ECON 201 FINAL
Economic profit is less than accounting profit because
Economic costs are greater than accounting costs as economic costs include opportunity cost.
T/F Marginal Costs are sloped upwards because the Marginal Productivity of Labor is increasing.
F
A substitute in production is a good that is _____ another good, and a complement in production is a good that is _____ another good.
produced in place of; produced together with
snapshot of possible output in an economy at a particular time, shows opportunity cost
production possibility curve
Assume Dell Computer Company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, price below the firm's marginal cost. It follows that producing one more computer will cause this firm's
profits to decrease
A supply curve shows the relationship between the ______ and _____ when all other influences on selling plans remain the same.
quantity supplied of a good; its price
unit elastic point maximizes ________
revenue
If a firm is able to change the amount of capital it employs, but is unable to change the amount of labor due to union contracts the firm is making ________________ decisions
short run
A supply curve that illustrates the law of supply _______.
shows that the quantity supplied decreases as the price falls
The greater the elasticity of demand, the _______ the tax revenue and the _______ is the deadweight loss.
smaller ; greater
Eab > 0
substitutes
when price B increases and quantity of A increases, A and B are
substitutes
Diet coke and regular coke are _______
substitutes for consumers and substitutes in production for producers
Leather purses and leather shoes are _______.
substitutes in production
French fries and baked potatoes are _______.
substitutes or substitutes in production
SUVs and pickup trucks are _______.
substitutes or substitutes in production
the usually positive relationship between price and the number of units brought to the market
supply
recipe by which we bring together resources to produce goods
technology
A supply curve _______.
tells us the lowest price at which someone is willing to sell
What is marginal revenue?
the additional revenue from producing an additional unit of a good
For a perfectly competitive firm,
P = MC at the profit-maximizing quantity only
If we consider ordinal utility, if Person A has utility of 3 for good X and Person B has utility 12 for good X we can say
Person B likes X more than person A
Perfectly competitive firms are price takers
True; this means they must accept the market price and this sets their demand equal to their marginal revenue
T/F/UNCERTAIN A firm earning positive accounting profit will choose to operate
Uncertain. To operate a firm must cover all its accounting cost plus the the opportunity costs.
stuff that makes stuff, human created inputs to production
capital
A change in the number of units we want with no change in price
change in demand
a change in the number of units we want given a change in price of the good
change in quantity demanded
the effect of a change in price on the number of units brought to market
change in quantity supplied
change in number of units brought to the market with no change in price
change in supply
what causes a change in demand
change in the determinants of demand
1 person can produce a good at a lower opportunity cost than another
comparative advantage
Bottled water and health club memberships are _______.
complements
If as the price of nylon decreases, the quantity of lawn fertilizer that firms plan to sell decreases, then nylon and lawn fertilizer are _______.
complements in production
Low-fat milk and cream are _______.
complements in production for a dairy and substitutes for consumers
Eab < 0
compliments
When price of B increases and quantity of A decreases, A and B are
compliments
The amount saved by people who buy the good at a price below their value for the god is called
consumer surplus
if the wage rate of dairy workers rises, the supply of low-fat milk _______.
decreases because the cost of producing low-fat milk increases
If marginal cost begins below average cost and is everywhere increasing, what is true about the shape of the average cost cover?
decreases, intersects marginal cost curve, then increases
the ususally negative relationship between price and quantity
demand
If the price of low-fat milk rises, the supply of low-fat milk _______.
does not change because the relationship between price and quantity supplied does not change
If a drought is forecast and dairies raise their expected price of low-fat milk next year, the supply of low-fat milk ______ .
does not change today because low-fat milk cannot be stored and sold later
If a price cut _______ total revenue, demand is ______.
does not change; unite elastic
the study of the allocation of scarce resources across unlimited wants
economics
| Ep | > 1
elastic
It is possible to increase social welfare from that achieved at the equilibrium price and quantity
false
The firm always want to operate where price elasticity is equal to 1 because this is where they are always able to maximize profits.
false unless costs are non-zero
In 2016, the price of corn fell and some corn farmers will switch from growing corn in 2017 to growing soybeans. Does this fact illustrate the law of demand or the law of supply? As the price of corn fell in 2016, _________.
farmers planned to decrease the quantity of corn supplied in 2017. This fact illustrates the law of supply.
If elasticity of supply is elastic we know that a 1% change in price leads to a___________ change in quantity supplied
greater than 1%
The greater the elasticity of demand, the ______ is the amount of the tax paid by sellers and the ______ is the decrease in the equilibrium quantity.
greater; greater
A minimum wage set below the equilibrium wage _______
has no effect on the equilibrium wage rate or the quantity of labor employed
Suppose a professor gives up her teaching job to devote her time to writing textbooks. If salaries of professors' fall,
her economic profit from textbooks will rise
The law of supply states that other things remaining the same, the _______ the price of a good, the _______.
higher; greater is the quantity supplied
If the price of cream rises, the supply of low-fat milk _______.
increases because cream and low-fat milk are complements in production
If a new technology lowers the cost of producing ice cream, the supply of low-fat milk _______.
increases because the supply of ice cream increases and low-fat milk is complement in production of cream, a factor of production of ice cream
A rise in the price of a smartphone ______ the quantity supplied and ______ supply.
increases; does not change
| Ep | < 1
inelastic
huma resources / human capital
labor
natural resources, fixed amount
land
3 types of resources
land, labor, capital
If the at a price of $1 demand for a good is 10 unites, and the elasticity of demand is elastic, we know the slope is:
less than -10
decision making between nations and world
macroeconomics
small view of economic activity
microeconomics
bigger part of budget
more elastic
more substitutes
more elastic
more time
more elastic
fewer substitutes
more inelastic
If a firm produces a good using 10 workers on contract for 5 years and two machines on contract for 3 years, the long-run is defined as
more than 10 years
If the price of a magazine falls, a ______ the supply curve occurs. If any factor that influences selling plans other than the price changes, then a ______ the supply curve occurs.
movement down along ; shift of
The demand curve for a good that has very few substitutes in consumption is likely to be
nearly vertical
what kind of slope does elasticity of demand have
negative
If at q units of output, AVC = $200, AFC = $10 and Total Cost = $21,000, what must the level of output for the firm be? 1 5 10 15 none of these
none
What are Marginal costs The additional quantity produced given an additional dollar in variable costs The additional quantity produced given an additional dollar in fixed costs The additional quantity produced given an additional dollar of opportunity cost None of these
none
When a worker produces more units of output than the work hired before her we have Decreasing marginal productivity of labor Positive labor productivity Increasing returns to capital Decreasing Marginal Productivity of capital None of these.
none
Which is the best example of a homogenous good. Automobiles Potato chips automobiles None of these are good examples All of these are good examples
none
A government wants to increase ridership on public transpiration such as buses by 10% The elasticity of demand is -1.5. The government must _______ the bus fare by _______ .a) lower; 20.0% b) raise; 20% c) raise; 10% d) lower;10% e) None of these
none of these
Assume that the equilibrium price of Corn is $4 per bushel. Government puts a price floor on at $4 per bushel. We should expect a) producers' surplus b) A change in price to all customers and increase output. c) Create a surplus of supply d) All of these e) None of these
none of these
If we are looking at the elasticity of automobiles the number is measured in units of a) Cars per dollar b) Dollars per car c) The percentage change in Quantity demanded of cars per dollar d) The percentage change in price given a one unit increase in the demand for cars e) None of these.
none of these
a price ceiling can be expected to : a.) Increase producers' surplus b) Lower the price to all customers and increase output. c) Create a surplus of supply d) All of these e) None of these
none of these
what the world SHOULD look like
normative view
The quantity supplied of a good or service is ______.
not necessarily the same as the quantity actually sold
the thing or activity we give up to get what we want or do what we want to do
opportunity cost
far left of linear demand curve =
perfectly elastic
On a linear demand curve, if the price of the good is zero we know the elasticity of demand is
perfectly inelastic
far right of demand curve =
perfectly inelastic
The sign of price elasticity of supply is
positive
slope of elasticity of supply is always
positive
What do we assume is true about adding labor to fixed capital in the short-run?
positively productivemore workers = more products
describes the way the word is today, our perspective
positivist
We observe a rise in the price of running shoes and a decrease in the quantity of running shoes that producers sell. The most likely explanation is that ______.
the law of supply applies to running shoes, but some other influence on selling plans decreased the supply of running shoes.
When a minimum wage is set above the equilibrium wage rate, _______.
unemployment increases
|Ep| = 1
unit elastic
In a world without prices and income we will consume until: We are full Our marginal utility is 0 Marginal utility is negative a) and b) none of the above
we are full and our marginal utility is 0
elastic revenue increases when
we lower the price
revenue decreases for inelastic demand when
we lower the price
When we speak of maximizing Social Welfare we mean:
we want to make total surplus as large as possible
3 determinants of supple
1. change in cost of inputs 2. change in technology 3. number of sellers
What are the assumptions underlying perfectly competitive markets?
1. many producers 2. many buyers 3. product homogeneity 4. perfect information 5. perfect factor mobility
5 determinants of demand
1. tastes and preferences 2. income 3. expectations 4. number of buyers 5. price of related goods
If Total cost for 10 units is $120 and fixed costs are $10, what is Average Variable Cost is
11
How do we determine average total cost?
AFC + AVCper unit fixed cost + per unit variable cost
In a graph of average costs (AVC and ATC), why is it not necessary to also include a graph of AFC (average fixed costs)?
AFC is the distance between the ATC and AVC curves
The assumption of perfect information means
All buyers know the prices of all sellers
Aqua Springs makes the following four statements about bottled spring water. Which statement best describes the firm's quantity supplied in the bottled water market?
At a price of $1 gallon, we plan to sell 2,000 gallons per day
I get more enjoyment out of the first piece of candy I eat than the last piece I eat because of:
Diminishing marginal utility
Which of the following statements describes a change in the quantity supplied and which describes a change in supply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.
I and IV are changes in supply and II and III are changes in the quantity supplied.
Which of the following statements by Aqua Springs demonstrates that the firm's selling plans obey the law of supply?
If the price of bottled water falls and all the other influences on our selling plans remain the same, we will cut back on production and lay off some workers
Why would a corn farmer grow soybeans?
Soybeans and corn can be grown with the same resources, so they are substitutes in production.
If demand for this good was inelastic relative to supply we would expect
The burden of the tax to fall more on consumers
Producer surplus can be described as
The difference between the price that the producer receives and their costs of production
The elasticity of supply can be defined as:
The percentage change in quantity supplied given a percentage change in the price of the good
Considering the graph for long run costs we do not have to include a graph for fixed costs as
There are no fixed costs in the long run
Marginal utility is the
additional satisfaction obtained from consuming one more unit of a good
when 1 person can produce a good using less time or resources than another
absolute advantage
A firm in a perfectly competitive market
accept the market price for its product
The reason that the price elasticity of demand for fresh green beans is greater than 1 is likely that: a.) There are many other vegetables other than green beans. b) There are many other forms of green beans such as frozen or canned. c) Green beans are a small part of most people's budgets d) All of the above e) None of these
all of the above
Changes in technology will: a. Change quantity demanded. b. Shift the PPF. c. Change supply. d. All of these e. None of these
all of these
If income increases and the equilibrium price of the good decreases the good is called:
an inferior good
3 determinants of elasticity
availability of substitutes time percentage of budget
A minimum wage set above the equilibrium wage rate _______.
creates unemployment
If marginal cost less than average total cost, average total cost will
decrease
The market for all goods start in equilibrium, Good A has an income elasticity of -0.75.What do we expect to happen to the equilibrium quantity for good A if income rises for workers?
decrease
Demand is elastic if
the percentage change in price is less than the percentage change in quantity demanded
A shortage of goods in the market occurs when:
the price in the market is below equilibrium and there is less supply than demand
Supply is _____, when all other influences on buying plans remain the same.
the relationship between the quantity supplied of a good and the price of the good
how do we determine value
tradeoffs/ what are we willing to give up to get something we want
A price floor will always reduce consumer surplus
true