AREC 202 Quiz 8 Study Guide

The shut-down price for this firm is about

$100 (at point A)

Think of an auto trip to the city center as a good that people consume. Which of the following strategies is using the Law of Demand (as opposed to shifting the demand curve)?

Raising the price of driving into the city center. For example, London imposed a "congestion fee."

If a perfectly competitive firm's revenues cannot cover its variable costs in the short run, it should

shut down

If the cross-price elasticity for two goods is positive, then the goods are

substitute goods

A Production Possibilities Curve (PPC)

can usually not be upward-sloping since that would imply that you can produce more of one good and at the same time, and the same given resources, produce more of one good.

With diminishing returns doubling an input in production

does not resulting in doubling the output.

If a price of a good in competitive market goes down because of a shift in supply, which of the following happens? (Total Consumer Surplus)

goes up

Finding out the buyer's reservation prices for certain quantities of a good is consistent with

the vertical interpretation of the demand curve

In class we talked about the UN report on Afghanistan's poppy seed harvest in 2010. Use the best (=most precise) of the following reasons to explain why Afghan poppy seed farmers were happy when about half their crop got destroyed by disease.

Because demand for the produce made from poppy seeds is fairly price-inelastic, and thus price increased overproportionally and the revenues for the poppy seed farmers went up.