managerial econ exam 2 - Custom Scholars
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# managerial econ exam 2

question
price elasticity of demand (E)
the percentage in quantity demanded, divided by the percentage change in price
E is always negative because P and Q are inversely related
question
point elasticity
a measurement of demand elasticity calculated at a point on a demand curve rather than over an interval
question
interval (arc) elasticity
price elasticity calculated over an interval of a demand curve
E = ΔQ/ΔP x Avg. P/Avg. Q
question
elastic
|E| < -1
question
inelastic
-1 < |E| < 0
question
unitary elastic
|E| = -1
question
cross-price elasticity
= %ΔQ/%ΔP
- complements
+ substitutes
0 unrelated goods
question
income elasticity
= %ΔQ/%Δm
+ normal
- inferior
question
production function
Q = f(L, K)
question
fixed-proportions production function
inputs -> perfect complements
question
variable-proportions production function
inputs -> substitutes
question
marginal revenue (mr)
=ΔTR/ΔQ
the additional to total revenue attributable to selling one additional unit of output
question
average product of labor (APL)
= Q/L
question
marginal product of labor (MPL)
=ΔQ/ΔL
question
technical efficiency
producing the maximum output for any given combination of inputs and existing technology
getting the most outputs from our inputs
question
economic efficiency
producing a given level of output at the lowest possible total cost
having the best mix of inputs
question
total fixed cost (TFC)
= r * K
the total amount paid for fixed inputs
total fixed cost does not vary with output
question
total variable cost (TVC)
= w * L
the amount paid for variable inputs
total variable cost increases with increases in output
question
total cost (TC)
total cost increases with increases in output
= TFC + TVC
question
average fixed cost (AFC)
= TFC/Q
question
average variable cost (AVC)
= TVC/Q = w/APL
question
average total cost (ATC)
= TC/Q = AFC+AVC
question
marginal cost (MC)
= w/MPL
question
marginal rate of technical substitution (MRTS)
the rate at which one output is substituted for another along an isoquant
MRTS = -ΔK/ΔL = MPL/MPK
question
isoquant
a CURVE showing all possible combination of inputs physically capable of producing a given fixed level of output
question
isocost
LINES that show the various combinations of inputs that may be purchased for a given level of expenditure at given input prices
question
cost-minimizing point (tangent)
-MPL/MPK = -w/r
------>
MPL/w = MPK/r
question
long-run average cost (LAC)
= LTC/Q
question
long-run marginal cost (LMC)
= ΔLTC/ΔQ
question
economies of scale
occurs when LAC falls as output increases
question
diseconomies of scale
occurs when LAC rises as input increases
question
economies of scope
exists when the join cost of producing two or more goods is less than the sum of the separate costs of producing the goods
question
downsizing
"restructuring"
permanently lays off a sizable fraction of their work force
eliminating low MPL positions
efficient, cut waste
question
dumbsizing
making across-the-board cuts in their labor force that don't deliver the cost savings needed
occurs when a manager lays off the wrong workers or too many workers
eliminating jobs to save \$ without consideration of MPL
question
perfect competition
homogeneous (fills the same purpose) products ex. dish soap
no barriers to entry/exit
lots of firms: no firm is large enough to affect market price
question
entropy
lack of order or predictability
disorder of things and how it affects outputs
1 of 36
question
price elasticity of demand (E)
the percentage in quantity demanded, divided by the percentage change in price
E is always negative because P and Q are inversely related
question
point elasticity
a measurement of demand elasticity calculated at a point on a demand curve rather than over an interval
question
interval (arc) elasticity
price elasticity calculated over an interval of a demand curve
E = ΔQ/ΔP x Avg. P/Avg. Q
question
elastic
|E| < -1
question
inelastic
-1 < |E| < 0
question
unitary elastic
|E| = -1
question
cross-price elasticity
= %ΔQ/%ΔP
- complements
+ substitutes
0 unrelated goods
question
income elasticity
= %ΔQ/%Δm
+ normal
- inferior
question
production function
Q = f(L, K)
question
fixed-proportions production function
inputs -> perfect complements
question
variable-proportions production function
inputs -> substitutes
question
marginal revenue (mr)
=ΔTR/ΔQ
the additional to total revenue attributable to selling one additional unit of output
question
average product of labor (APL)
= Q/L
question
marginal product of labor (MPL)
=ΔQ/ΔL
question
technical efficiency
producing the maximum output for any given combination of inputs and existing technology
getting the most outputs from our inputs
question
economic efficiency
producing a given level of output at the lowest possible total cost
having the best mix of inputs
question
total fixed cost (TFC)
= r * K
the total amount paid for fixed inputs
total fixed cost does not vary with output
question
total variable cost (TVC)
= w * L
the amount paid for variable inputs
total variable cost increases with increases in output
question
total cost (TC)
total cost increases with increases in output
= TFC + TVC
question
average fixed cost (AFC)
= TFC/Q
question
average variable cost (AVC)
= TVC/Q = w/APL
question
average total cost (ATC)
= TC/Q = AFC+AVC
question
marginal cost (MC)
= w/MPL
question
marginal rate of technical substitution (MRTS)
the rate at which one output is substituted for another along an isoquant
MRTS = -ΔK/ΔL = MPL/MPK
question
isoquant
a CURVE showing all possible combination of inputs physically capable of producing a given fixed level of output
question
isocost
LINES that show the various combinations of inputs that may be purchased for a given level of expenditure at given input prices
question
cost-minimizing point (tangent)
-MPL/MPK = -w/r
------>
MPL/w = MPK/r
question
long-run average cost (LAC)
= LTC/Q
question
long-run marginal cost (LMC)
= ΔLTC/ΔQ
question
economies of scale
occurs when LAC falls as output increases
question
diseconomies of scale
occurs when LAC rises as input increases
question
economies of scope
exists when the join cost of producing two or more goods is less than the sum of the separate costs of producing the goods
question
downsizing
"restructuring"
permanently lays off a sizable fraction of their work force
eliminating low MPL positions
efficient, cut waste
question
dumbsizing
making across-the-board cuts in their labor force that don't deliver the cost savings needed
occurs when a manager lays off the wrong workers or too many workers
eliminating jobs to save \$ without consideration of MPL
question
perfect competition
homogeneous (fills the same purpose) products ex. dish soap
no barriers to entry/exit
lots of firms: no firm is large enough to affect market price
question
entropy
lack of order or predictability
disorder of things and how it affects outputs

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