EcoTest1

If the price in a market is above the equilibrium price, this creates ______.

An EXCESS in SUPPLY or a SURPLUS. When P is above the equilibrium point, Q's would be greater than Qd, creating a surplus.

B/c we face scarcity, every choice involves ______.

An Opportunity Cost.

Economists point out that scarcity confronts

Both Poor & Rich

Rationale people respond to ______ & _____.

Both rewards & Penalties.

Misty has the option of purchasing one of 3 products: Brand A, Brand B, Brand C. Each costs 10$. If she decides Brand A meets her needs best, then the opportunity cost of this decision is.

Brand B or Brand C, depending on which is considered the highest-value alternative foregone.

The difference between the amount the consumer would be willing to pay & the amount the consumer actually paid for a certain amount of goods & services is;

Consumer surplus of buying the good.

For the law of demand to work, what needs to be fixed as constant?

Consumers' income level # of consumers Price of other goods & services.

When the price of a good increases, the quantity demanded _____.

Decreases

The _____ ______ is the quantity where quantity demanded & quantity supplied are equal at a certain price.

Equilibrium Quantity

If the price of cars falls, car makers are likely to make _____ _____.

Fewer Cars. *For suppliers, when price increases quantity supplied would increase as well.

If someone can produce a good at a lower opportunity cost, they _____ in producing that good.

Have a comparative advantage

Employees' wage rate is _____ _____ when moving along a supply curve.

Held Constant For the law of supply to hold, we need to keep everything else constant, except for price & quantity.

The opportunity cost of something you decide is to get is the ____.

Highest valued alternative you give up to get it.

If the market for bluetooth headsets is unregulated & is presently characterized by excess demand, you can accurately predict that price will.

Increase, the quantity demanded will fall, & the quantity supplied will rise.

Which of the following explain why supply curves slope upward?

Increasing marginal cost. *The upward slopping curve can be derived from an increasing marginal cost. Sellers would offer up goods until the point where P=MC.

Scarcity requires that people must

Make Choices

As an individual consumer _____ of a product within a given period of time, it is likely that each additional unit consumed will yield _____ satisfaction.

More Successively less *Marginal value declines as more is consumed.

Total expenditure is obtained by

Multiplying the unit price & the chosen quantity.

Nearly all supply curves share a similarity: they have a ______ slope.

Positive *When prices go up, sellers are more willing & more able to supply a larger quantity as they can get a higher profit.*

A supply curve is a graphical illustration of the relationship between _____, shown on the vertical axis and _____ shown on the horizontal axis.

Price Quantity *Price = Vertical-axis P/V, Quantity = horizontal Q/H

The downward slope of the demand curve, illustrates the pattern that as _____ rises, _____ _____ decreases.

Price Quantity Demanded *The response variable is the quantity demanded. Price is given by the market.

The difference between a firms revenue based on current market price & full costs of production for the firm is known as.

Producer Surplus.

The most fundamental economic problem is?

Scarcity

Individual preferences of a product.

Stays the same along a demand curve.

In a market system, prices are determined by;

Supply & Demand

According to marginal analysis, optimal decision making involves:

Taking actions whenever the marginal benefit exceeds the marginal cost.

Marginal cost is...

The additional cost associated with one extra unit of output.

Opportunity cost is _____.

The amount of other products that must be given up in order to product a good.

The quantity supplied of a good is.

The amount that the producers are planning to sell at a particular price at a given period of time.

Which of the following about market equilibrium is correct?

The competitive market equilibrium maximizes the total gain from trade.

If scarcity was eliminated.

The concept of trade-offs would become irrelevant. With unlimited resources, people would not have to face trade-offs.

Consumer Surplus

The difference between the highest price a consumer is willing to pay for a good or service & the actual price the consumer pays.

Producer Surplus

The difference between the lowest price a firm would be willing to accept for a good/service & the actual price it receives.

Each point on a supply curve represents.

The lowest price for which a supplier can profitably sell another unit. *A supply curve is also a firms marginal cost curve. The vertical axis represents the dollar amount that the seller requires at minimum to be willing to offer another unit of good for sell*

The benefit or value that an individual enjoys by increasing the amount of assumption by 1 unit is called;

The marginal benefit (or marginal value).

The production possibilities frontier shows _____.

The maximum levels of production that can be attained.

Which of the following is NOT held constant while moving along a supply curve?

The price of the good itself. A supply curve illustrates the relationship between price & quantity supplied. Thus supply is varying along a supply curve.

Microeconomics focuses on...

The purchasing decisions that an individual consumer makes. The effect of an increase of some taxes. Hiring decisions that business' make

According to the law of supply:

There is a positive relationship between price & price quantity supplied.

Suppose the equilibrium price of a good A is 10$ & the equilibrium quantity is 60 units. If the current price of good A is 4$.

There will be an excess demand for good A

The production possibilities frontier is the boundary between _____.

Those combinations of goods & services that can be produced & those that cannot.

In economics, the demand for a good refers to the amount of the good the people:

Will buy at various prices.

If you pay exactly equal to your willingness to pay, then...

Your consumer surplus is 0$. Ex; the consumer would still demand the product when P=MV. However, by demanding it, the consumer obtains a 0 net benefits, as the difference between their MV and the price they actually pay is equal to 0.