ECON TEST 1
price elasticity of demand
compare percent change in quantity over percent change in price
long run
diseconomy/ economy
elastic
elasticity is greater than 1
inelastic
elasticity is less than 1
a ceiling price in a competitive market will result in persistent surpluses of a product
false
a price floor in a competitive market will result in persistent shortages in a product
false
although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not.
false
an economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy.
false
an increase in quantity supplied might be causes by an increase in production costs
false
certain inherently desirable products such as education and health care should be produced so long as resources are available
false
in linear demand curve has a constant elasticity over the full range curve
false
normative statements are expressions of facts
false
surpluses drive market prices up, shortages drive them down
false
the law of diminishing returns explains diseconomies of scale
false
the law of diminishing returns explains why the long run average total cast curve is U shaped
false
the short run is a period of time during which all costs are fixed costs
false
the smaller the number of good substitutes for a product, the greater will be there price elasticity of a demand for it.
false
toothpaste and toothbrushes are substitute goods
false
inferior good
good that when income goes up, you buy less of it
normal good
good that you'll buy more of it when you're income goes up
law of demand
individual group will buy more of a good the lower its price, other things effecting demand remaining the same
factors of production
land, labor, capital, managers
short run
law of diminishing returns
average marginal
marginal plus average up or down
substitution effect
more of a good who's price has fallen
change in supply
movements of entire supply curve
law of diminishing returns
one fixed factor of production
income effect
price of good goes down, income states the same.. you're better off and wealthier
goods
something that you give up in order to get something after
bad
something you give to get ride of something else
equilibrium
state of equal / rest and when quantity demand equals quantity supply
what is economics
study of cost and choice
a government subsidy per unit of output increases supply
true
a government tax per unit of output reduces supply
true
an increase in demand accompanied by an increase in supply will increase equilibrium quantity but the effect on equilibrium price will be indertermined
true
choices entail marginal costs bc resources are scarce
true
costumers buy more of normal goods as their incomes rise
true
if demand increases and supply simultaneously decreases, equilibrium price will rise
true
if market demand increases and market supply decreases, the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes
true
if the marginal cost curve lie below the average variable cost curve, the average variable cost curve must be falling
true
if the price and total revenue are directly related, demand is inelastic
true
in a competitive market every consumer willing to pay the market price can buy a product and every producer willing to sell the producer at that price
true
in a competitive market, there are forces moving the market towards equilibrium
true
products and services are scarce bc resources are scarce
true
returns to scale determine the shape of the long run average cost curve
true
the production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment.
true
the real opportunity cost of producing X is the amounts of products Y, Z and so forth that might have been produced if resources had not been used to product X
true
variable costs are costs that vary directly with output
true
positive economics
what is or what will be
rationing
what markets do, match available supply with existing demand
normative economics
what ought to be
scarcity
whats fundamental to economics