MicroEconomics
What is an example of a private non-profit?
A private school not keeping a crazy teacher around
For many types of production ________ can produce more efficiently than households.
Firms
What is the absence of residual claimants in nonprofit firms likely to lead to?
1) More Shirking 2) Top administrators spending excess funds to benefit themselves
List two of the determinants of demand.
1- number of buyers 2-preferences
Who might try to limit shirking behavior?
A Manager who is a residual client
Cost of Production (Decrease)
A decrease in the cost of production will cause an increase in supply.
Buisness Firms
All types of business firms are assumed to pursue profit-maximization as their chief goal.
Cost of Production (increase)
An increase in the cost of production will cause a decrease in supply (the supply curve shifts left)
What is the definition of shirking?
Avoiding the performance of an obligation
What is an example of a nonprofit firm?
Church
The price and quantity supplied of a good one are _______ related.
DIRECTLY RELATED ** (Test Q)
What happens to demand if income goes down?
Demand goes down
What is the formula for Cross Elasticity of Demand?
Ec= Percentage change in quantity of demand good Y / Percentage change in $ Good X
What is the formula for Price elasticity of demand?
Ed = percentage change in quantity demanded / percentage change in price
A decrease in the number of buyers will cause equilibrium price to increase. True or False?
False
Surplus
If a market price is above the equilibrium price, the quantity supplied will exceed the quantity demanded
Shortage
If the market price is below the equilibrium price, the quantity demanded will exceed the quantity supplied.
What are the 5 determinants of demand?
Income, Preferences, Prices of related goods, Number of buyers, and Expectations of future price.
If any change happens in the 5 determinants of demand will it change the quantity demand?
Yes
What are the three types of Business Firms?
Proprietorship, Partnership, and corporations
Change in Demand
Refers to a shift in demand curve, and it is caused by change in the determinants of demand
What is an example of the principle-agent problem?
Shirking
A price below equilibrium results in __________
Shortage
___________ is the willingness and ability of SELLERS to sell different quantities of a good at different prices.
Supply
A price above equilibrium results in a ___________
Surplus
_________ production may be more productive than individual production.
Team
Extensive use of Capital
Team production may allow for the use of large amounts of highly specialized and highly productive capital.
Privat Non-Profit Firm is finance by what?
The voluntary actions of private individuals (costumers or contributors)
What is the biggest factor affecting price elasticity of supply?
Time
Firms can reduce _______
Transaction costs
A price floor will tend to create a surplus. true or False?
True
True or False. A proprietorship is easy to form and dissolve.
True
True or False. Partnerships can specialize more than proprietorships.
True. Parters have unlimited liability.
Why do we care about Price Elasticity?
We care because it helps us predict burden of a new tax, or change in price on revenue.
Equilibrium
Where two lines intersect on the graph
What is a proprietorship?
a firm owned and operated by ONE individual.
What is a partnership?
a firm owned and operated by TWO or more co-owners.
Free market
a market in which price is free to adjust
Free Market
a market in which price is free to adjust up or down in response to demand and supply.
Price Ceiling
a maximum legal price
Elasticity
a measure of the responsiveness of one variable to changes in another variable
Utility
a measure of the satisfaction received from the consumption of a good.
Price Floor
a minimum legal price
What is a corporation?
an organization owned by stockholders that is considered a separate legal person, separate from its owners.
What happens to demand if income goes up?
demand increases
Nonprofit Firms
have no residual claimants. They are not seeking to maximize profits
Specialization of Labor
in individual production, the individual must attempt to master every step in the production process
Public non-profit firms are financed by what?
involuntary contributions (Taxes)
Change in Quantity Demanded
refers to a movement along the demand curve, and it is caused by a change in price
Marginal Utility
the additional Utility received from consuming an additional unit of a good.
Law of diminishing marginal Utility
the marginal utility from consuming additional units of a good eventually declines
Law of Demand
the price and the quantity demanded of a good are inversely related
Law of Supply
the price and the quantity supplied of a good are directly related.
Equilibrium Price
the price where quantity demanded equals quantity supplied.
Supply
the willingness and ability of sellers to sell different quantities of a good at different prices.
Demand
the willingness and ability to buy different quantities of a good at different prices
What is a disadvantage of a proprietorship?
they have unlimited liability (personal assets are subject to business debts)
