Econ 221- microeconomics final exam review

producer that requires a smaller quantity inputs to produce a good is said to have an

absolute advantage

under monopolistic competition, firms will continue entering market until

economic profit is zero

Long run average cost curve

L shape

explicit costs

monetary costs

The value of money or income in terms of the quantity of goods the money can buy is called

real value

Diminishing marginal returns implies that firms

require more and more workers to produce each additional unit of output.

payoff matrix

shows payoff or consequences for each player

If price of the good or service is held constant and something else changes -- like technology --

then it is a change in demand or supply and the entire curve shifts.

if the price of the good or service changes and everything else is held constant,

then it is a change in quantity demanded or supplied and there is movement along the curve.

Accounting profit is larger than economic profit- T/F

true

The price elasticity of demand tends to be smaller when consumers have less time to adjust to price changes

true

product differentiation

process used by firms to distinguish their products from others

the difference between the price a producer receives for a product and the minimum amount a producer is willing to accept for that product is

producer surplus

When a business advertises that its product has unique features that make it superior to other similar​ products, it is engaging​ in:

product differentiation

Economic models are:

simplifications of reality that focus only on key relationships and ignore less relevant details

In the short run

some of the factors of production are fixed but not all

HHI

square the market share of each and add together

game theory

study of decision making in strategic

If real salaries increase but nominal salaries do not

this means that prices have fallen

Normative statements are not essential components of an economic model

true

Which of the following products has the most elastic​ demand? A.Ben and​ Jerry's Chunky Monkey ice cream in the pint container .B. all Ben and​ Jerry's ice cream C. all premium ice cream D.all ice cream

A

ATC

AVC+AFC

AFC

FC/Q

short run average total cost is what shape

U shape

AVC

VC/Q

The short run is a period of time where __________ while the long run is a period of time where __________.

at least one input is fixed, all inputs are variable in the long run, you can change all variables

A firm experiences diminishing marginal returns because

at least one of the variables is fixed

public good

available for everyone, regardless of who pays for it

The marginal cost curve intersects the shortminus−run average total cost curve​ where

average total costs are minimized in the short run

Which of the following is a longminus−run ​adjustment? A. A farmer buys twice her usual amount of herbicide. B. Two firms exit the asbestos removal industry. .C. A firm lays off two workers. D.A manufacturer increases its purchase of raw materials.

b

__________ equals the firm's revenues minus all implicit and explicit costs.

economic profit

More elastic if takes up a bigger/smaller portion of consumers budget

bigger

Who are the price takers in a perfectly competitive​ market?

both buyers and sellers

Production possibilities curve

can only produce more of one product if it produces less of another

The "all things equal" assumption is also known as

ceteris paribus

marginal costs (MC)

change in TC/quantity

the ability of one person or nation to produce a good at a lower absolute cost than another is called a(n)

comparative advantage

private good

consumed by one person or household

substitution effect

decreases amount of leisure time

Perfectly elastic demand

demand is infinite

The downward sloping part of the long run average total cost curve is where the firm is achieving:

diseconomies of scale

The demand curve in a monopoly is

downward sloping

demand curve in a monopoly is

downward sloping

If the price elasticity of demand is very elastic, which of the following could be a possible value of the elasticity?

elastic is anything greater than 1, ex: 2

Unit elastic

equal to 1- so % change in quantity equals % change in price

Perfectly inelastic demand

equals zero

normative statements

expresses a value judgment about whether a situation is desirable or undesirable. It looks at the world as it "should" be.

marginal revenue product

extra revenue generated by one additional unit of of labor

The price elasticity of demand tends to be greater when a product accounts for a smaller portion of the consumer's budget

false

In the short-run, the cost that is independent of the amount of output produced is called __________.

fixed cost bc it does NOT change with the level of output

total costs

fixed costs + variable costs

industry is highly concentrated

higher than 1800

marginal revenue product measures

how much labor to hire at a specific price

Economics is concerned with what?

how people respond to incentives

Opportunity Cost:

incorporates notion of scarcity, no matter what we do- there is always tradeoffs

As the number of substitutes for a particular product increases, the price elasticity of demand for the produce

increases

income effect

increases amount of leisure time

If a product is a necessity and has no substitutes at all, demand for the product is most likely to be

inelastic

The firmminus−specific demand curve in a perfectly competitive market The demand curve in a monopoly is downward sloping.

is horizontal

the firm−specific demand curve in a perfectly competitive market

is horizontal

If an economy is represented by a point along its production possibilities curve

it can produce more of one product only if it produces less of another product.

A good is said to be "normal" if

it has a positive income elasticity of demand. "increase in income increases demand

oligarchy

just a few firms, working off of incentives

If HHI shows industry is not concentrated

less than 1000

diseconomies of scale

long run average cost of production increases as output increases

economies of scale

long term cost of production decreases as the output increases

__________ is the additional cost to the firm of producing one more unit of a good or service.

marginal cost

to stay in market long curve ATC must meet

marginal cost

do we include personal expenses in opportunity costs?

no

face value amount of money

nominal value

in the long run

none of the factors of production are fixed

implicit costs

opportunity costs that come along

Diminishing returns

output will increase at a decreasing rate, one of the variables if FIXED

In a market for a homogeneous​ good, if sellers and buyers can enter or exit a market freely​ , the market is most​ likely:

perfectly competitive market

free rider

person who gets the benefit from a good but does not pay for it

Midpoint formula

(Q of new-initial/new+initial/2)/ (P of new-initial/new+initial/2)

Possible value of elasticity if inelastic

.5, must be less than 1

MRP=

marginal product x price of output

Factors of Production

natural, labor, physical capital, human capital , entrepreneurship