Podcast
Questions and Answers
What does the marginal rate of substitution (MRS) represent?
What does the marginal rate of substitution (MRS) represent?
- The total utility derived from consuming an additional unit of a good
- The percentage change in income spent on goods X and Y
- The ratio of prices between two goods
- The rate at which a consumer is willing to trade one good for another (correct)
What is a 'corner solution' in utility maximization?
What is a 'corner solution' in utility maximization?
- A situation where an individual spends all income on both goods equally
- A situation where an individual maximizes utility by consuming only one of the goods (correct)
- A situation where an individual's preferences cannot be represented by indifference curves
- A situation where the budget constraint intersects at a corner of the graph
What is the condition for utility maximization at a given point?
What is the condition for utility maximization at a given point?
- The individual spends all available income on a single good
- The marginal rate of substitution is always equal to one
- The quantity of X equals the quantity of Y
- The slope of the budget constraint equals the slope of the indifference curve (correct)
What does the tangency condition in utility maximization refer to?
What does the tangency condition in utility maximization refer to?
What does the budget constraint represent in utility maximization?
What does the budget constraint represent in utility maximization?
What is the first-order condition for profit maximization?
What is the first-order condition for profit maximization?
What happens if the supply curve facing the firm for the inputs it hires is not infinitely elastic at prevailing prices?
What happens if the supply curve facing the firm for the inputs it hires is not infinitely elastic at prevailing prices?
In a price-taking behavior in the output market, what is true about the profit-maximizing levels of each input?
In a price-taking behavior in the output market, what is true about the profit-maximizing levels of each input?
What is the marginal revenue product (MRP) from hiring an extra unit of any input?
What is the marginal revenue product (MRP) from hiring an extra unit of any input?
What does individual labor supply (LS) express?
What does individual labor supply (LS) express?
What is the golden rule of profit maximization for a perfectly competitive firm?
What is the golden rule of profit maximization for a perfectly competitive firm?
What is the condition for profit maximization for a perfectly competitive firm in the short/long run?
What is the condition for profit maximization for a perfectly competitive firm in the short/long run?
What does the efficiency of perfect competition imply?
What does the efficiency of perfect competition imply?
Flashcards
MRS
MRS
The rate at which a consumer is willing to trade one good for another, remaining equally satisfied.
Corner Solution
Corner Solution
A utility-maximization scenario where only one good is consumed.
Utility Max Condition
Utility Max Condition
Budget constraint slope equals indifference curve slope.
Tangency Condition
Tangency Condition
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Budget Constraint
Budget Constraint
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Profit Max (1st order)
Profit Max (1st order)
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Input Supply Impact
Input Supply Impact
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Price-taking Profit Max
Price-taking Profit Max
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Marginal Revenue Product (MRP)
Marginal Revenue Product (MRP)
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Labor Supply (LS)
Labor Supply (LS)
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Perfect Comp. Profit Max Short/Long
Perfect Comp. Profit Max Short/Long
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Perfect Competition Efficiency
Perfect Competition Efficiency
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Profit Max (Perfect Comp.)
Profit Max (Perfect Comp.)
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