EVWL - Thinking Like a Seller

6 flashcards · Economics · by ehartl

1. What is an Individual Supply Curve?

   A graph plotting the quantity of an item that a business plans to sell at each price. It graphs the selling plans. holds other things constant is upward-sloping

2. What is the Law of Supply?

   The tendency for the quantity supplied to be higher when the price is higher.

3. What does Perfect Competition in Competitive markets mean?

   Markets in which all firms in an industry sell an identical good there are many buyers and sellers, each of whom is small relative to the size of the market Therefore all competitors in this markets are Price takers

4. What do the marginal costs include?

   Only the variable costs (like labor and raw materials), because fixed costs (like costs for buildings) exist regardless of an increase or decrease of production.

5. What is the Rational Rule for Sellers?

   Supply one more if Price >= Marginal Costs How many should I supply? Marginal principle: should I supply one more? Cost Benefit principle: Depends on Price vs. Marginal cost Opportunity Cost principle: Calculate marginal costs (only containing variable costs, but not fixed costs) Rational Rule!

6. What is the marginal product and what does diminishing marginal product mean?

   marginal product: the increase in output that arises from an additional unit of an input, like labor diminishing marginal product: the marginal product of an input declines as you use more of that input. e.g. more workers in a fixed office space --> louder, more crowded, thus less productivity e.g. farmers sows more seed --> overcrowded --> many plants won't survive