ECON 2G03 Study Guide - Midterm Guide: Oligopoly, Isocost, Isoquant
9 May 2016
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See notes for equations not included as follow. Opportunity cost is the value of the highest forsaken alternative the value of the next best alternative. Sunk costs: unavoidable, non-recoverable costs no economic decisions because nothing that can be done about them advertising costs and firm-specific stamp, it doesn"t change based on output. Avoidable costs: can be recovered/resell (at least in part), need not be incurred and can be avoided lighting and wire input, you can turn off lights, and stop producing to save wires. Fixed costs: do not vary with output lighting, advertising, loan, rent. Variable costs: change with output wire, firm-specific stamp, labour. Long run: plan horizon long enough to vary inputs a. 1. minimize tc = w1z1+w2z2 a. 2. choosing z1 and z2 a. 3. subject to constraint y=f(z1, z2) (w is price) it should be in the same unit of time. Short run: at least one input is fixed.
