Changes

*a '''transaction cost''' is not the overall cost of the transaction.  It is not the overall price paid for something, but is the portion of the overall cost that is due to "friction", or the time and expense of obtaining what you really want from the transaction.  Examples include tips, taxes, commissions, salesmen, broker fees, gas to drive there, etc.

*a '''transaction cost''' is not the overall cost of the transaction.  It is not the overall price paid for something, but is the portion of the overall cost that is due to "friction", or the time and expense of obtaining what you really want from the transaction.  Examples include tips, taxes, commissions, salesmen, broker fees, gas to drive there, etc.

*a '''variable cost''' is not any cost that varies over time.  It is a type of production cost for a firm that '''varies with output'''.  It is a cost that grows bigger as the number of units made increases, such as more electricity for staying open later, more paper and ink costs for making more copies of lectures, higher gas costs for taking more taxicab rides, etc.

*a '''variable cost''' is not any cost that varies over time.  It is a type of production cost for a firm that '''varies with output'''.  It is a cost that grows bigger as the number of units made increases, such as more electricity for staying open later, more paper and ink costs for making more copies of lectures, higher gas costs for taking more taxicab rides, etc.

*'''Returns to scale''' is the answer to this question:  if you own a firm, and you double the amount of your inputs (such as the size of your factory and the number of employees), does the output of your firm increase precisely double also, or increase by less than 2 times, or more than 2 times?  Example: doubling the size of a car can carry more than twice as many people.  That means it has increasing economies of scale.  But the phrase "too many cooks spoils the broth" means there are decreasing economies of scale in a kitchen.

*'''Returns to scale''' is the answer to this question:  if you own a firm, and you double the amount of your inputs (such as the size of your factory and the number of employees), does the output of your firm increase precisely double also, or increase by less than 2 times, or more than 2 times?  Example: doubling the size of a car can carry more than twice as many people.  That means it has increasing economies of scale.  But the phrase "too many cooks spoil the broth" means there are decreasing economies of scale in a kitchen.

*In calculating '''overall utility''', keep in mind in which order someone chooses to maximize his marginal utility.  Exam questions might ask how someone specifically spent his third hour of time based on assumptions about how the utility for different activities diminish over time.

*In calculating '''overall utility''', keep in mind in which order someone chooses to maximize his marginal utility.  Exam questions might ask how someone specifically spent his third hour of time based on assumptions about how the utility for different activities diminish over time.

*the concept of '''marginal product''' is specific to an input, as in "marginal product of labor," which is the additional overall output (product) produced due to an additional unit of that input (labor).

*the concept of '''marginal product''' is specific to an input, as in "marginal product of labor," which is the additional overall output (product) produced due to an additional unit of that input (labor).