econ 202 final

Refer to the diagram... An increase in quantity supplied is depicted by a:

move from y to point x

An industry in which economies of scale are so great that a single firm can produce the industry's product at a lower average cost than would be possible if more than one firm produced the product

natural monopoly

Increases in the value of the product to each user, including existing users, as the total number of user rise

network effects

Competition based on distinguishing one's product by means of product differentiation and then advertising the distinguishing product to consumers

nonprice competition

The demand for most products varies directly with changes in consumer income. Such products are known as:

normal goods

The payment made by a firm to obtain and retain entrepreneurial ability; the minimum income that entrepreneurial ability must receive to induce entrepreneurs to provide their ability to a firm

normal profit

A market structure in which a few firms sell either a standardized or differentiated product, into which entry is difficult, in which the firm has limited control over product price because of mutual independence, and there is a typical nonprice competition

oligopoly

Joe sold gold for $1,000 that he bought a year ago for $1,000. He says "At least I didn't lose any money on my financial investment. His economist friend points out that in effect he did lose money because he could have received 3% return from the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:

opportunity cost

Product or resource demanded in which price can be one of any amount at a particular quantity of the product or resource that is demanded; when the quantity demanded does not respond to a change in price; graphs as a vertical demand curve

perfect inelastic demand

Produce or resource demand in which quantity demanded can be any amount at a particular product or resource price; graphs as a horizontal demand curve

perfectly elastic demand

The construction of demand and supply curves assume that the primary variable influencing decisions to produce and purchase goods is:

price

The law of demand states that, other things equal,

price and quantity demanded are inversely related

The selling of a product to different buyers at different prices when the price differences are not justified by differences in cost

price discrimination

The ratio of percentage change in quantity demanded of a product or resource to the percentage change in its price; a measure of the responsiveness of buyers to a change in the price of a product or resource

price elasticity of demand

The ratio of the percentage change in quantity supply of a product or resource to the percentage change in its price; a measure of the responsiveness of producers to a change in the price of a product or resource

price elasticity of supply

A seller (or buyer) that is unable to affect the price at which the product or resource sells by changing by changing the amount it sells

price taker

The difference between the actual price a producer receives and the minimum acceptable price; the triangular area above the supply curve and below the market price

producer surplus

A strategy in which one firm's product is distinguished from competing products by mean of its designs, relative service, quality, location, or other attributes

product differentiation

The production of a good in the least costly way; occurs when production takes place at all outputs at which average total cost is a minimum and marginal product per dollars worth of input is the same for all inputs

productive efficiency

A market structure in which a very large number of firm sells a standardized product, into which entry is very easy, in which the individual seller has no control over the product price, and in which there is no nonprice competition; a market characterized by a very larger number of buyers and sellers

pure competition

A market structure in which one firm sells a unique product, into which entry if blocked, in which the single firm has considerable control over product price, and in which nonprice competition may or may not be found

pure monopoly

A market structure in which one firm sells a unique product, into which entry of blocked, in which the single firm has considerable control over product price, and in which nonprice competition ay or may not be found

pure monopoly

If the supply and demand curves for a product both decrease, the equilibrium

quantity most decline, but equilibrium price may rise, fall, or remain unchanged

Human behavior based on comparison of marginal cost and marginal benefit; behavior designed to maximize total utility

rational behavior

The actions of persons, firms, or unions to gain special benefits from the government at the taxpayers' or someone else's expense

rent- seeking behavior

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread, and potatoes are a consumer substitute for bread, we would expect the price of wheat to

rise, the supply of bread to decrease, and the demand for potatoes to increase

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the ideas of:

scarcity and opportunity cost

Refer to the diagram... A decrease in demand is depicted by a:

shift from D2 to D1

If the price of product L increase, the demand curve for close-substitute product J will:

shift to the right

A period of time in which producers are able to change the quantities of some but not all of the resources they employ; a period in which some resources are fixed and some are variable

short run

A supply curve that shows the quantity of product a firm in a purely competitive industry will offer to sell at various prices in a short run; the portion of the firm's short- run marginal cost curve that lies above its average- variable- cost curve

short- run supply curve

The same-time derivation of utility from one product by a large number of consumers

simultaneous consumption

Economics may best be defined as the

social science concerned with how individuals, institutions and society make optimal choices under conditions of scarcity

the price of a product that results in the most efficient allocation of an economy's resources and that is equal to the marginal cost of the product.

socially optimal price

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry

A change in quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the good's orn price

substitution effect

Graphically, the market demand curve is:

the horizontal sum of individual demand curves

What are the determinants of elasticity of demand?

the number of available substitutes, the size of a item's price relative to ones budget, whether the product is a luxury or a necessity, and the length of time to adjust

When the price of Nike soccer balls fell, Ronale purchased more Nike soccer balls and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decisions to buy more Nike soccer balls?

the substitution effect

In a competitive market economy, firms select the least- cost production techniques because

to do so will maximize the firm's profits

The sum of fixed cost and variable cost

total cost

The total amount of a particular good or service produces by a firm

total product

The total amount of dollars received by a firm from the sale of a product; equal to the total expenditures for the product produced; equal to the total expenditures for the product produced by the firm; equal to the quantity sold (demanded) multiplied by the price at which it is sold

total revenue

the total number of dollars received by a firm (or firms) from the sale of a product; equal to the total expenditures for the product produced by the firm (or firms); equal to the quantity sold (demanded) multiplied by the price at which it is sold.

total revenue

The total amount of satisfaction derived from the consumption of a single product or a combination of products

total utility

A test to determine the elasticity of demand. If total revenue changes in the opposite direction from price, demand is elastic. If price and total revenue change in the same direction demand is inelastic

total- revenue test

Demand or supply for which the elasticity coefficient is equal to 1; means that the percentage change in the quantity demanded or quantity supplied is equal to the percentage change in price

unit elasticity

In economics, the pressure, happiness, or satisfaction received from a product is called:

utility

The want- satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption od a good or service

utility

The principle that to obtain the greatest total utility, a consumer should allocate money income so that the last dollar spent on each good or service yields the same marginal utility.

utility- maximizing rule

A cost that increases when a firm increases its output and decreases when the firm produces its output

variable costs

The production of output, whatever its level, at a higher average cost than is necessary for producing that level of output

x- inefficiency

Anything that artificially prevents the entry of firms into an industry

barriers to entry

A recent study found that an increase in the federal tax on beer (which would increase the price of beer) would reduce the demand of marijuana. Based on this information, we can conclude

beer and marijuana are complementary goods

A person should consume more of something when the marginal:

benefits exceeds its marginal cost

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that:

bicycles are normal goods

An output in which a firm makes normal profit but not economic profit

break-even point

The limit That the size of a consumer's income imposes on the ability of that consumer ro obtain goods and services

budget constraint

Refer to the production possibilities curve... At the onset of the Second World War, the Soviet Union was already at full employment. Its economic adjustment for peacetime to wartime can best be described by the movement from point:

c to b

When a firm's average total cost of producing a product remains unchanged in the long runas the firm varies the size of its plant

constant returns to scale

An industry in which the entry and exit of firms have no effect on the prices firms in the industry must pay for resources and thus no effect on prodution cost

constant- cost industry

In marginal utility theory, the combination of good purchased that maximizes total utility by apply the utility maximizing rule

consumer equilibrium

The difference between the maximum price a customer is willing to pay for an additional unit of product and its market price; the triangular area below the demand curve and above the market price

consumer surplus

The increase in the price of a product will reduce the amount of it purchased because:

consumers will substitute other products for the one whose price has risen

The hypothesis that the creation of new products and production methods destroy the market power of existing monopolies

creative destruction

The ratio of the percentage change in quantity demanded of one good to the percentage change to the percentage change in the price of some other goods. A positive coefficient indicates the two products are substitute goods; a negative coefficient indicates they are complementary goods

cross elasticity of demand

An industry in which expansion through the entry of firms lowers the prices that firms in the industry must pay for resources and therefore decreases their production cost

decreasing- cost industry

In which of the following instances is the effect on equilibrium price (whether is rises, falls, or remains unchanged) dependent on the magnitude of the shifts in supply and demand?

demand rises and supply falls

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purpose more units of the good. This statement is most consistent with which explanation for the law for the law of demand?

diminishing marginal utility

When a firm's average total cost of producing a product increases in the long run as the firm increases the size of its plant

diseconomies of scale

A payment that must be made to obtain and retain the services of a resource; the income a firm must provide to a resource supplier to attract the resource away from an alternative use; equal to the quantity of other products that cannot be produced when resources are instead used to make a particular product

economic cost

The return flowing to those who provide the economy with economic resource of entrepreneurial ability; the total revenue of a firm less its economic cost; "pure- profit" and "above-normal profit"

economic profit

When a firm's average total cost of producing a product decreases in the long run as the firm increases the size of its pant

economies of scale

Product or resource demand whose price elasticity of demand is greater than 1, so that any given percentage change in price leads to a larger percentage change in quantity demanded. As a result, the quantity demanded is relatively sensitive to price

elastic demand

Plant resources that are underused when imperfectly competitive firms produce less output than that is associated with achieving minimum average total cost

excess capacity

The monetary payment made by a furm or an outsider to abtain a resource

explicit cost

For natural monopolies, subject to rate regulations, the price that would allow the regulated monopoly to earn a normal profit; a price equal to the average total cost

fair- return price

Answer the question on the basis of the given supply and demand data for wheat... If the price in this market was $4,

farmers would not be able to sell all their wheat

Any cost that does not change when the firm changes its output

fixed cost

The percentage of total industry sales accounted for by the top four firms in the industry

four-firm concentration ratio

Which of the following is not a typical characteristic of a market system?

government ownership of most property resources

Which of the following statement is correct? a. If supply increases and demand decreases, equilibrium will fall b. if supply declines and demand remains constant, equilibrium price will fall c. if demand increases and supply decreases, equilibrium price will fall d. if demand decreases and supply increases, equilibrium price will rise

if the supply increases and demand decreases, equilibrium will fall

The length of time in which the producers of a product are unable to change the quantity supplied in response to a change in price and in which there is a perfectly inelastic supply

immediate market period

all market structures except pure competition; includes monopoly, monopolistic, competition, and oligorgy

imperfect competition

The monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market; equal to what the resource could have earned in the best-paying alternative employment; includes a normal profit

implicit cost

A change in quantity demanded of a product that results from the change in real income caused by a change in the product's price

income effect

The ratio of the percentage in the quantity demanded of a good to a percentage change in consumer income; measures the responsiveness of consumers purchases to income changes

income elasticity of demand

An industry in which expansion through the entry of new firms raise the prices firms in the industry must pay for resources and therefore increases their production

increasing- cost industry

Product or resource demand for which the price elasticity of demand is less than 1, so that any given percentage change in price leads to a smaller percentage change in quantity demanded. As a result, quantity demanded is relatively insensitive to price

inelastic demand

The principle that as a consumer increases the consumption of a good or service, the marginal utility obtained from each additional unit of the good or service decreases

law of diminishing marginal utility

The principle that as successive increments of a variable resource and added to a fixed resource, the marginal product of the variable resource will eventually decrease

law of diminishing returns

A period of time long enough to enable producers of a product to change the quantity of all the resources they employ, so that all the resources and cost are variable and none are fixed

long run

A supply curve for which the price, but not real output, changes when the demand curves shift; a vertical supply curve that implies fully flexible prices

long- run supply curve

The extra cost of producing one more unit of output; equal to the change in total cost divided by a change in output; equal to the change in total product divided by the change in the quantity of a resource employed

marginal cost

The additional output produced when 1 additional unit of a resource in employed; equal to the change in total product dividend by the change in the quantity of a resource employed

marginal product

The change in total revenue that results from the sale of one additional unit of a resource; equal to the change in total revenue divided by the change in the quantity of the product sold

marginal revenue

The extra utility a consumer obtains from the consumption of 1 additional unit of a good or service; equal to the change in total utility divided by the change in total consumed

marginal utility

The characteristic of an industry that define the likely behavior and performance of its firms

market structure

The lowest level of output at which a firm can minimize long run average total cost

minimum efficient scale

Which of the following is a distinguishing feature of laissez- faire capitalism?

minimum government intervention

A market structure in which many firms sell a differentiated product, entry is relatively easy, each firm has some control over its product price, and there is considerable nonprice competition

monopolistic competition

A market structure in which many firms sell and differentiate product, entry is relatively easy, each firm has some control over its product price, and there is a considerable nonprice competition

monopolistic competition

Which of the following expressions best states the idea of opportunity cost?

"There is no such thing as free lunch"

The market system's answer to the fundamental question "who will get the goods and services?"

"Those most willing and able to pay for them"

Refer to the diagram... A shortage of 160 units would be encountered if price was:

$.50

Refer to the diagram... the Equilibrium price and quantity in this market will be

$1.00 and 200

Assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75,

A larger quantity of C will demand

A measure of the concentration in competitiveness of an industry; calculated as the sum of the squared percentage market shares of the individual firms in the industry

Herfindahl index

The principle that a firm will maximize its product by producing the output at which marginal revenue and marginal cost are equal, provided product price is equal to or greater than average variable cost

MR=MC rule

Which of the following is one of the Five Fundamental Questions?

What goods and services will be produces

Which of the following will not cause the demand for the demand for product K to change

a change in the price of product K

The economic perspective entails

a comparison of marginal benefits and marginal costs in decision making

If producers must obtain higher prices than before to produce a given level of output, then the following has occurred:

a decrease in supply

The total revenue of a firm ledd the explicit cost; the profit that appear on accounting statements and that is reported to the government for tax purposes

accounting profit

Two major virtues of the market system are that it

allocates resources efficiently and allows economic freedom

The apportionment of resources among firms and industries to obtain the production of the products most wanted by consumers; the output of each product at which its marginal cost and price or marginal benefit are equal and producer surplus is maximized

allocative efficiency

Assuming competitive markets with typical supply and demand curves, which of the following is correct?

an increase in demand with no change in supply will result in an increase in sales

Which of the following statements is correct? a. an increase in income will reduce the demand for a normal good b. a decline in the price of X will increase the demand for substitute product Y c. an increase in the price of C will decrease the demand for complementary product D d. a decrease in income will decrease for an inferior good

an increase in the price C will decrease the demand for complementary product

Economic profits and losses:

are essential to the reallocation of resources from less desired goods

The firm's total fixed cost divided by total output

average fixed cost

The total output produced per unit of a resource employes; the tota; product divided by the quantity that employed resource

average product

Total revenue from sale of a product of a product divided by the quantity of the product sold; equal to the price at which the product is sold when all units of the product are sold at the same price

average revenue

A firm's total cost divided by the total output

average total cost

A firm's total variable cost divided by the total output

average variable costs