Homework questions
Profit calculation
(P-ATC) x quantity (units)
production function
the relationship between the quantity of inputs used and the quantity of outputs produced.
econmics
the study of the production, distribution, and consumption of goods and services
Which of the following is not an item studied under microeconomics?
the unemplyment rate
calculate econimic cost
total revenues- implicit costs-explicit costs.
Social surplus is the ____________. Social surplus is maximized when the ___________.
total value from trade in a market highest-value buyers are making a purchase and the lowest-cost sellers are selling. B. buyers and sellers as distinct groups are doing as well as they possibly can. C. competitive market is in equilibrium.
Which of the following statements would not be considered a positive statement? The statement that the U.S. government should increase carbon taxes to reduce carbon emissions that cause global warming is ___________.
tuition at 4 year universities is too high and should be lowered a normative statement, since it describes what ought to be done and is therefore not possible to confirm with data.
Martha runs a business that makes designer jeans. Each of the seamstresses she employs uses one of the sewing machines on the factory floor. In the short run, the seamstresses are a _______ factor of production and the sewing machines are a _____ factor of production. The output of each seamstress is considered the _____ product.
variable fixed fixed
The price at which a seller is indifferent between making a sale and not doing so is known as his ____________.
willingness-to-sell value. reservation price.
The market for electric drills in a certain country is characterized by a large number of buyers. The market for drills is in equilibrium. Does this also mean that it is Pareto efficient? Explain your answer. Assume that some of the buyers in this market are now willing to pay more for a drill than they did earlier. Does this mean that the market for drills is Pareto efficient? Explain your answer. Compared to the market for electric drills, the market for vintage buttons has fewer buyers and sellers. Social surplus is likely to be higher in the market for drills than in the vintage button market. Is it then correct to assume that the outcome in the drills market is Pareto efficient while in the vintage button market it is not? Explain.
Yes, with the market in equilibrium, no one participant can be made better off without someone else being harmed Yes, as long as the market equilibrium still holds, the outcome is still Pareto efficient. No, market size has no bearing on the attainment of Pareto efficiency.
When the ATC curve is decreasing, we know that the MC curve is _______ , and when the ATC curve is increasing, we know that MC is _____ .
below the ATC curve above the ATC curve
In a perfectly competitive market, a seller _____ choose to raise the price of its good since all sellers in the market produce ________ , so raising the price would result in ________ .
cannot identical goods losing all its customers
In a perfectly competitive market, sellers _________ and buyers _________.
cannot charge more than the market price; cannot pay less than the market price.
The long run supply curve in a perfectly competitive market is The longdashrun supply curve in a perfectly competitive market states that _____.
horizontal . the longdashrun quantity can vary while the equilibrium price returns to the price at the minimum of the average total cost
Economists study all ___ ; therefore, the unifying feature of economics is a focus on ___ .
human behavior choice
Every candle maker in Town A must have a license. The cost of a license is the same regardless of the number of candles a business produces. Assume that the candle market is perfectly competitive. i. Does this license shift a candle maker's short-run average fixed cost curve? ii. Does this license shift a candle maker's short-run average variable cost curve? iii. Does this license shift a candle maker's short-run profit-maximizing choice of the number of candles to produce? With the license, the short-run average fixed cost curve shifts up and the short-run average variable cost curve remains unchanged .
look at phone pic
Free riding occurs when people's private benefits are out of sync with the public interest .
neighborhood watch, public libraries, national security
Equilibrium describes a situation where
no one would benefit from changing his or her behavior
In the long run, which of the following factors of production is fixed for a firm? For a firm, constant returns to scale occur when the ____for the firm does not change ____ The long-run average total cost curve is __________ and is found by using the ___________.
none ATC as the quantity produced increases. U-shaped; minimum point across all possible ATC curves for a given quantity.
Optimization describes a situation where
people weigh costs and benefits when making a decision
A perfectly competitive firm will choose to shut down when the ____intersects the marginal cost curve below the ___ Therefore, the short-run supply curve for a perfectly competitive firm is represented by __________. In the long run, the supply curve for a perfectly competitive firm is represented by __________. .
price (marginal revenue) average variable cost curve the portion of the marginal cost curve above average variable cost. the portion of the marginal cost curve above average total cost.
Producer surplus is the difference between the and the ____ .
price consumers pay supply curve .
All firms in a perfectly competitive market are said to be
price takers
The goal of a business in a perfectly competitive market is to maximize:
profits
n a perfectly competitive market, all of the following statements are true except:
A. Marginal revenue is equal to price times quantity.
Is producer surplus always equal to profit?
A. Producer surplus equals profit when marginal cost and average total cost can be represented with the same curve.
Which of the following is true about how a firm in a competitive market decides what level of output to produce in order to maximize its profit?
Produce at point where price equals marginal cost
A decreasing production pattern where successive increases in inputs lead to a decrease in marginal product is called the Law of:
DIminishing returns
What is the difference between accounting profit and economic profit? Is it possible for accounting profit to be positive and economic profit to be negative Under which of the following examples is it likely that the accounting profit is positive and the economic profit is negative?
Economic profit subtracts both explicit and implicit costs from total revenue, while accounting profit only subtracts explicit costs. Yes, this could occur if explicit costs were modest and implicit costs were high. Using a diamind mining place as a tourist attraction instead of mining it
Which of the following is not one of the three conditions that characterizes a perfectly competitive market?
Firms have pricing power and can set their prices freely.
Which of the following describes the long-run competitive market if demand were to increase?
Market price increases, economic profits increase, short-run market supply increases, long-run supply settles at minimum ATC
During the process of optimization economists believe that people are considering _________. The goal of optimization for an individual is to maximize ___
The feasibility of a choice, given the information available at the time. Overall well being
Are all efficient outcomes also equitable? Explain.
There is really no definitive answer to this question since issues surrounding efficiency and equity are the domain of normative economics, where subjective value judgments are made.
Would a profit-maximizing firm continue to operate if the price in the market fell below its average cost of production in the short run?
Yes, but only if price stayed above average variable cost
MArket
a group of economic agents who are trading a good or service, and the rules and arrangements for trading
Economic Agent
an individual or a group that makes choices
a. Law of diminishing returns b.Physical Capital c.Short run d.Production e.Marginal product f. Specialization g. Long run
a. Increases in inputs eventually lead to less additional output. b.Machines and equipment that can be used for production. c.Period of time when at least one of a firm's inputs is fixed. d.The process of transforming inputs into output. e.The change in total production associated with using one more of a unit f.The result of workers developing a certain skill set in order to increase total productivity g.Period of time when all of a firm's inputs can be varied.
in a perfectly competitive market,
all buyers and sellers are price takers
conomists mostly use optimization in differences, as opposed to optimization in levels, because ____________.
comparing different features of alternatives is simple.
What is an economic agent what is a scarce resource
consumers, sports teams, students, senators oil, gold, time, mechanical pencils
A firm is producing goods in a market where the market price is less than the firm's average total cost but greater than its average variable cost. At this point the firm should:
continue to operate at a loss
A difficult problem for central planners is bringing together those economic agents whose interests coincide in order to trade. This is known as the ____________ problem. Once planners have successfully brought economic agents together, a second problem of aligning the interests of the economic agents must be solved. This is known as the ___________ problem. n a market economy, the alignment of interests is accomplished through the use of
coordination incentive prices
A deadweight loss is the ___ in social surplus that results from a market ___
decrease distortion.
Economics is all about making choices. The reason we have to choose one thing over another is:
economic resources are scarce
Empiricism describes a situation where
economists use data to analyze what is happening in the world
A budget constraint represents _________.
the bundles of goods or activities that a consumer can choose given her limited budget.
Optimization is the process that describes __________ Optimization in levels examines ___________, while optimization in differences analyzes ____________.
the choices people make Total net benefits of alternatives, the change in benefits
In a competitive market, if economic profits exist, then:
the market supply curve will shift rightward and the price will decrease.
