ECON 111 - 1st Midterm
Marginal cost
is the minimum price a producer must receive to induce him to offer one more unit of a good or service for sale
Which of the following are correct? According to the law of demising product,
marginal product eventually falls & marginal cost eventually rises
Statements about "what ought to be" are called
normative statements
Economies of scale are present when
the LRAC curve slopes downward
Marginal cost is equal to
the increase in total cost divided by the increase in output
If the government imposes a maximum rent for housing that is above the equilibrium price, then you predict that
the law will have no effect in the market for housing
The magnitude of the slope of an indifference curve is
the marginal rate of substitution
The average variable cost curve will shift upward if
the price of the variable input increases
Producer surplus is
the price received for a good minus its marginal cost, summed over the quantity sold
At the best affordable point, what is the relationship between the indifference curve and the budget line?
the slope of the indifference curve equals the slope of the budget line
If we produce one more bottle of water
we incur a marginal cost
A price ceiling set below the equilibrium price will result in
excess demand
An increase in the price of ground beef
increase the demand for chicken, a substitute for ground beef & decreases the quantity demanded of ground beef
An increase in income
increase the demand for turnips if turnip is a normal good
A Price elasticity of demand of 2 means that a 10 percent increase in price will result in a
20 percent decrease in quantity demanded
Which one of the following illustrates an inelastic demand?
a 10 percent rise in price leads to a 5 percent decrease in quantity demanded
An indifference curve is
a line that shows combinations of goods among which a consumer is indifferent
A turnip is an inferior good if
an increase in income decreases the demand for turnips
Which one of the following events shifts the demand curve for grape jelly to the right?
an increase in income if grape jelly is a normal good
The law of diminishing marginal returns states:
as a firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes
If ATC is falling, then MC must be
below ATC
Suppose Honda can triple its production of Civics by tripling its production facility for those cars. This indicates the presence of
constant returns to scale
If the price of a good is not affected by a tax, then
demand is perfectly elastic
Complete the following sentence. Economic models
describe some aspect of the economic world, but include only those features needed for the purpose at hand
