Podcast
Questions and Answers
What primarily determines a country's standard of living?
What primarily determines a country's standard of living?
- Its ability to produce goods and services. (correct)
- The amount of money in circulation.
- The size of its government.
- The level of trade with other nations.
Fixed costs vary depending on the quantity being produced.
Fixed costs vary depending on the quantity being produced.
False (B)
In economics, what term describes the condition where supply and demand intersect?
In economics, what term describes the condition where supply and demand intersect?
Equilibrium
Costs that represent actual money spent and direct expenses are known as ______ costs.
Costs that represent actual money spent and direct expenses are known as ______ costs.
Match the following cost types with their formulas:
Match the following cost types with their formulas:
According to economic principles, what should rational people consider?
According to economic principles, what should rational people consider?
Accounting profit includes implicit costs.
Accounting profit includes implicit costs.
What does 'Q' represent in economic equations?
What does 'Q' represent in economic equations?
If a business's total revenue is less than its variable costs (TR < VC), it should consider a short-term __________.
If a business's total revenue is less than its variable costs (TR < VC), it should consider a short-term __________.
Match the following conditions with their implications for production:
Match the following conditions with their implications for production:
In the short run, society faces a trade-off between which of the following?
In the short run, society faces a trade-off between which of the following?
Marginal costs are determined by dividing total costs by the quantity produced.
Marginal costs are determined by dividing total costs by the quantity produced.
What is the formula for total revenue (TR)?
What is the formula for total revenue (TR)?
________ costs represent the hidden costs or the money one would have received in an alternative opportunity (e.g., job salary, bank savings).
________ costs represent the hidden costs or the money one would have received in an alternative opportunity (e.g., job salary, bank savings).
Match the following formulas/inequalities with their implications for a firm's decision to shut down or exit:
Match the following formulas/inequalities with their implications for a firm's decision to shut down or exit:
What is the definition of economics?
What is the definition of economics?
Trade can only benefit one party in a transaction.
Trade can only benefit one party in a transaction.
What is the long-term strategy when a firm decides to leave the market?
What is the long-term strategy when a firm decides to leave the market?
According to economists, people respond to __________.
According to economists, people respond to __________.
Match the profit conditions with their implications
Match the profit conditions with their implications
Flashcards
Economics
Economics
Managing limited resources
Trade-off
Trade-off
Giving up something to obtain something else.
Opportunity cost
Opportunity cost
What you give up to get something.
Incentives
Incentives
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Benefits of trade
Benefits of trade
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Explicit costs
Explicit costs
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Implicit costs
Implicit costs
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Accounting Profit
Accounting Profit
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Economic Profit
Economic Profit
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Fixed Costs
Fixed Costs
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Variable Costs
Variable Costs
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Average Fixed Costs (AFC)
Average Fixed Costs (AFC)
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Average Variable Costs (AVC)
Average Variable Costs (AVC)
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Marginal Cost (MC)
Marginal Cost (MC)
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Total Revenue (TR)
Total Revenue (TR)
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Perfect competition
Perfect competition
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Shutdown Point
Shutdown Point
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Exit Strategy
Exit Strategy
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Equilibrium
Equilibrium
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Study Notes
- Economics is about managing limited resources.
- People must make trade-offs.
- The cost of something is what you give up to get it.
- Rational people think at the margin, considering marginal costs and marginal revenue.
- People respond to incentives.
- Trade can benefit everyone.
- Markets are usually a good way to organize economic activity.
- Governments can sometimes improve market outcomes.
- A country's standard of living depends on its ability to produce goods and services.
- Growth of money leads to inflation.
- Society faces a short-run tradeoff between inflation and unemployment.
- Explicit costs are actual money spent, like wages or electricity bills.
- Implicit costs are hidden costs, like potential job salary or bank savings.
- Accounting profit is sales revenue minus explicit costs.
- Economic profit is sales revenue minus explicit costs and implicit costs.
- If economic profit is greater than zero, the business is worth continuing.
- If economic profit is less than zero, the business is failing.
- If economic profit is zero, you are earning the same as you would in a job.
- Fixed costs do not vary depending on the quantity produced.
- Variable costs vary depending on the quantity produced.
- Average costs are determined by the costs divided by the quantity produced.
- Marginal costs are the increase in total costs from more production of units.
- TFC is total fixed costs.
- AFC is average fixed costs, calculated as fixed costs divided by quantity (FC/Q).
- TVC is total variable costs.
- AVC is average variable costs, calculated as variable costs divided by quantity (VC/Q).
- TC is total costs, calculated as total fixed costs plus total variable costs (TFC + TVC = TC).
- ATC is average total costs, calculated as average fixed costs plus average variable costs (AFC + AVC = ATC) or total costs divided by quantity (TC/Q).
- MC is marginal cost, calculated as the change in total cost divided by the change in quantity.
- MR is marginal revenue, calculated as the change in total revenue divided by the change in quantity.
- TR is total revenue, calculated as price multiplied by quantity sold.
- P is price, and also equals average revenue in perfect competition.
- MR-MC is the change in profit.
- When MR > MC, increase production (Q).
- When MR < MC, decrease production (Q).
- When MR = MC, profit is maximized.
- Shutdown is a short-term decision not to produce more in current market conditions.
- Shutdown if total revenue is less than variable costs (TR < VC).
- Shutdown if the price is less than average variable costs (P < AVC).
- Exit is a long-term strategy to leave the market.
- Exit if total revenue is less than total costs (TR < TC).
- Exit if the price is less than average total costs (P < ATC).
- P stands for price.
- Q stands for quantity.
- D stands for demand.
- S stands for supply.
- Equilibrium is where supply and demand collide.
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