Chapter 12:
1. A budget line describes the limits to consumption possibilities. It shows the boundary between what people can and can’t afford.
2. The slope of the budget line is an opportunity cost (Relative price). The price of one good in terms of another good- an opportunity cost. It equals the price of one good divided by the price of another good.
3. The budget line has rotated inward. Page 295 12.4 graph.
4. The benefit or satisfaction that a person gets from the consumption of a good or service. (Person’s consumption choice, it depends on possibilities and preference)
5.
6. The general tendency for marginal utility to decrease as the quantity of a good consumed increases.
7. Marginal benefit is the maximum price a consumer is willing to pay for an extra unit of a good or service when total utility is maximized.
8.
Chapter 13:
1. Maximize profit.
2. A cost paid in money is an explicit cost.
3. The time frame in which the quantities of some resources are fixed. In the short run, a firm can usually change the quantity of labor it uses but not its technology and quantity of capital.
4. When the marginal product of an additional worker exceeds the marginal product of the previous worker.
5. Total fixed cost is the cost of a firm’s fixed factors of production: land, capital, and entrepreneurship. In the short run, the quantities of these inputs don’t change as output changes, so total fixed cost doesn’t change as output changes.
6. ATC is the sum of AFC