ECON TEST 1

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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


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