii EFFIECEINT SCALE THE QUANTITY THAT MINIMIZES ATC viii THE MC CURVE CROSSES THE ATC VURVE AT THE ATC CURVE S MINIMUM What are explicit costs and implicit costs i EXPLICIT COST REQUIRE AN OUTLAY OF MONEY 1 E G PAYING WAGES TO WORKERS ii IMPLICIT COST DO NOT REQUIRE A CASH OUTLAY 1 E G THE OPPORTUNITY COST OF THE OWNER S TIME Calculating accounting and economic profit i ACOUNTING PROOFIT TOTAL REVENUE MINUS TOTAL EXPLICIT COSTS IGNORES IMPLICIT COSTS SO IT S HIGHER THAN ECONOMIC PROFIT ii ECONOMIC PROFIT TOTAL REVENUE MINUS TOTAL COSTS INCLUDING EXPLICIT AND IMPLICIT COSTS What is a production function and what is marginal product i PRODUCTION FUNCTION SHOWS THE RELATIONSHIP BETWEEN THE QUANTITY OF INPUTS USED TO PRODUCE A GOOD AND THE QUANTITY OF OUTPUT OF THAT GOOD IT CAN BE REPRESENTED BY A TABLE EQUATION OR GRAPH ii MARGINAL PRODUCT THE INCREASE IN OUTPUT ARISING FROM AN ADDITIONAL UNIT OF THAT INPUT HOLDING ALL OTHER INPUTS CONSTANT 1 NOTATION CHANGE IN 2 Q CHANGE IN OUTPUT L CHANGE IN LABOR Calculating marginal product of labor MPL i MARGINAL PRODUCTION OF LABOR MPL Q L What is diminishing MPL and why does it occur i IN GENERAL MPL DIMINISHES AS L RISES WHETHER THE FIXED INPUT IS LAND OR CAPITAL EQUIPMENT MACHINES ETC ii DIMINISHING MARGINAL PRODUCT THE MARGINAL PRODUCT OF AN INPUT DECLINES AS THE QUANTITY OF THE INPUT INCREASES OTHER THINGS EQUAL Calculate or determine FC VC TC AFC AVC ATC and MC i FIXED COSTS FC DO NOT



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