Whar is the difference between total utility and marginal usility Explain the pa

Question

Whar is the difference between total utility and marginal usility Explain the paradox of valuc. What is meant by (a) Consumer's budget line (b) Consumer consumption possibilities frontier (draw and label the CCPF) c) Marginal utility per dollar (in words and mathematically) (d) Diminishing marginal utility From Chapter 1 1. What is the difference between accounting profit and economic profi What forms of decisions are made by firms? What are the firm's constraints (list and explain)? What is the difference between technical and economic efficiency? What is the difference between command systems and incentive systems 3. 6. List and explain the types of business organization 7. List and explain the market structure List and explain how market concentration can be measured and explain the limitations of a concentration measure What is meant by (a) Firm's opportunity cost of production b) Principal-Agent problem and could this be solved or resolved?

Explanation / Answer

1. What is the difference between accounting profit and economic profit?

Accounting profit is total revenue minus explict costs. Explicit costs are those costs that involve actual outflow of money like rent, wages, insurance.

Economic profit is total revenue minus implict plus explicit costs. Implicit costs are opportunity costs. Example of opportunity costs are salary foregone if one goes to school instead of working, rent foregone if the premises is usedfor own's own business etc.

2. Microeconomics involves decision making by firms and households on how to maximize their utility in view of the scarce resources. Firms make decision on resource allocation, production techniques used, quantity produced and pricing. Consumers, on the other hand, make decisions to maximize their utility.

3. Firms face technological constraints ( in terms of availability of technology), availability of factors of production, like labor, capital, land and marketing constraints ( demand for product produced).

4.Economic efficiency is producing a given level of output at the lowest cost, whereas, technical efficiency is producing the given output with least amount of inputs.

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