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COLORADO / Economics / ECON 2010 / The seller's problem has three parts; what is it?

The seller's problem has three parts; what is it?

The seller's problem has three parts; what is it?

Description

School: University of Colorado at Boulder
Department: Economics
Course: Principles of Microeconomics
Professor: Wolfgang keller
Term: Fall 2017
Tags: Microeconomics
Cost: 50
Name: Midterm 2 Study Guide
Description: General study guide for 2nd midterm
Uploaded: 10/31/2017
2 Pages 47 Views 4 Unlocks
Reviews


Chapter 6: 


The seller’s problem has three parts, what is it?



Key Concepts 

1. The seller’s problem has three parts: production, costs, and revenues 

2. An optimizing seller makes decisions at the margin 

3. The supply curve reflects a willingness to sell a good or service at various price levels 4. Producer surplus is the difference between the market price and the marginal cost curve 5. Sellers enter and exit markets based on profit opportunities 

Revenue 

● Total revenue = Price x Quantity Sold 

● In a perfectly competitive market, firms have no control over price and are price takers and can only decide the quantity they produce


What is the equation to be used in computing the price elasticity of demand?



General rule for firms: choose to produce where MC = MR 

Profits = Total revenue ­ Total cost 

Total cost = ATC x Q 

Profit = (P x Q) ­ (ATC x Q) = (P ­ ATC) x Q  If you want to learn more check out What is the difference between positive and negative punishment?

Price Elasticity of Demand = (% change Q) / (% change P) 

Chapter 7: 

Key Concepts: 

1. The invisible hand efficiently allocates goods and services to buyers and sellers 2. The invisible hand leads to efficient production within an industry 

3. The invisible hand allocates resources efficiently across industries 

4. Prices direct the invisible hand 


What is the general rule for firms?



5. There are trade­offs between making the economic pie as big as possible and dividing the pieces equally

Self­interest ≠ selfish 

Maximum well-being ≠ fairness 

We are examining how efficient markets lead to the maximum level of well­being 

Efficiency ­ getting the most out of scarce resources  Don't forget about the age old question of Where was muhammad born?

● Making the pie as big as possible 

We are ignoring fairness (equity) currently 

Chapter 8: 

Key Concepts 

1. The production possibilities curve tells us how much we can produce from existing  resources and technology

2. The basis for trade is comparative advantage

3. Specialization is based on comparative, not absolute, advantage 

4. There are winners and losers in trading states and countries 

5. The winners from trade can more than compensate the losers 

6. Important arguments against free trade exist 

Production Possibilities Curve 

● Underlying motivation of trade ­ we’re all better off by trading because trade allows total  production to be maximized

● Plot this with a production possibilities curve: relationship between max production of  one good for a given level of production of another good

○ Points on PPC are efficient and attainable 

○ Points inside PPC are attainable but inefficient 

○ Points outside PPC are unattainable 

● PPC is similar to budget constraint concept ­ tells us how much we can produce from existing  resources If you want to learn more check out Who is adolf hitler?

● Opportunity Cost = slope = |loss 

gain|

Chapter 9: 

Key Concepts 

1. There are important cases in which free markets fail to maximize social surplus 2. Three such cases are: externalities, public goods, and common pool resources 3. One common link among these three examples is that there is a difference between the  private benefits and costs and the social benefits and costs If you want to learn more check out People tend to believe that a statement is true or valid simply because it has been repeated repeatedly. what is it?
If you want to learn more check out What is the meaning of mcdonaldization?
We also discuss several other topics like Motor (efferent) division means what?

4. Government can play a role in improving market outcomes in such cases 

Chapter 10: 

Key Concepts 

1. In the United States, governments tax citizens and corporations to correct market failures  and externalities, raise revenues, redistribute funds, and finance operations 2. Through direct regulation and price controls, governments can intervene to influence  market outcomes

3. Although government intervention sometimes creates inefficiencies, it often results in  improved social well­being

4. Weighing the trade­offs between equity and efficiency is one task of an economist 5. It’s up to individuals to decide when government intervention makes the most sense

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