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