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A natural monopoly is a type of monopoly that exists as a result of the high fixed costs or startup costs of operating a business in a specific industry. Additionally, natural monopolies can arise in industries that require unique raw materials, technology or other similar factors to operate.

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- at the lowest level of output a firm can lower long-run average costs

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Production process with neither economies nor dis economies of scale: the output of the process increases or decreases simultaneously and in step with increase or decrease in the inputs. A plant with a constant returns to scale is equally efficient in producing small batches as it is in producing large batches.

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The difficulty of efficiency controlling and coordinating a firm's operations as it becomes a large-scale producer.

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Economies of scale are the cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

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- law assumes that technology is fixed and thus the techniques of production do not change
- states that as successive units of a variable resource are added to a fixed resource

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The endowment effect (also known as divestiture aversion and related to the mere ownership effect in social psychology) is the hypothesis that people ascribe more value to things merely because they own them.

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- extra cost of adding 1 more unit to production
- MC= change of TC/ change in Q

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Average total cost for any output level is founded by dividing total cost (TC) by that output (Q) or by adding AFC and AVC at the output.
ATC = TC/Q = TFC/Q + TVC/Q = AFC + AVC

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. A concept first named by Richard Theiler , mental accounting (or psychological accounting.Mental accounting refers to the tendency for people to separate their money into separate accounts based on a variety of subjective criteria, like the source of the money and intent for each account.

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output per unit of labor input
AP= total product/units of labor

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In economics and decision theory, loss aversion refers to people's tendency to prefer avoiding losses to acquiring equivalent gains: it's better to not lose $5 than to find $5. Some studies have suggested that losses are twice as powerful, psychologically, as gains

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-AVC= TVC/ Q
- at first starts to decreases to a minimum then increase bc of increasing then diminishing returns
-bc TVC reflects the law of diminishing returns so does the AVC since it derives from it

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The definition of status quo is the current political or social conditions. An example of status quo is that the U.S. government is in debt. An example of status quo is the common sense of a period of time. An example of status quo is the economic conditions of a particular class at a particular period of history.

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Behavioral economics, along with the related sub-field behavioral finance, studies the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and resource allocation, although not always that narrowly

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the extra output or added product associated with adding a unit of a variable resource, in this labor, to the production process.

Marginal Product= (change in total product)/(change in labor input)

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the total quantity of a particular good

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behavioral economic theory that describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known. ... The paper "Prospect Theory: An Analysis of Decision under Risk" (1979) has been called a "seminal paper in behavioral economics".

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-AFC= TFC/ Q
-AFC decreases as quantity increases bc of the FC

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Time Value of Money, Inflation, and Opportunity Cost. The time value of money is a basic principal to compare two known scenarios: a payment today or the value of a payment in the future. But TVM also connects with inflation and opportunity cost.

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The paradox of value (also known as the diamond–water paradox) is the apparent contradiction that, although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market.

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period long enough for a plant to adjust the quantities of all the resources that it employs, including the plant capacity

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The demand curve obtained by joining points a and b. The demand curve is downward sloping showing inverse relationship between price and quantity demanded as good X is a normal good. In this section we are going to derive the consumer's demand curve from the price consumption curve in the case of inferior good

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MU of product A / price of A = MU of product B / Price of B = MU of product C / price of C = etc.

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period too brief for a firm to alter its plant capacity, yet long enough to permit a change in the degree to which the plant's capacity is used

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Economic Profit = Revenue -  Explicit Costs - Implicit Costs

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The state of balance achieved by an end user of products that refers to the amount of goods and services they can purchase given their present level of income and the current level of prices. Consumer equilibrium allows a consumer to obtain the most satisfaction possible from their income

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The Utility Maximization rule states: consumers decide to allocate their money incomes so that the last dollar spent on each product purchased yields the same amount of extra marginal utility.

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the opportunity costs of using the resources that it already owns to make the firm's own product rather than selling those resources to outsiders for cash

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Fixed Costs- change in quantity does not affect the fixed cost, cost must be paid even if output is zero, as the fixed cost is spread over the increasing quantity-> the output decreasing
Variable Costs- change in quantity does affect the variable costs because of the amount of variable resources that increase to satisfy the quantity
Total Costs- the sum of TFC + TVC, graphed- the TC is separated from The TVC but follows the form because of the FC

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the monetary payments it makes to those from whom it must purchase resources that it does not own

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payment that must be made to obtain and retain the services of a resource, it is the income the firm must provide to resource suppliers to attract resources away from alternative uses

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as a person increases consumption of a product while keeping consumption of other products constant, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

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total amount of satisfaction or pleasure a person derives from consuming some specific quantity

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Consumer Choice and the Budget Constraint 

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Consumer Choice and the Budget Constraint 

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Rational Behavior :decision-making process is based on making choices that result in the most optimal level of benefit or utility for the individual. Most conventional economic theories are created and used under the assumption all individuals taking part in an action/activity are behaving rationally.

Preferences :  a clear  -cut preferences for a certain of the goods and services that are available in the market

Budget constraint :represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income. Consumer theory uses the concepts of a budget constraint and a preference map to analyze consumer choices.

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the more that is purchased of a  product the less utility
(is want-satisfying power) it has as it continues to be purchased