econ final review

assume that the demand curve for romance novels is downward sloping. If the price of a book increases from $4.95 to $5.95,

the quantity demanded for romance novels will decrease

opportunity cost is best defined as

the value of the best foregone alternative

the price of season tickets to a performing arts theater decreases by 3%. as a result the quantity demanded increases by 6%. The price elasticity of demand for season tickets is

2

suppose you are given the following data on demand for a product. The price elasticity of demand when price decreases from $9 to $7 is price -- Qd $10 -- 30 $9 -- 40 $8 -- 50 $7 -- 60 $6 -- 70

((60-40)/((60+40)/2))/((7-9)/((7+9)/2)) (20/50)/(-2/8) =1.60

Perfectly competitive markets explained on the basis of supply and demand

assume many buyers and many sellers of a standardized product

Consumer surplus arises in a market because

some consumers are willing to pay more than the equilibrium price but do not need to do so

an increase in demand means that

the demand curve has shifted to the right

If country a has a comparative advantage in the production of good x over country b, then

the domestic opportunity cost of producing x in country a is lower than in country b

The law of diminishing returns indicates that

As extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point

Other things equal, if the fixed costs of a firm were to increase by $100,000 per year, what would happen?

Average fixed costs and average total costs would rise

are the goods that businesses offer for "free" to consumers also free to the society?

No, because scarce resources were used to produce the free goods

when an economy is at full employment and full production more of any one product

can be produced only if there is less production of some other products

there will be a surplus of a product when

consumers want to buy less than produces offer for sale

if demand for farm crops is inelastic, a good harvest will cause farm revenue to

decrease because of a percentage fall in price greater than the percentage increase in quantity sold

As a consequence of the condition of scarcity

individuals and communities have to make choices from among alternatives

if the price of a product rises, and as a result businesses increase their production then

quantity supplied has increased

the law of supply

reflects the amounts that producers want to offer at each price in a series of prices

a shift in the demand for gasoline would result if

significantly more people decided to use mass transit than travel by automobile

# of workers --- units of output 0 --- 0 1 --- 40 2 --- 90 3 --- 126 4 --- 150 5 --- 165 6 --- 180 According to the data above, diminishing returns become evident with the addition of the

third worker