ECON 1 Study Guide - Final Guide: Competitive Equilibrium, Marginal Revenue, Marginal Cost
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ECON 1 Full Course Notes
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Efficient market outcome: the sum pf profits made by all individuals in the market is as large as possible. Competitive equilibrium is efficient, but might not be equitable. "be willing to pay" is not an explicit cost. Total cost = fixed cost + variable cost. Comparing mc and ac to determine the position of mc. Mc = ac --> ac doesn"t change (vespa, lecture 6, slide 18) Price > minimum avc --> p = mc. Avc < p < ac --> loss but better than not producing. Supply curve: marginal cost curve above min avc. Sunk costs: fixed costs --> not opportunity cost. Ped < -1 --> elastic demand --> quantity effect dominates. 0 > ped > -1 --> inelastic demand --> price effect dominates. Perfectly inelastic --> shift in demand affects p only. Perfectly elastic --> shift in demand affects q only. Utility function --> preference (increase in utility for one more unit)
