Micro Exam 1 - Custom Scholars
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# Micro Exam 1

question
Elasticity equation
(Derivative Q/Derivative P) x (P/Q)
question
Income Elasticity
E>0=nominal good; E<0=inferior good
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Cross-Price Elasticity of Demand
E>0=substitutes; E<0=complements
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Marginal Utility equation
change in total utility/change in quantity
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marginal rate of substitution
MUx/MUy=Px/Py
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Substitution effect
One good relatively cheaper and one good relatively more expensive
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Income Effect
Feel richer or poorer due to price change
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Intermediate point
New prices, old utility
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Lagrange Method equation
U(X,Y)-symbol(PxX+PyY-I)
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Expected Value equation
Sum (probability of outcome)(payoff)
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Expected Utility equation
Sum (probability of outcome)(utility)
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Certainty Equivalent
The amount of for sure money that gives the same expected utility as the gamble's expected utility
question
Expected value of game 0 certainty equivalent
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Average Product of Labor equation
q/L
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Marginal Rate of Technical Substitution equation
MPL/MPK
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Economic Costs equation
Accounting costs + implicit opportunity costs
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Marginal Cost equation
W/MPL
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Average Total Cost equation
TC/q
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User Cost of Capital equation
Depreciation + interest forgone
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Interest Forgone equation
Interest rate x cost
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Rental Rate equation
Depreciation rate + interest rate
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Depreciation Rate equation
Depreciation/cost
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Total Cost equation
ML+rK
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Economies of Scope
(C(q1)+C(q2)-C(q1,q2))/C(q1,q2)
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Returns of scale
Inputs and outputs, inputs have same ratio, has economies of scale
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Economies of Scale
Output and cost, inputs change in any matter, easier to achieve
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LAC decreases at first because
Specialization, flexibility of scale, inputs are cheaper in bulk
question
LAC increases later because
Limited space, machines, management issues
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How to reduce risk?
Diversification and mutual funds
question
Perfect Substitutes
Has linear isoquants with a constant MRTS
question
Perfect Complements
90 degree angle isoquants
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Risk Averse
Square root
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Risk Neutral
Linear with Marginal Utility constant
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Risk Loving
Exponential
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Diseconomies of Scale
SC<0
question
Cost minimization
MPL/MPK=w/r
question
Sunk Costs
Already paid for and cannot be refunded or recovered
1 of 37
question
Elasticity equation
(Derivative Q/Derivative P) x (P/Q)
question
Income Elasticity
E>0=nominal good; E<0=inferior good
question
Cross-Price Elasticity of Demand
E>0=substitutes; E<0=complements
question
Marginal Utility equation
change in total utility/change in quantity
question
marginal rate of substitution
MUx/MUy=Px/Py
question
Substitution effect
One good relatively cheaper and one good relatively more expensive
question
Income Effect
Feel richer or poorer due to price change
question
Intermediate point
New prices, old utility
question
Lagrange Method equation
U(X,Y)-symbol(PxX+PyY-I)
question
Expected Value equation
Sum (probability of outcome)(payoff)
question
Expected Utility equation
Sum (probability of outcome)(utility)
question
Certainty Equivalent
The amount of for sure money that gives the same expected utility as the gamble's expected utility
question
Expected value of game 0 certainty equivalent
question
Average Product of Labor equation
q/L
question
Marginal Rate of Technical Substitution equation
MPL/MPK
question
Economic Costs equation
Accounting costs + implicit opportunity costs
question
Marginal Cost equation
W/MPL
question
Average Total Cost equation
TC/q
question
User Cost of Capital equation
Depreciation + interest forgone
question
Interest Forgone equation
Interest rate x cost
question
Rental Rate equation
Depreciation rate + interest rate
question
Depreciation Rate equation
Depreciation/cost
question
Total Cost equation
ML+rK
question
Economies of Scope
(C(q1)+C(q2)-C(q1,q2))/C(q1,q2)
question
Returns of scale
Inputs and outputs, inputs have same ratio, has economies of scale
question
Economies of Scale
Output and cost, inputs change in any matter, easier to achieve
question
LAC decreases at first because
Specialization, flexibility of scale, inputs are cheaper in bulk
question
LAC increases later because
Limited space, machines, management issues
question
How to reduce risk?
Diversification and mutual funds
question
Perfect Substitutes
Has linear isoquants with a constant MRTS
question
Perfect Complements
90 degree angle isoquants
question
Risk Averse
Square root
question
Risk Neutral
Linear with Marginal Utility constant
question
Risk Loving
Exponential
question
Diseconomies of Scale
SC<0
question
Cost minimization
MPL/MPK=w/r
question
Sunk Costs
Already paid for and cannot be refunded or recovered

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