ch. 9, Exam 2- quiz, micro CH5, mirco ch 6, micro ch7, ch 8

Assume the Price Elasticity of Demand (PED) coefficient for Corona Light is equal to 1.50 (or 3/2 when expressed in fractional form). If Constellation Brands decided to increase the price of Corona Light by 12%, then the quantity demanded of Corona Light would:

Decrease by 18%

The Law of Diminishing Returns begins (or kicks into action - same thing) with the addition of the:(where it stops increasing eachtime higher than last)

Fourth worker

If the price of a product with relatively inelastic demand is increased, then the:

Gain in revenue from the higher price is greater than the loss in revenue from selling fewer units

If the price of a product with relatively elastic demand is increased, then the:

Gain in revenue from the higher price is smaller than the loss in revenue from selling fewer units

In order to achieve technical efficiency, a firm must:

Get maximum output from the resources used in production.

Within the context of the blue jeans factory example discussed in the text, why is the MPP of the second worker greater than the MPP of the first worker

Having two workers instead of just one allowed the factor of production results jump to a bigger total output.

According to Supplemental Handout #1, the largest expenditure item in the budget of the typical American household during year 2020 was:

Housing

When a Perfectly Competitive shoe factory is producing a level of output where the Market Price (P*) is greater than Marginal Cost (MC), from society's standpoint the factory is producing too:

Little output because society would be willing to give up more alternative goods in order to get additional shoes.

If the owner of the factory believes he will produce 280 widgets per day in the future, what size factory will he choose to build for future use?

Indifferent between the factory size represented by ATC2 and the factory size represented by ATC3

If the owner of the factory believes he will produce 500 widgets per day in the future, what size factory will he choose to build for future use?

Indifferent between the factory size represented by ATC3 and the factory size represented by ATC4

Which of the following IS NOT a characteristic of a Perfectly Competitive market?

Individual firms produce differentiated products.

The term Explicit Cost:

Is the sum of actual monetary payments made by the business owner for the resources used to produce a good or service.

How do car dealerships practice price discrimination

Isolate individual consumer, negotiate each price individually, charge maximum price each person is willing to pay.

Which statement below accurately describes the relationship between Price (P) and Marginal Revenue (MR), from the perspective of an individual Perfectly Competitive firm?

KIS Price is equal to Marginal Revenue.

Economic Profit is:

Less than accounting profit by the amount of implicit cost.

Last year, Debbie's Mobile Dog Grooming Service incurred $ of Economic Cost.(add it all together explicit+implicit)

$79,000

price elasticity (e) =

% change in quantity demanded / % change in price

Write down the other formula used to calculate Total Profit (this is the new way, which is far easier to use on graphing problems

(P- ATC) x quantity

List the five factors that determine the market supply in a Competitive Industry.

-the price of factor inputs -technology -expectations -taxes and subsidies -the number of firms in the industry

Suppose that Apple increases the price of its iPhone 12 Pro by 15 percent, and as a result, the quantity demanded of this device decreases by 3 percent. Using the Basic Formula, the Price Elasticity of Demand (PED) coefficient for this product, in absolute value, is:

0.20 and demand for this product is relatively inelastic.

When the price of Nike tennis shoes goes from $100 to $80, the quantity demanded increases from 20 to 30 million. Using the Midpoint Formula, the Price Elasticity of Demand (PED) coefficient for this product, in absolute value, is:

1.80

How much Marginal Utility does Patrick receive from consuming the fifth slice of pizza at dinner?(marginal= just the bar graph)

10 utils

How much Marginal Utility does Rachel get from consuming the fourth Oreo cookie this afternoon?

10 utils

The Marginal Physical Product (MPP) of the second worker is: (the distance from the last to it )

5 units of output per day

The Marginal Physical Product (MPP) of the third worker is:

7 units of output per day

Rachel's favorite sweet snack food is Oreo cookies. She gets 30 utils of satisfaction from consuming the first Oreo cookie of the afternoon, an additional 50 utils of satisfaction from consuming the second Oreo cookie of the afternoon, and an additional 20 utils of satisfaction from consuming the third Oreo.cookie of the afternoon. If she consumes a total of four Oreo cookies this afternoon, Rachel's Total Utility would be 110 utils.

80 utils

According to the In The News box on page 93 of the Required Course Textbook, all of the following represent common traits in the spending patterns of young men and young women EXCEPT:

Both young men and young women spend little on health care.

If a Perfectly Competitive firm is earning zero economic profit, it:

Can expect to see about the same amount of competition in the future

Suppose a Perfectly Competitive firm can sell 300 bushels of corn at a price of $16 per bushel. In order to sell one more bushel of corn, the Perfectly Competitive firm:

Can sell 301 bushel of corn at a price of 16$ per bushel

What is the driving force behind price reductions and product quality improvements?

Competition

Suppose you are told that bottled water is a product with relatively elastic demand. An increase in the price of bottled water will cause the producing firm's Total Revenue to:

Decrease

According to Supplemental Handout #2, your Total your Marginal Utility from consuming the next unit of this Utility from consuming a product will decrease when product is:

Negative

The optimal quantity of output (q*) for this Perfectly Competitive firm to produce is:

O 2,500 units of output

How much Marginal Utility does Patrick receive from consuming the first slice of pizza at dinner?

O 20 utils

According to pages 165 - 166 of the Required Course Textbook, the typical consumer believes that cents of every sales dollar goes to profit. In reality, average profit per sales dollar is closer to cents.

O 36: 5

How much Total Utility does Patrick receive from consuming three pizza slices at dinner tonight?(add each bar together)

O 90 utils

Which of the following items is most likely to have a Price Elasticity of Demand coefficient take on a value greater than 1 (in absolute value)?

O A Big Mac sandwich

According to Supplemental Handout #1, a product's demand curve is described as being relatively elastic if it is:

O A downward-sloping but "flat looking" demand curve

When the firm produces q* units of output, how much does it cost to produce the typical unit of output?

O ATC = $7O

When Alan visits the grocery store, he purchases four bags of potato chips no matter what the price per bag. What does this information imply about Alan's demand for potato chips?

O Alan's demand for potato chips is perfectly inelastic.

In order to stay in the game, a Perfectly Competitive firm must:

O All of the above

Statement 1: In the short run, the Marginal Cost Curve crosses the Average Total Cost Curve at the minimum point on the Average Total Cost Curve. Statement 2: In the short run, the Marginal Cost Curve crosses the Average Variable Cost Curve at the minimum point on the Average Variable Cost Curve.

O Both statements are correct.

Statement 1: Firms should not hire another worker if hiring that worker results in diminishing marginal returns. Statement 2: Diminishing marginal returns cannot occur if additional workers are as skilled as previously hired workers and have a good work ethic.

O Both statements are incorrect.

Suppose you are told that fresh spinach is a product with relatively inelastic demand. A decrease in the price of fresh spinach will cause a producing firm's Total Revenue to:

O Decrease

Suppose you work in the marketing department for Tombstone Pizza. The company would like to see the quantity demanded of its frozen pizza products increase by 27% this year. If the Price Elasticity of Demand (PED) coefficient for Tombstone Pizza is 2.25 (or 9/4 when expressed in fractional form), then the marketing department should recommend alan:

O Decrease in price of 12%

If the owner of the factory believes he will produce 100 widgets per day in the future, what size factory will he choose to build for future use?

O Factory size represented by ATC1

If the owner of the factory believes he will produce 460 widgets per day in the future, what size factory will he choose to build for future use?

O Factory size represented by ATC3

If the owner of the factory believes he will produce 620 widgets per day in the future, what size factory will he choose to build for future use?

O Factory size represented by ATC4

In the short run, when a firm produces ZERO UNITS of output, the firm's Total Cost equals:

O Fixed Cost

According to Supplemental Handout #2, the Price Elasticity of Demand (PED) coefficient for a product with Relatively Elastic Demand will take on a value:

O Greater than 1

According to Supplemental Handout #2, when a new worker hired adds more to Total Output than the previous worker hired, the firm experiences:

O Increasing marginal returns

The loss of a Perfectly Competitive firm which chooses to shutdown in the short run:

O Is equal to the size of its Fixed Cost.

Miranda is making a normal profit by selling T-shirts at the price of $15 each in a Perfectly Competitive Market. If the market price decreases to $11, then Miranda can expect:

O Less competition in the future

The main characteristic of the Perfectly Competitive Market that causes economic profits and losses to go to zero in the long run is:

O Low barriers to entry and exit

The Utility Maximizing Rule states that the consumer will purchase the combination of Good X and Good Y such that:

O MUX /Px = MUy/Py

The profit motive can encourage businesses to do all of the following except:

O Maximize social welfare

Jack is making a normal profit by selling firewood at the price of $100 per bundle in a Perfectly Competitive Market. If the market price increases to $120, then Jack can expect:

O More competition in the future

A restaurant manager concludes that when he has too many servers on the floor, the servers get into each other's way and fewer people get served. This illustrates the concept of:

O Negative marginal returns

According to Supplemental Handout #2, when a new worker hired detracts from the Total Output of the firm, the firm experiences:

O Negative marginal returns

The quantity demanded for which product would be the most responsive to a change in price?

O PED = 8.20 for Good D

When the firm produces q* units of output, what is the value of the firm's Per Unit Loss (PUL)?

O PUL = $7

According to Figure 8.1, the continuum of Imperfect Competition includes all of the following except:

O Perfect Competition

In a Perfectly Competitive Market, what offers a reliable basis for making choices about resource allocation?

O Price

To maximize Total Profit, a Perfectly Competitive firm will expand its production of output until:

O Price equals Marginal Cost

In a Perfectly Competitive Market, individual firms can choose:

O Quantities of output to produce but not prices

Most Economists believe that business owners behave and attempt to:

O Rationally; maximize total profit

Suppose you are the owner/manager of a large grocery store. You decide to decrease the price of over-the- counter allergy medication by 15%, and in response, the quantity demanded rises by 30%. You conclude that the demand for over-the-counter allergy medication is and your store's Total Sales Revenue will as a result of your price change.

O Relatively elastic; increase

The Law of Diminishing Returns explains the general shape of the firm's:

O Short-run cost curves

Assume Patrick's roommate purchased the pizza, so slices are available to Patrick for free. If Patrick wanted to maximize his Total Utility from eating pizza at dinner tonight, then Patrick should consume:(when bar gets to 0)

O Six pizza slices

Statement 1: A firm's Total Output may continue to rise even though Marginal Physical Product is declining. Statement 2: A firm's Total Output may continue to rise even though Marginal Physical Product is negative.

O Statement 1 is correct and Statement 2 is incorrect.

When the firm produces q* units of output, what is the value of the firm's Total Loss (TL)?

O TL = $17,500

According to Supplemental Handout #2, your Total Utility from consuming a product is maximized when the Marginal Utility from consuming the next unit of this product is:

O Takes on a numerical value of zero

Which of these factors DOES NOT determine an individual's demand for a specific product?

O The cost of producing this specific product

The difference between the Accountant's measurement of production costs and the Economist's measurement of production costs is equal to:

O The opportunity cost of unpaid resources.

In the United States today, few (if any) product markets are Perfectly Competitive markets.

O True

In the long run, a business owner should choose the plant size that yields the lowest average total cost for the desired level of output.

O True

The Law of Diminishing Marginal Utility applies to virtually all goods and services over short periods of time.

O True

Last year, Debbie's Mobile Dog Grooming Service earned an Accounting Profit of $

O-$9,000

How much Marginal Utility does Patrick receive from consuming the third slice of pizza at dinner? (marginal= just the bar graph)

O40 utils

In Economics, a util is:

OA hypothetical unit of satisfaction

According to Figure 6.2, the Price Elasticity of Demand (PED) coefficient for a product with Perfectly Elastic Demand will take on a value:

Of an infinitely large number

According to Figure 6.2, the Price Elasticity of Demand (PED) coefficient for a product with Perfectly Inelastic Demand will take on a value:

Of zero

Write down the formula used to calculate Profit Per Unit.

P- ATC

For a Perfectly Competitive business owner, the shutdown point occurs where:

P= minimum AVC

Short-Run Competitive Equilibrium

P=MC

Long-Run Competitive Equilibrium:

P=MC=minimum ATC

When the firm produces q* units of output, what is the value of the firm's Per Unit Profit (PUP)?

PUP = $30

According to the Required Course Textbook, how do Sociologists explain consumer behavior?

People consume certain goods and services to feel safe and secure,

According to the Required Course Textbook, how do Economists explain consumer behavior?

People consume certain goods and services to feel safe and secure.

According to the Required Course Textbook, how do Psychiatrists and Psychologists explain consumer behavior?

People consume certain goods and services to feel safe and secure.

If Publix Supermarkets were to raise the prices of its bakery items, we would expect that:

People would buy fewer baked goods at Publix, and the decrease in sales would grow larger over time

What formula us used to calculate an Income Elasticity coefficient

Percentage change in quantity demanded divided by percentage change in income.

What formula is used to calculate a Cross-Price Elasticity coefficient

Percentage change in the quantity demanded of X divided by the percentage change in the price of Y

Which of the following is NOT an example of a barrier to entry?

Perfect information

Lauren likes to play golf and watch movies at the AMC 20 Theaters. In fact, she currently plays 3 rounds of golf and watches 4 movies each week. The Marginal Utility that Lauren receives from the last round of golf played is 150 utils, and the Marginal Utility that Lauren receives from the last movie watched is 30 utils. Lauren has to pay a price of $25 for each round of golf played, and a price of $10 for each movie watched at the AMC 20 Theaters. Assuming that Lauren's goal is to maximize her Total Utility, what action should she take and why?

Play more rounds of golf and watch fewer movies each week, since she receives more "bang for her buck" from playing rounds of golf.

According to Supplemental Handout # 2, your Total Utility from consuming a product will increase as long as your Marginal Utility from consuming the next unit of this product is:

Positive

The Perfectly Competitive Market Model assumes that consumers will base their decisions to purchase a product solely on:

Price

An individual Perfectly Competitive firm is a:

Price taker; it must accept the market equilibrium price

total revenue

Price x Quantity

Suppose the Market Price (P*) in the Perfectly Competitive Catfish Market is currently $13 per pound. An individual catfish farmer confronts an Average Total Cost (ATC) of $13 and an Average Variable Cost (AVC) of $9. In the short run, a profit-maximizing catfish farmer should do which of the following?

Produce a level of output where MR = MC and earn a normal economic profit.

The Long Run Average Total Cost (LRATC) Curve for a firm is constructed from the:

Lowest average total cost for producing each level of output.

List the three possible scenarios for Marginal Cost (MC) and Price (P)

MC> p p>MC p=MC

What is the relationship between marginal physical product and marginal cost? Identify both "sides" of the relationship, please.

MPP is the additional output obtained by employing one more unit of input. MC refers to the increase in total cost required to get one more additional unit of output.

Write down the utility maximizing rule for a consumer.

MUx/Px = MUy/Px

utility maximizing rule

MUx/Px = MUy/Py

When an individual Perfectly Competitive firm makes its Investment Decision, the firm is:

Making a long-run decision regarding the amount of plant and equipment to use, or to enter or exit an industry

When an individual Perfectly Competitive firm makes its Production Decision, the firm is:

Making a short-run decision regarding the quantity of output to produce.

The main difference between Marginal Utility and Total Utility is that:

Marginal Utility looks at the satisfaction from consuming an additional unit of a product, while Total Utility looks at the satisfaction from the total quantity of the product consumed,

What curve serves as the short-run supply curve for a perfectly competitive firm? Explain why

Marginal cost curve. it defines the lowest price a firm will accept for a given quantity of output.

According to Consumer Choice Theory, rational behavior requires a consumer to compare what TWO things? Marginal utility of each good or service and the price of each good or service

Marginal utility of each good or service and the price of each good or service

Consumer surplus is the difference between the:

Maximum price the buyer is willing to pay and the price actually paid for a good or service

Consider the product pizza. An individual's position along the Market Demand Curve for pizza expresses the:

Maximum price this consumer is willing to pay in order to acquire a pizza

If the Market Price (P*) is $32 and the firm confronts an Average Total Cost (ATC) of $25 at the profit-maximizing quantity of output to produce, what will happen in the long run in a Perfectly Competitive Market?

More firms will enter the market, pushing the market price lower

In general, as the price of a particular good falls, the consumer will purchase:

More units of the good and the marginal utility from this good's consumption will fall.

Suppose you are the owner/manager of a large grocery store. You decide to increase the price of a gallon of milk by 15%, and in response, the quantity demanded falls by 25%. You conclude that the demand for a gallon of milk is and your store's Total Sales Revenue will as a result of your price change.

Relatively elastic; decrease

Over the P1 - P2 price range, the demand for vodka is likely to be:

Relatively inelastic

Over the P3- P4 price range, the demand for vodka is likely to be:

Relatively inelastic

Suppose you are the owner/manager of a large grocery store. You decide to decrease the price of laundry detergent by 20%, and in response, the quantity demanded rises by 15%. You conclude that the demand for laundry detergent is and your store's Total Sales Revenue will as a result of your price change.

Relatively inelastic; decrease

Suppose you are the owner/manager of a large grocery store. You decide to increase the price of frozen pizza by 20%, and in response, the quantity demanded falls by 14%. You conclude that the demand for frozen pizza is and your store's Total Sales Revenue will as a result of your price change.

Relatively inelastic; increase

Why is the minimum point on the ATC curve important?

Represents the least cost of production, lowest possible opportunity cost which allows maximum amount of resources left over for production of other goods and services

When the firm produces 10 units of output, what is the value of Fixed Cost?(10x6)

S60

Statement 1: Barriers to entry are obstacles that make it difficult or impossible for would-be producers to enter a particular market. Statement 2: In a Perfectly Competitive Market, we observe high barriers to entry and exit.

Statement 1 is correct and Statement 2 is incorrect.

Statement 1: Perfectly Competitive firms can earn an above-normal amount of economic profit in the short run. Statement 2: Perfectly Competitive firms will can earn an above-normal amount of economic profit in the long run.

Statement 1 is correct and Statement 2 is incorrect.

Statement 1: A Perfectly Elastic demand curve implies that the firm must reduce its price in order to sell more units of output. Statement 2: A Perfectly Elastic demand curve implies that the firm can sell as much output as it chooses at the existing price.

Statement 1 is incorrect and Statement 2 is correct.

When the firm produces q* units of output, what is the value of the firm's Total Profit (TP)?

TP = $3,450

Write down the formula (the old way) used to calculate Total Profit

TR-TC

Complete this sentence: "The production function represents maximum..."

Technical efficiency- that is, the most output attainable from any given level of factor inputs.

For downward-sloping straight-line demand curves (refer to Panel "a" in Figure 6.4 on page 125 of the text), the price elasticity of demand:

Tends to be inelastic at relatively low prices and elastic at relatively high prices.

Which statement below explains the logic of the Profit Maximization Rule for a Perfectly Competitive firm?

The firm should produce every unit of output that adds more to total revenue than it adds to total cost, so that the firm captures all the available profit.

If the market price of the product is equal to P3:

The firm will earn a normal amount of economic profit.

If the market price of the product is equal to P4:

The firm will earn an above-normal amount of economic profit

New firms will continue to enter into a Perfectly Competitive Market as long as:

The market equilibrium price (P*) is greater than average total cost (ATC), so that firms can earn above-normal amounts of economic profit.

Perfectly Competitive firms cannot individually impact the market-determined price because:

The market is composed of so many individual firms, none of which produces a significant share of the total market output.

In the short run, the Perfectly Competitive firm will continue to produce output even though it might experience an economic loss if:

The market price exceeds the firm's average variable cost

Economists assume that consumers attempt to maximize their:

Total utility

Demand for a specific product category may be relatively inelastic, while the demand for specific brands of this product may be relatively elastic.

True

Economists use the absolute value of the Price Elasticity of Demand (PED) coefficient.

True

If the Marginal Utility per Dollar Spent for CDs is greater than the Marginal Utility per Dollar Spent for movie tickets, then you should buy more CDs and fewer movie tickets in order to maximize Total Utility.

True

In a Perfectly Competitive Market, entry ceases and the market structure stabilizes once economic profit disappears.

True

In a Perfectly Competitive market, the market-level supply of a product is calculated as the horizontal sum of the individual firms' Marginal Cost curves above the Average Variable Cost curves.

True

In the long run, firms operating within a Perfectly Competitive Market will achieve Allocative Efficiency.

True

The Law of Diminishing Marginal Utility even applies to goods and services that a person really likes and enjoys consuming.

True

The Price Elasticity of Demand coefficient is equal to 1 (in absolute value) at the point along a straight-line demand curve for a product where the product's Total Revenue maximized.

True

The only people who purchase a product are those whose maximum price equals or exceeds the market price of a particular product.

True

The opportunity to earn a profit may be limited by the structure of the market in which a firm operates.

True

The profit motive drives the entry and exit decisions made by business owners.

True

Explain how productivity advances impact global competitiveness.

U.S productivity must increase as fast as that in other nations.

Explain why US workers have a tremendous advantage over foreign workers

U.S workers have a advantage because they work with vast quantities of capital and state of the art technology

According to Figure 8.2, how is the equilibrium price of T-shirts established?

by the intersection of market demand and market supply

marginal cost (mc)

change in total cost/change in output

marginal physical product (mpp)

change in total output/change in input quantity

Write down the formula used to calculate Marginal Revenue (MR)

change in total revenue /change in output

marginal utility =

change in total utility/change in quantity

Complete the following sentence: "To maximize utility, the consumer should...

choose the good that delivers the most marginal utility per dollar.

Unit Labor Cost

computed by dividing the average cost of workers by their average levels of output

What formula is used to compute the value of consumer surplus?

consumer surplus= max. price willing to pay - price actually paid

variable cost

cost of production that change when the rate of output is altered, such as labor and material costs

fixed cost

costs of production that do not change when output changes

if a product has "perfectly elastic demand", what would the product's demand curve look like

demand curve would be horizontal

If a product has "perfectly inelastic demand", what would the product's demand curve look like?

demand curve would be vertical

How would we describe the "entry-exit conditions" that exist in a perfectly competitive market?

easy to entry as long as there is economic profit. easy to exit if there is no more economic profit

in a long-run equilibrium, what happens to the entry and exit of firms?

entry and exit cease, and zero economic profit (that is, normal profit) prevails

util

equal to one unit of electricity during a given time period

accounting cost

explicit cost

economic cost

explicit cost + implicit cost

How many real-world product markets have all the characteristics of a perfectly competitive market?

few if any

total cost

fixed cost +variable cost

Complete this sentence: "The short run is characterized by..

fixed costs

What type of cost MUST be paid, even if all output ceases

fixed costs

inferior goods

good for which demand decreases when income rises

normal good

good for which demand increases when income rises

complementary goods

goods frequently consumed in combination; when the price of good x rises the demand for good y falls

substitute goods

goods that substitute for each other; when the price of good x rises, the demand for good y increases, ceteris paribus

Complete this sentence: "The Law of Demand implies that price elasticity of demand will always be...."

greater than zero

Why is there is no upper limit to a firm's Total Cost in the short run?

how fast total cost rises depends on how many variable costs are added on.

Complete this sentence: "The key question, then, is

how much greater then zero E actually is

Explain what it means for a product to have "elastic demand"

if E is greater than 1, demand is elastic. consumer response is large relative to the change in price

Explain what it means for a product to have "inelastic demand"

if E is less than 1, demand is inelastic. consumers aren't very responsive to the change in price

marginal

if the marginal is equal to zero, then the total will be maximized

marginal cost

if the marginal is negative then the total will decrease.

marginal-

if the marginal is positive then the total will increase then

If a product's Income Elasticity coefficient is negative, then how would the product be classified

inferior good

Explain what it means for a product to have "unitary elastic demand"?

is E is equal to 1, demand is unitary elastic. the change in both quantity and price is equal

Explain what happens to the shape of the long-run cost curve when, in the real world, business owners confront an infinitely large number of scale choices.

it becomes a smooth U shape curve

complete this sentence: "Labor is "cheap" only if..."

it produces a lot of output in return for the wages paid.

explain how (and why) TIME impacts a product's price elasticity of demand.

it takes time for people to adjust their behavior to changed prices.

How much output would a perfectly competitive firm produce IF the business owner's goal was to maximize Total Revenue

it would always produce at capacity

List the three distinguishing characteristics of a perfectly competitive industry

many firms, identical products, low entry barriers

Explain the following statement: "As long as marginal utility is positive, total utility must be increasing.

marginal utility refers to the pleasure we get from one more unit of good. Although marginal utility diminishes as we consume additional units, total utility keeps rising so long as marginal utility is positive. until there is no satisfaction or pleasure of consumption.

If you are given information on a person's Total Utility, what is the formula used for computing Marginal Utility?

marginal utility= change in total utility/change in quantity

Efficiency

maximum output of a good from the resources used in production

Why will an increase in output reduce a firm's average fixed cost (AFC)

more output helps spread out the total fixed cost, making the AFC fall

Explain how the entry of new firms alters the market price of output in a competitive market

more producers= prices and economic profit to decline

Complete this sentence: "The best single rule for maximizing profits in the short run is straightforward...

never produce a unit that cost more than it brings in

is the potential for earning profit the same thing as a guarantee of earning profit

no because substantial risks are attached to starting and operating a business.

Do all businesses have an equal opportunity to earn an economic profit? Explain

no. the opportunity for profit may be limited by the structure of the industry in which the firm is engaged in

If a product's Income Elasticity coefficient is positive, then how would the product be classified?

normal good

How does self-preservation play a role in explaining human consumption patterns

not all consumption is motivated by ego or status concerns. Some food is consumed to survive, clothes for warmth, and some housing built for shelter

Barriers to Entry

obstacles, such as patents, that make it difficult or impossible for would-be producers to enter a particular market

under what condition does a productive activity reap an economic profit?

only if it earns more than its opportunity cost

Under what condition should a business owner "shut down" production

only if the losses from continuing production exceed fixed costs

Explicit Cost

opportunity cost of resources employed by a firm that takes the form of cash payments

Explain why the demand for "necessities" tends to be INELASTIC.

our "taste" for such goods is so strong, we can not imagine getting by without them. As a result, we don't change our consumption much when the price increases.

Complete this sentence: "The long run cost curve is just a summary of.

our best short run possibilities, using existing technology and facilities

Productivity

output per unit of input- for example, output per labor-hour

explicit cost

payment made for the use of a resource

Complete this sentence: "The profit-maximizing producer NEVER seeks to maximize..." and then explain why not.

per unit profits. what counts is total profits, not the amount of profit per unit

income elasticity of demand

percentage change in quantity demanded divided by percentage change in income

For perfectly competitive firms, what interesting little fact do we discover about Marginal Revenue

price = marginal revenue

Complete this sentence: "Total profits of the firm are maximized at the rate of output where

price =MC

How do Economists explain consumer behavior

prices and income are just as relevant to consumption decisions as are more basic desires and preferences. economists focus on the demand for goods and services.

Explain how the exit of firms alters the market price of output in a competitive market

prices will stabilize

profit maximization rule

produce at that rate of output where marginal revenue equals marginal cost

How can the profit motive be a "good thing" for society? Explain

profit motive works with the "invisible hand" so producing goods and services that consumer desire the most at the the prices they're willing to pay will give business owners more profit.

in a long-run equilibrium, how much profit will firms earn?

profits declines will cease when the price of output equals the minimum average cost of production.

Document how public perceptions of profit are very different from the actual amount of profit earned by firms in America.

public perceptions of profit are seven to eight times higher than actual profit.

When considering a purchase, WHAT does rational behavior require a consumer to do

rational behavior requires one to compare the anticipated utility of each expenditure with its price.

How do colleges and universities practice price discrimination

scholarships and grants

What are the four things a business owner must do in order to earn economic profit?

see opportunities the others have missed, discover new products, find new and better methods of production, or take above average risks.

Describe how the spending pattern of male consumers differs from the spending pattern of female consumers.

single women spend more money on clothes and pets, men spend more on entertainment, food and drinks

How can the profit motive be a "bad thing" for society? Explain.

social needs can be ignored in pursuit of high profits and can cause firms to pollute the environment, restrict competition, and maintain unsafe work conditions

Complete this sentence: "In other words, economic profits represent

something over and above "normal profit"

Why are consumers sometimes willing to settle for goods that yield less marginal utility

sometimes the price of a good we most desire is too high. we end up settling for a good that cost less but has less marginal utility.

what is the most desirable rate of output for a business owner to produce?

that maximizes total profit

market power

the ability to alter the market price of a good or service

What does Marginal Cost (MC) measure for a firm?

the added cost of producing one more unit of a good

total utility

the amount of satisfaction obtained from entire consumption of a product

Describe the relationship between average total cost (ATC) and marginal cost (MC)

the average total costs increase whenever marginal costs exceed average costs.

Complete this sentence: "The output decision has to be based not only on..

the capacity to produce but also on the costs of production

Marginal Physical Product (MPP)

the change in total output associated with one additional unit of input

marginal revenue

the change in total revenue from an additional unit sold

marginal utility

the change in total utility obtained by consuming one additional unit of a good or service

investment Decision:

the decision to build, buy, or lease plants and equipment; to enter or exit an industry

investment decision

the decision to build, buy, or lease plants and equipment; to enter or exit an industry

profit

the difference between total revenue and total cost

Complete this sentence: "Everyone agrees that profit represents

the difference between total revenue and total costs

Economic Profit

the difference between total revenues and total economic costs

economic profit

the difference between total revenues and total economic costs

profit

the difference between totall revenue and total cost

How does the existence of profit (or loss) in a Competitive Market lead to the "right mix of output" being produced?

the existence of economic profits is an indication that consumers place a high value on a particular product and are willing to pay almost any price to get it.

complete this sentence: "The basic motivation for producing goods and service is

the expectation of profit

Explain how "substitute goods" impacts a product's price elasticity of demand.

the greater availability of substitutes, the higher the price elasticity of demand.

According to the text, how have consumers benefitted from competition in the computer market

the increase in supply pushed computer prices super low.

marginal cost

the increase in total cost associated with a one-unit increase in production

Marginal Cost

the increase in total cost that arises from an extra unit of production

In the long run, we'd choose the plant that yielded..

the lowest average cost for any desired rate of output .

Complete this sentence: "Notice that the market supply curve is the sum of..

the marginal cost curves of all the firms

law of diminishing returns

the marginal physical product of a variable input declines as more of it is employed with a given quantity of other (fixed) inputs

the law of diminishing marginal utility

the marginal utility of a good declines as more of it is consumed in a given time period

total cost

the market value of all resources used to produce a good or service

optimal consumption

the mix of consumer purchases that maximizes the utility attainable from available income

identify the first observation made by Economists concerning products and pleasure.

the more pleasure a product gives us, the higher the price we are willing to pay for it.

Opportunity Cost:

the most desirable alternative given up as the result of a decision

opportunity cost

the most desired goods or services that are forgone in order to obtain something else

market structure

the number and relative size of firms in an industry

Marginal Cost Pricing

the offer (supply) of goods at prices equal to their marginal cost

normal profit

the opportunity cost of capital; zero economic profit

implicit Cost

the opportunity cost that arises when a firm uses owner-supplied resources

How does the output of an individual wheat farmer compare to the total annual output of the wheat market?

the output of the lone farmer is so small relative to the market supply that is has no significant effect on the total quantity or price in the market

Economic Cost

the payment that must be made to obtain and retain the services of a resource

price elasticity of demand

the percentage change in quantity demanded divided by the percentage change in price

cross-price elasticity of demand

the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good

short run

the period in which the quantity of some inputs can't be changed

Long Run

the period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant

utility

the pleasure or satisfaction obtained from a good or service

What are the two things that keep existing firms "on their toes" in a Competitive Market

the potential threat of other firms expanding production or of new firms entering the industry

Equilibrium Price

the price at which the quantity demanded equals the quantity supplied

Will a price elasticity of demand coefficient automatically be a positive number or a negative number. explain why

the price elasticity of demand (e) is a negative number since quantity demanded and price always move in opposite directions (law of demand)

Explain how an item's price (relative to the consumer's income) impacts a product's price elasticity of demand

the price elasticity of demand declines as price moves down the demand curve

total revenue

the price of a product multiplied by the quantity sold in a given time period: p x q

List the four determinants of a competitive firm's supply.

the price of factor inputs Technology expectations taxes and subsidies

Complete this sentence: "The dilemma of machine operators without sewing machines illustrates a general principle of production..."

the productivity of any factor of production depends on the amount of other resources available to it.

Economies of Scale

the property whereby long-run average total cost falls as the quantity of output increases

Constant Returns to Scale

the property whereby long-run average total cost stays the same as the quantity of output changes

Complete this sentence: "A worker's productivity (MPP) depends on.

the quantity and quality of other resources in the production process

law of deamnd

the quantity of a good demanded in a given time period increase as its price falls

Law of Demand

the quantity of a good demanded in a given time period increases as its price falls, ceteris paribus

Explain the difference in shape between the Market Demand Curve for T-shirts and the demand curve for the T-shirts produced by one individual shop in the T-shirt market

the quantity of t shirts purchased in the market depends on the price, that is the market demand and why the market demand curve is downward sloping. but for a individual shop the demand curve is horizontal because its share of the market is so small that changes in the output dont disturb market equilibrium

Shutdown Point

the rate of output where price equals minimum AVC

shut down point

the rate of output where price equals minimum AVC

price discrimination

the sale of an individual good at different prices to different consumers

Production Decision

the selection of the short-run rate of output (with existing plants and equipment)

production decision

the selection of the short-run rate of output (with existing plants and equipment)

long run

the time period in which all inputs can be varied

Market Supply

the total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus

total output

the total quantity of a particular good or service produced

if the Cross-Price Elasticity coefficient is negative, then what relationship exists between the two goods under consideration

the two goods are complementary

If the Cross-Price Elasticity coefficient is positive, then what relationship exists between the two goods under consideration

the two goods are substitutes

Market Mechanism

the use of market prices and sales to signal desired outputs (or resource allocations)

economic cost

the value of all resources used to produce a good or service

implicit cost

the value of resources used, for which no direct payment is made

Consider Figure 8.5. How do we measure the firm's Total Profit on this type of graph

the vertical distance between the total revenue and cost curves

demand

the willingness and ability to buy specific quantities of a good at alternative prices in a given time period

if the marginal is zero

then the total is maximized

if the marginal is negative

then the total will decrease in value

if the marginal is positive

then the total will increase in value

For a given firm, does maximum profit usually coincide with maximum output? Why or why not?

there is no reason to expect maximum profit to coincide with maximum output. a firm might not want to produce any output if costs always exceed sales revenue.

Why is there a lower limit to a firm's Total Cost in the short run? As a part of your answer, be sure identify WHAT this lower limit is!

there is no way to avoid fixed cost in a short run. even if there is zero output, you still have to pay a fixed cost.

Why are Perfectly Competitive firms referred to as "price takers"?

they take the price the market sets. anything higher priced consumers will shop elsewhere

What is the short-run objective of the business owner?

to make the best possible use of the factory we've acquired

Average Total Cost

total cost divided by the quantity of output

Average Total Cost (ATC)

total cost divided by the quantity produced in a given time period

average total cost

total cost/total output or afc +avc

average fixed cost

total fixed cost/quantity

Average Fixed Cost (AFC)

total fixed costs divided by quantity of output

Profit Per Unit

total profit divided by the quantity produced in a given time period; price minus average total cost

What formula(s) are used to compute Economic Profit

total revenue -total economic cost OR accounting profit- implicit costs

what formula is used to compute a firm's Total (Sales) Revenue

total revenue = price x quantity sold

As a person consumes more units of a particular good, the person's will increase. At the same time, this person's will decrease with each additional unit consumed.

total utility; marginal utility

average variable cost

total variable cost / quantity

Average Variable Cost (AVC)

total variable costs divided by quantity of output

economic profit

tsr- economic cost

accounting profit

tsr-ac

What three things must a Competitive firm do in order to "stay in the game"

update technology, improve their products, and reduce costs.

What formula is used to compute unit labor cost?

wage rate /MPP

How do psychiatrists and psychologists explain human consumption patterns

we strive for ever higher levels of consumption to satisfy basic drives for security, sex, and ego gratifications.

How do sociologists explain human consumption patterns

we strive for ever higher levels of consumption- not to just keep up with others but to surpass them

Price discrimination is most effective and easiest to practice under which three conditions?

when consumers do not have prefect information about the market prices, there are fewer sellers, and where individual consumers make only occasional purchases.

Suppose a perfectly competitive business owner is currently producing a level of output such that Marginal Cost exceeds Price (MC > P). Explain why the business owner will have the incentive to contract his output

when price equals mc the profits are maximum.

What drives the entry and exit decisions of firms in a Competitive Market?

when there is economic profits firms try to entry but then exit when there is too many and profits decline

Under what condition will economic costs and accounting costs diverge

whenever any factor of production is not paid an explicit wage

Under what condition will the profit maximization rule minimize losses for a firm?

where price exceeds average variable cost but not average total cost

In reality, do we see goods and services having these "extreme" elasticities of demand?

yes. elasticities of demand lie between those two extremes (obeying the law of demand)

A unitary elastic demand means that if the percentage change in price is then the percentage change in quantity demanded is

© 5%, 5%

When the firm produces 15 units of output, what is the value of Average Total Cost? (15 look at line is 12)

$12

When the firm produces 15 units of output, what is the value of Total Cost?(15x12=180)

$180

The Total Cost of producing TWO pairs of shoes is:

$26

What is the Marginal Cost of producing the 6th unit of output?(6 look at line to 4)

$4

Last year, Debbie's Mobile Dog Grooming Service incurred $ of Implicit Cost.(opportunity cost kinda)

$51,000

According to Supplemental Handout #1, the typical American household spent approximately on goods and services during year 2020.

$61,749

When the firm produces 10 units of output, what is the value of Average Variable Cost?(the middle intercts at 7)

$7

When the firm produces 10 units of output, what is the value of Variable Cost?(7x10)

$70

List the Three Long-Run Rules for Entry and Exit in a Competitive Market.

- p>ATC = firms will entry and gain profit - p<ATC =firms will exit and loss - p=ATC = break even

List the six market characteristics of perfect competition.

-Many firms -identical products -perfect information -MC=P -low barriers -zero economic profit

Suppose the General Motors Corporation decreases the price of the Cadillac Escalade SUV by 8 percent, and as a result, the quantity demanded of this automobile increases by 5 percent. Using the Basic Formula, the Price Elasticity of Demand (PED) coefficient for this product, in absolute value, is:

0.625 and demand for this product is relatively inelastic.

Complete this sentence: "Hence, if jeans production isn't up to par, society is either

1. getting fewer jeans than it should for the resources devoted to jeans production or 2. giving up too many other goods and services in order to get a desired quantity of jeans.

What are the four factors that influence an individual's demand for a specific product

1. tastes (desire for this good and other goods) 2. income (of the consumer) 3. expectations (for income, prices, tastes) 4. other goods (their availability and prices)

For a Perfectly Competitive business owner, the shutdown point occurs where price equals:

Average Variable Cost (AVC)

Rachel's favorite sweet snack food is Oreo cookies. She gets 30 utils of satisfaction from consuming the first Oreo cookie of the afternoon, an additional 50 utils of satisfaction from consuming the second Oreo cookie of the afternoon, and an additional 20 utils of satisfaction from consuming third Oreo cookie of the afternoon. If she consumes a total of four Oreo cookies this afternoon, Rachel's Total Utility would be 110 utils. How much Total Utility does Rachel get if she consumes three Oreo cookies this afternoon?

100 utils

The optimal quantity of output (q*) for this Perfectly Competitive firm to produce is:

115 units of output

How much Total Utility does Patrick receive from consuming five pizza slices at dinner tonight?add each bar together)

125 utils

How much Total Output per day is produced by the firm when it uses six workers in its production process?

15 units of output per day

How much Total Output per day is produced by the firm when it uses four workers in its production process?

17 units of output per day

Suppose that Honda increases the price of its Goldwing motorcycle by 18 percent, and as a result, the quantity demanded of the model decreases by 36 percent. Using the Basic Formula, the Price Elasticity of Demand (PED) coefficient for this product, in absolute value, is:

2.00 and demand for this product is relatively elastic.

Suppose that Lean Cuisine decreases the price of its frozen meals by 15 percent, and as a result, the quantity demanded of these frozen meals increases by 40 percent. Using the Basic Formula, the Price Elasticity of Demand (PED) coefficient for this product, in absolute value, is:

2.667 and demand for this product is relatively elastic.

According to Supplemental Handout #1, the typical American household spent approximately of its budget on gasoline and oil during year 2020.

3.05%

Rachel's favorite sweet snack food is Oreo cookies. She gets 30 utils of satisfaction from consuming the first Oreo cookie of the afternoon, an additional 50 utils of satisfaction from consuming the second Oreo cookie of the afternoon, and an additional 20 utils of satisfaction from consuming the third Oreo cookie of the afternoon. If she consumes a total of four Oreo cookies this afternoon, Rachel's Total Utility would be 110 utils. How much Total Utility does Rachel get if she consumes only one Oreo cookie this afternoon?

30 utils

Match the curves in the figure (lines A, B, and C) with correct cost curve name.

A = marginal cost; B = average variable cost; C = average total cost

According to Supplemental Handout # 1, a product's demand curve is described as being relatively inelastic if it is:

A downward-sloping but "steep looking" demand curve

According to Figure 6.2 and Supplemental Handout #1, a product's demand curve is described as being perfectly elastic if it is:

A horizontal demand curve

Which of these events can occur only in the long run?

A new movie theater is built on the southeast side of Tallahassee.

Suppose you are told that 1 TB external hard drive has a PED = 4. What does this mean?

A price increase of 1% will reduce the quantity demanded by 4%

In the Perfectly Competitive model, business failures can benefit society by causing:

A reallocation of resources to the production of products more highly valued by society.

Which of the following items is most likely to have a Price Elasticity of Demand coefficient take on value less than 1 (in absolute value)?

A smartphone

According to Figure 6.2 and Supplemental Handout #1, a product's demand curve is described as being perfectly inelastic if it is:

A vertical demand curve

When the firm produces q* units of output, how much does it cost to produce the typical unit of output?

ATC = $22

Complete this sentence: "The profit-maximizing producer has NO DESIRE to produce at that rate of output where

ATC is at minimum.

Why will the firm's average variable cost (AVC) eventually rise as output increases

AVC rise because of the diminishing returns in the production process.

Which of the following statements about the relationship between Economic Costs and Accounting Costs is true?

Accounting costs are always less than or equal to economic costs.

Lori receives 25 utils of satisfaction from drinking a beer and 100 utils of satisfaction from watching her favorite new movie on Netflix. Which of the following statements is TRUE?

All else constant, Lori would prefer to watch a movie than drink a beer,

Economists categorize industries (or markets) using which of these characteristics?

All of the above

According to the In The News box on page 93 of the Required Course Textbook, which of the following represent distinctive traits in the spending patterns of young men and young women?

All of the above represent distinctive traits in the spending patterns of young men and young women.

In Economics, normal profit is:

All of the above.

If the goods produced by two firms are homogeneous, then these goods:

Are perfect substitutes for each other

This firm will continue to produce output while taking a loss at all prices:

Between P2 and P3

Statement 1: The period of time during which at least one factor of production is fixed is called the short run. Statement 2: The period of time during which all factors of production are variable is called the long run.

Both statements are correct.

Statement 1: If a firm earns an Accounting Profit, then it also earns an Economic Profit. Statement 2: If a firm is taking an Economic Loss, then it is also taking an Accounting Loss.

Both statements are incorrect.

Connor eats a fourth bacon double cheeseburger and pukes all over the place. At this point:

Connor's marginal utility from consuming the fourth bacon double cheeseburger is negative

In a Perfectly Competitive Market, above-normal economic profit indicates:

Consumers want more of that industry's goods

According to the Law of Diminishing Marginal Utility:

Consuming additional units of a good will eventually yield smaller and smaller amounts of additional satisfaction for the consumer.

Sam likes to drink soda and eat hamburgers. In fact, he currently consumes 5 sodas and 5 hamburgers each week. The Marginal Utility that Sam receives from the last soda consumed is 20 utils, and the Marginal Utility that Sam receives from the last hamburger consumed is 40 utils. Sam has to pay a price of $1 for each soda consumed, and a price of $2 for each hamburger consumed.

Continue to purchase 5 sodas and 5 hamburgers each week, since this is his optimal consumption bundle.

For a firm, Variable Cost measures:

Costs of production that do change when the rate of output is altered

For a firm, Fixed Cost measures:

Costs of production that don't change when the rate of output is altered

A firm that makes zero economic profit.

Covers all its costs, including a provision for normal profit.

Suppose you work in the marketing department for the Ford Motor Company. The company would like to see the quantity demanded of its Mustang Shelby GT 500 automobile increase by 12% this year. If the Price Elasticity of Demand (PED) coefficient for the Mustang Shelby GT 500 automobile is 0.60 (or 3/5 when expressed in fractional form), then the marketing department should recommend alan:

Decrease in price of 20%

Suppose you are told that the demand for bacon is relatively elastic. Then, a 10% increase in the price of bacon will:

Decrease the quantity of bacon demanded by more than 10 percent.

According to Supplemental Handout # 2, when a new worker hired adds less to Total Output than the previous worker hired, the firm experiences:

Diminishing marginal returns

The demand curve for a product produced in a Perfectly Competitive market is, while the demand curve for the output of an individual firm in that market is

Downward sloping; perfectly elastic

For simplicity, how do we usually express our price elasticity of demand coefficients

E is typically expressed in absolute terms (without the minus sign)

What does it mean for a product to have "perfectly elastic demand"

E= infinity. any increase in price would cause quantity demanded to fall to zero

What does it mean for a product to have "perfectly inelastic demand"

E=0. any increase in price won't affect the quantity demanded; consumers are willing to pay any price to get the quantity.

Which type(s) of cost will an Economist focus on

Economic cost

Which type(s) of cost will businesses focus on

Explicit costs

If the owner of the factory believes he will produce 210 widgets per day in the future, what size factory will he choose to build for future use?

Factory size represented by ATC2

The eventual sharp increase in a firm's Marginal Cost results from:

Falling marginal physical product.

According to Economists, a successful advertising campaign is one that increases the perceived Marginal Utility of a product, thereby shifting the Demar Curve for that product to the left.

False

Hiring additional workers always causes the firm's Total Output to increase.

False

If the Marginal Utility per Dollar Spent for candy bars is greater than the Marginal Utility per Dollar Spent for popcorn, then you should buy more popcorn and fewer candy bars in order to maximize Total Utility.

False

In the long run, a Perfectly Competitive Market will achieve Production Efficiency because:

Firms produce a quantity of output that minimizes the average total cost of production.

In the long run, there are no costs for a firm.

Fixed

The Fixed Cost for the shoe factory is equal to:

Fixed O $15

The Marginal Physical Product (MPP) of the fifth worker is:

O 2 units of output per day

Suppose you are told that butter is a product with relatively elastic demand. A decrease in the price of butter will cause a producing firm's Total revenue to:

Increase

Suppose you are told that heavy whipping cream is a product with relatively inelastic demand. An increase in the price of heaving whipping cream will cause a producing firm's Total Revenue to:

Increase

Assume the Price Elasticity of Demand (PED) coefficient for blue jeans is equal to 0.40 (or 2/5 when expressed in fractional form). If a clothing retailer decided to decrease the price of a pair of blue jeans by 20%, then the quantity demanded of blue jeans would:

Increase by 8%

Suppose you are told that the demand for kosher salt is relatively inelastic. Then, a 15% decrease in the price of kosher salt will:

Increase the quantity of kosher salt demanded by less than 15 percent.

If the owner of the factory believes he will produce 150 widgets per day in the future, what size factory will he choose to build for future use?

Indifferent between the factory size represented by ATC1 and the factory size represented by ATC2

According to Supplemental Handout #1, how much calendar time is assigned to our definition of the short run in an introductory Microeconomics class?

No amount of calendar time is assigned to our definition of the short run. The actual length of a firm's short varies based on firm type, industry and characteristics of the firm's owner.

Diminishing Marginal Utility begins when Patrick consumes pizza slice:(first bar that decreases)

Number 4

The optimal price (P*) for this Perfectly Competitive firm to charge customers is:

O $100 per unit of output

Suppose that a customer's maximum willingness to pay for a product is $79, and the seller's minimum willingness to sell is $64. If the negotiated price is $68, what is the value of consumer surplus?

O $11

The Average Total Cost of producing THREE pairs of shoes is:

O $11

The Variable Cost of producing TWO pairs of shoes is:

O $11

The optimal price (P*) for this Perfectly Competitive firm to charge customers is:

O $15 per unit of output

The market price of watermelons is $4, and Wendy sells 40 watermelons at the local farmer's market. Wendy's Total Sales Revenue is _ If Wendy sold a 41st watermelon to a customer, her Marginal Revenue would be

O $160; $4

Last year, Debbie's Mobile Dog Grooming Service incurred $ of Accounting Cost.(something you actually paid )

O $28,000

Last year, Debbie's Mobile Dog Grooming Service incurred $ of Explicit Cost.(anything w a receipt )

O $28,000

When the firm produces 10 units of output, what is the value of Average Fixed Cost?(13-7)

O $6

The Marginal Cost of producing the THIRD pair of shoes is:

O $7

When the price of a ticket to an Atlanta Braves baseball game is reduced from $20 to $15, the quantity of tickets demanded increases from 25,000 tickets to 30,000 tickets. Using the Midpoint Formula, the Price Elasticity of Demand (PED) coefficient for this product, in absolute value, is:

O 0.64

Suppose the Market Price (P*) in the Perfectly Competitive Wheat Market is currently $15 per bushel. individual wheat farmer confronts an Average Total Cost (ATC) of $10 and an Average Variable Cost (AVC) of $7. In the short run, a profit-maximizing wheat farmer should do which of the following?

Produce a level of output where MR = MC and earn an above-normal economic profit.

Suppose the Market Price (P*) in the Perfectly Competitive Soybean Market is currently $22 per pound. An individual soybean farmer confronts an Average Total Cost (ATC) of $26 and an Average Variable Cost (AVC) of $19. In the short run, a profit-maximizing soybean farmer should do which of the following?

Produce a level of output where MR = MC and take an economic loss.

When competition is present, self-interested business decision makers have a strong incentive to:

Produce efficiently in order to increase profits

Shannon likes to attend baseball games and read books. In fact, she currently attends 10 baseball games and reads 7 books each month. The Marginal Utility that Shannon receives from the last baseball game attended is 60 utils, and the Marginal Utility that Lauren receives from the last book read is 50 utils. Shannon has to pay a price of $15 for each ticket to a baseball game, and a price of $5 for each book that she reads. Assuming that Shannon's goal is to maximize her Total Utility, what action should she take and why?

Read more books and attend fewer baseball games each month, since she receives "more bang for her buck" from reading books.

The term Implicit Cost:

Reflects the monetary payment a resource could have earned in its best alternative use.

For a particular product, if the percentage change in quantity demanded is greater than the percentage change in price, then we claim this product has:

Relatively Elastic Demand

For a particular product, if the percentage change in quantity demanded is less than the percentage change in price, then we claim this product has:

Relatively Inelastic Demand

Products with many close substitutes tend to have demand, and products considered to be luxury goods tend to have demand.

Relatively elastic demand; Relatively elastic demand

Suppose the Market Price (P") in the Perfectly Competitive Corn Market is currently $19 per bushel. An individual corn farmer confronts an Average Total Cost (ATC) of $30 and an Average Variable Cost (AVC) of $23. In the short run, a profit-maximizing corn farmer should do which of the following?

Shut down immediately and produce zero units of output.

Marginal Physical Product (MPP) is negative for the:

Sixth worker

List three ADDITIONAL things that may service as motivations for producers.

Social status. to produce goods and services consumers desire, and at prices consumers are willing to pay

Assume the current market demand curve for output is represented by D3, so that the current market price of output (P*) is equal to $35. In the long run, what adjustments will take place in this Perfectly Competitive Market?

Some current firms will exit from this market, since economic losses are being taken by current firms when P* = $35.

If the Market Price (P*) is $8 and the firm confronts an Average Total Cost (ATC) of $10 at the profit-maximizing quantity of output to produce, what will happen in the long run in a Perfectly Competitive Market?

Some firms will exit the market, pushing the market price higher

Assume the current market demand curve for output is represented by D5, so that the current market price of output (P*) is equal to $60. In the long run, what adjustments will take place in this Perfectly Competitive Market?

Some new firms will enter this market, since above- normal economic profits are being earned by current firms when P* = $60.

All of these are basic determinants of a product's elasticity of demand, except for.

The availability of complementary goods

This firm's short-run supply curve is:

The b-c-d segment of the MC curve

The term Marginal Physical Product (MPP) reflects:

The change in a firm's Total Output that results from adding the next worker to the production process

For a business owner, Marginal Revenue (MR) measures:

The change in total revenue resulting from a one-unit change in the quantity sold.

In the short run, which of the following is most likely a Fixed Cost for the Little Biscuit Bread Company?

The cost of commercials to promote Little Biscuit's products.

In the short run, which of the following is most likely a Variable Cost for the Little Biscuit Bread Company?

The cost of flour and other ingredients used to make Little Biscuit's products.

In the short run, Average Total Cost (ATC) tells a business owner:

The cost of producing the typical unit of output, if total cost is spread out evenly over all the units of output being produced.

The concept of Price Elasticity of Demand is designed to measure:

The degree of consumer responsiveness to a change in the price of a product

consumer surplus

The difference between the maximum amount a person is willing to pay for a good and the price paid.

For a firm, Marginal Cost (MC) measures:

The increase in total cost associated with a one unit increase in production

Assume the market for soybeans is a Perfectly Competitive Market. How is the market price (P*) of a bushel of soybeans determined?

The interaction between Market Supply and Market Demand determines the market price of a bushel of soybeans.

In the Perfectly Competitive Corn Market, the price of a bushel of corn is determined by:

The interaction between the market-level demand for corn and the market-level supply of corn

The Law of Diminishing Returns states that:

The marginal physical product of a factor of production will shrink as more of that factor is used in the production process.

When two or more goods are being purchased, optimal consumption is achieved when:

The marginal utility per dollar spent for the last unit of each good being consumed is the same

Current firms will continue to exit from a Perfectly Competitive Market as long as:

The market eguilibrium price (P") is less than average total cost (ATC), so that firms are taking economic losses.

There will be neither entry into nor exit from a Perfectly Competitive Market as long as:

The market equilibrium price (P") is equal to average total cost (ATC), so that firms earn a normal amount of economic profit.

Assume the current market demand curve for output is represented by D4, so that the current market price of output (P*) is equal to $42. In the long run, what adjustments will take place in this Perfectly Competitive Market?

The market structure will remain unchanged, since zero economic profit is being earned by current firms when p* = $42.

As current firms exit from a Perfectly Competitive Market:

The market supply curve shifts to the left and the market equilibrium price increases.

As new firms enter into a Perfectly Competitive Market:

The market supply curve shifts to the right and the market equilibrium price decreases.

A production function shows the business owner:

The maximum amount of output that can be produced from using different combinations of productive resources.

The term Market Structure focuses on: The number and relative size of the firms within an industry

The number and relative size of the firms within an industry

Which of the following IS NOTA determinant of Market Supply within a Perfectly Competitive industry?

The number of buyers in the industry

Assume the owner of a Perfectly Competitive firm is currently producing 314 units of output per day. The Marginal Revenue (MR) generated from the sale of the 314th unit of output is $43, while the Marginal Cost (MC) of producing the 314th unit of output is $43. What action should be taken by the owner of this firm?

The owner of this firm should continue producing 314 units of output per day, since Total Profit is maximized at this level of output.

Assume the owner of a Perfectly Competitive firm is currently producing 800 units of output per day. The Marginal Revenue (MR) generated from the sale of the 800th unit of output is $48, while the Marginal Cost (MC) of producing the 800th unit of output is $56. What action should be taken by the owner of this firm?

The owner of this firm should produce less than 800 units of output per day, to move his firm closer toward the profit maximizing level of output.

Assume the owner of a Perfectly Competitive firm is currently producing 150 units of output per day. The Marginal Revenue (MR) generated from the sale of the 150th unit of output is $25, while the Marginal Cost (MC) of producing the 150th unit of output is $21. What action should be taken by the owner of this firm?

The owner of this firm should produce more than 150 units of output per day, to move his firm closer toward the profit-maximizing level of output.

Using the Basic Formula, we will calculate a product's Price Elasticity of Demand (PED) coefficient as:

The percentage change in the quantity demanded divided by the percentage change in the price.

In Economics, the term utility refers to:

The pleasure or satisfaction received from consuming a good or service

The amount of Total Revenue (TR) derived from the sale of a particular product is computed as:

The price per unit multiplied by the quantity sold, or P x Q

Marginal Cost Pricing results in the most desirable mix of goods and services from the consumer's standpoint because:

The prices consumers pay for a product are a reflection of the value of the goods and services given up to produce it.

To determine the Market Supply of a product:

The quantities supplied at each price by each supplier are added together.

According to Figure 6.2, a product is said to have perfectly elastic demand if:

The quantity demanded falls to zero in response to a change in the price of this product.

Which of the following is NOT an example of an Explicit Cost?

The salary an entrepreneur could have earned in an alternative job

A product is said to have relatively elastic demand if:

There is a large quantity response by consumers to a change in the price of this product.

A product is said to have relatively inelastic demand if:

There is a small quantity response by consumers to a change in the price of this product.

When firms in a Perfectly Competitive Market are earning zero economic profit, this is an indication that:

There is currently no better way to use society's scarce resources

According to Figure 6.2, a product is said to have perfectly inelastic demand if:

There is zero quantity response by consumers to a change in the price of this product.

In a Perfectly Competitive Market, economic losses are a signal to producers that:

They are not using society's scarce resources in the best way

Explain why the demand for "luxuries" tends to be ELASTIC.

Things we want but can get by without them. Only willing to buy with income increases or a sharp decline in price.

When a Perfectly Competitive computer firm is producing a level of output where Marginal Cost (MC) is greater than the Market Price (P*), from society's standpoint the firm is producing:

Too much output because society is giving up more to produce additional computers than the computers are worth.

The market value of all resources used in producing a good or service is expressed by:

Total cost

For a particular product, if the percentage change in quantity demanded is of the same size as the percentage change in price, then we claim this product has:

Unitary Elastic Demand

In the short run, changes in the firm's Total Cost result from changes in:

Variable costs

Which of the following industries most closely resembles the Perfectly Competitive Market Model?

Vegetable farming

The Marginal Cost Pricing characteristic of Perfectly Competitive Markets permits society to efficiently answer the:

WHAT-to-produce question

Which is the BETTER purchase: a new top-quality motorcycle or an older, used motorcycle?

We cannot tell which is the better buy without knowing their prices or the utility derived from each

According to Supplemental Handout #2, the Price Elasticity of Demand (PED) coefficient for a product with Relatively Inelastic Demand will take on a value:

Within the range of 0 and 1

In the short run, when a firm produces ZERO UNITS of output, the firm's Variable Cost equals:

Zero

demand curve

a curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus

competitive firm

a firm without market power, with no ability to alter the market price of the goods it produces

supply curve

a graph of the quantity supplied of a good at different prices

Competitive Market

a market in which no buyer or seller has market power

prefect competition

a market in which no buyer or seller has market power

Complete this sentence: "In fact, economic profits are often regarded as

a reward to entrepreneurship

Why does a firm's average total cost (ATC) curve takes on a "capital letter U" shape?

a steady decline of AFC when combined with a increase in AVC

How would an Economist characterize a successful advertising campaign?

a successful advertising campaign is one that increases the perceived marginal utility of a product, thereby shifting the demand curve for that product to the right.

Complete this sentence: "What the theater owner wants to know is...."

by how much the quantity demanded increases if the price is reduced

production function

a technological relationship expressing the maximum quantity of a good attainable from different combinations of factor inputs

Explain how production efficiency is achieved in a perfectly competitive market. Remind yourself why society cares about this!

all competitive firms seek to produce at that output where MC=p

How much output can a perfectly competitive firm sell at the current market equilibrium price

all of its output

marginal utility

an additional amount of satisfaction decreasing every time

Complete this sentence: "That is because the only people who purchase a product..."

are those whose maximum price equals or exceeds the market price.

Under what "condition" can we make the claim that economic profits won't last long?

as long as it is easy for existing producers to expand production or for new firms to enter an industry. keep low barriers

Suppose a perfectly competitive business owner is currently producing a level of output such that Price exceeds Marginal Cost (P > MC). Explain why the business owner will have the incentive to expand his output

as long as prices exceeds MC, additional output increases total profit

explain the following statement: "People are willing to buy additional quantities of a good only if its price falls.

as marginal utility of a good dimensions, so does our willingness to pay. Unless the price of that good falls, becomes cheaper.

Why does diminishing returns to labor eventually begin in every production process?

as more labor is hired, each unit of labor has less capital and land to work with.

On a graph, at what point does a firm's Marginal Cost curve intersect the firm's Average Total Cost curve?

at ATC lowest point

Describe how the spending pattern of male consumers is similar to the spending pattern of female consumers

both spend about the same in a year. Education being one of the largest. neither sex spends much on charity, readings, or health care