AGB 212 TIPS REVIEWS ANSWERS AND QUESTIONS
SET A+
✔✔Quantity demanded - ✔✔refers to the amount of a good buys are willing and able to
buy
✔✔what are the determinants of demand - ✔✔consumer income, price of related goods,
tastes, population, ad trends, seasonality, expectations
✔✔In the Law of Demand there is a ___ relationship between P x QD - ✔✔inverse
✔✔increase in income means demand for a ___ will increase - ✔✔normal good
✔✔increase in income means demand for ___will decrease - ✔✔inferior good
✔✔quantity supplied - ✔✔refers to amount of goods sellers are willing and able to
produce at a given price
✔✔Determinants of Supply - ✔✔Input prices, weather/disease, taxes, technology, future
price expectations, number of producers, gov restrictions
✔✔In the Law of Supply, there is a ___ relationship between P & QS - ✔✔direct
✔✔3 Basic assumptions - ✔✔complete:knowing all what options offer
transitive: if A>B and B>C then A>C
non-satiation: more is better
✔✔an ______ represents all combinations of consumption bundles that provide the
same level of satisfaction to a person - ✔✔indifference curve
✔✔how do you find budget constraint? - ✔✔Income/Price of good x or y
, ✔✔what is the Law of Diminishing Returns - ✔✔you will eventually have too many
cooks in the kitchen and productivity levels will go down ^labor decrease MP
✔✔Accounting profit - ✔✔TR-explicit costs
✔✔Economic profit - ✔✔TR-explicit costs-implicit costs
✔✔Short run (analyzing costs) - ✔✔time period over which sometime inputs are
variable and some are fixed
✔✔Long run (analyzing costs - ✔✔time period over which all inputs are variable
✔✔profit maximization- Input Basis, __>__ - ✔✔what is the input level that maximizes
profit MRP>MFC
✔✔TRP= - ✔✔TP x P(Q)
✔✔MRP= - ✔✔MP x P(Q)
✔✔ARP= - ✔✔AP x P(Q)
✔✔MFC= - ✔✔△TC/△X (inputs)
✔✔profit maximization- total output basis, ___-___ - ✔✔how much do I have to produce
to maximize profit, TR-TC
✔✔AR= - ✔✔TR/Q; also P
✔✔MR= - ✔✔△TR/△Q
✔✔profit maximization- unit per output basis, __>__ - ✔✔MR>/= MC
✔✔profit is maximized when __=___ - ✔✔MR=MC
✔✔a shut down is ___ - ✔✔Temporary, short run decision not to produce anything
during a specific time
✔✔an exit is a ___ - ✔✔long run decision to leave the market
✔✔a firm shuts down if - ✔✔all revenue is lost
saves the variable cost
still pays fixed costs
SET A+
✔✔Quantity demanded - ✔✔refers to the amount of a good buys are willing and able to
buy
✔✔what are the determinants of demand - ✔✔consumer income, price of related goods,
tastes, population, ad trends, seasonality, expectations
✔✔In the Law of Demand there is a ___ relationship between P x QD - ✔✔inverse
✔✔increase in income means demand for a ___ will increase - ✔✔normal good
✔✔increase in income means demand for ___will decrease - ✔✔inferior good
✔✔quantity supplied - ✔✔refers to amount of goods sellers are willing and able to
produce at a given price
✔✔Determinants of Supply - ✔✔Input prices, weather/disease, taxes, technology, future
price expectations, number of producers, gov restrictions
✔✔In the Law of Supply, there is a ___ relationship between P & QS - ✔✔direct
✔✔3 Basic assumptions - ✔✔complete:knowing all what options offer
transitive: if A>B and B>C then A>C
non-satiation: more is better
✔✔an ______ represents all combinations of consumption bundles that provide the
same level of satisfaction to a person - ✔✔indifference curve
✔✔how do you find budget constraint? - ✔✔Income/Price of good x or y
, ✔✔what is the Law of Diminishing Returns - ✔✔you will eventually have too many
cooks in the kitchen and productivity levels will go down ^labor decrease MP
✔✔Accounting profit - ✔✔TR-explicit costs
✔✔Economic profit - ✔✔TR-explicit costs-implicit costs
✔✔Short run (analyzing costs) - ✔✔time period over which sometime inputs are
variable and some are fixed
✔✔Long run (analyzing costs - ✔✔time period over which all inputs are variable
✔✔profit maximization- Input Basis, __>__ - ✔✔what is the input level that maximizes
profit MRP>MFC
✔✔TRP= - ✔✔TP x P(Q)
✔✔MRP= - ✔✔MP x P(Q)
✔✔ARP= - ✔✔AP x P(Q)
✔✔MFC= - ✔✔△TC/△X (inputs)
✔✔profit maximization- total output basis, ___-___ - ✔✔how much do I have to produce
to maximize profit, TR-TC
✔✔AR= - ✔✔TR/Q; also P
✔✔MR= - ✔✔△TR/△Q
✔✔profit maximization- unit per output basis, __>__ - ✔✔MR>/= MC
✔✔profit is maximized when __=___ - ✔✔MR=MC
✔✔a shut down is ___ - ✔✔Temporary, short run decision not to produce anything
during a specific time
✔✔an exit is a ___ - ✔✔long run decision to leave the market
✔✔a firm shuts down if - ✔✔all revenue is lost
saves the variable cost
still pays fixed costs
