Econ Chapter 4, 11, & 12
What is price discrimination?
charging different prices to different consumers
What is not a determinant of the market supply for commodity j?
consumer tastes
When the price of a good is below its equilibrium value...
consumers will bid the price up
If fixed costs increase, in the short-run, a competitive firm will...
continue to produce the same level of output
As the price of flour (an input into the cookie production process) increases, firms that produce cookies will...
decrease the supply of cookies
One reason for the _____ slope of the demand curve is that, as prices fall...
downward; more people find that the price is less than their reservation price
What is an individual consumer's surplus?
economic measure of consumer benefit
What is true regarding the relationship between accounting profit and economic profit?
economic profit includes account profit as well as the opportunity cost of the entrepreneur's time and talent
A market in disequilibrium would feature...
excess supply or excess demand
If market supply increases, equilibrium price will...
fall, causing a movement along the demand curve
When workers are paid higher wages, production costs...
rise, supply shifts leftward, and product prices rise
A __________ the demand curve means that the quantities will be different at all prices. A change in the price of a good causes a _________ the demand curve. A shift in the supply curve may lead to a _________ the demand curve.
shift in; movement along; movement along
What is disequilbrium?
temporary situation which will inherently change
What is a marginal buyer?
the buyer who buys the last unit transacted in a market
Marginal cost is calculated as...
the change in total costs divided by the change in output
In general, when the supply curve shifts to the left and demand is constant then...
the equilibrium price will rise
If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then the marginal cost of increasing production from 20 to 40 units is...
$24
In the United States, say gasoline costs consumers about $2.50 per gallon. In Italy, say it costs consumers about $6 per gallon. What effect does this price differential likely have on the use of scooters and motorcycles in the United States compared to Italy?
Americans likely drive fewer scooters and motorcycles than Italians
Predict the effect on equilibrium price and quantity from a new fertilizer that is developed that increases the yield per acre of apples
Supply increases
How is AVC related to APL?
AVC and APL are inversely related
State the law of diminishing returns
As more of a variable input is used with a fixed input, the increases in output will eventually diminish.
Predict the effect on equilibrium price and quantity from scientific evidence that presents an adverse health effect of alar, a chemical used to treat apples.
Decrease in demand
Predict the effect on equilibrium price and quantity from a severe drought that decimates the apple crop.
Decrease in supply
In terms of supply and demand curves, what is the expected impact of increased security measures imposed by the federal government on airlines and consumers?
Decrease in supply OR decrease in demand OR both
In cities that strictly limit the number of taxis, there are long waits for customers who are trying to get a taxi. What does this tell you about the outcome in that market?
Excess demand
Predict the effect on equilibrium price and quantity from the price of pears decreasing.
Increase in quantity demanded for pears
How is MC related to MPL?
MC and MPL are inversely related
Pears and apples are substitute goods. It has just been reported that there is a health risk associated with a chemical used in apple growing. In the market for pears, show the effects of this report. What will happen to the market equilibrium quantity and price of pears?
Price will increase and quantity will increase
What is the Law of Demand?
Quantity demanded rises as price falls, and quantity demanded falls as price rises
Why does the price of airline tickets rise during the summer months?
The demand for air travel shifts to the right, increasing price and quantity supplied
What is buyer's reservation price?
The highest price a consumer would be willing to pay for a unit of the good (think price ceiling)
What would cause an increase in the quantity supplied of wheat?
The price farmers receive for their wheat rises
The major source for rare earth materials is China. These minerals are used in much of the technology we use today from computers to smart phones. Suppose several new mines recently became operational in the United States. As a result, what would happen?
The supply curve for rare earth minerals will have a lower height at any given quantity
The model of supply and demand leads to the prediction that low interest rates cause...
an increase in housing prices, especially in cities with limited land
The law of diminishing marginal returns states that eventually...
as more and more of a variable input is used with a given fixed input, the additions to output become smaller and smaller
When a slice of pizza at the student union sold for $2, Moe did not purchase nay. When the price fell to $1.75, Moe purchased a slice every day for lunch. Moe's reservation price for a slice of pizza must be...
at least $1.75, but less than $2.
Shelly purchases a leather purse for $400. One can infer that...
her reservation price was at least $400
If the stock market experiences price declines which are expected to continue, then you might expect the bond market to experience...
higher bond price and lower interest rates
A decrease in the demand for bananas with no concurrent change inn the supply of bananas will result in a _____ equilibrium price and a(n) _____ equilibrium quantity.
lower, higher
After some level of output, marginal cost begins to rise because...
marginal product eventually decreases
The U.S. Treasury recently announced that it plans to supply fewer new Treasury bonds. This has led to...
more demand for previously issued Treasury bonds
If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that equilibrium...
price will rise with indeterminate change in equilibrium quantity
What is allocative efficiency?
production represents consumer preferences
What is equilibrium?
stable, no inherent reason for change
In a free market, if the price of a good is above the equilibrium price, then...
suppliers, dissatisfied with growing inventories, will lower the price
If the demand and the supply of commodity j increase at the same time then...
the equilibrium quantity of commodity j will definitely increase, but the equilibrium price of commodity j may rise or fall or stay the same
What is seller's opportunity cost?
the full economic cost of producing a unit of output
Given a disequilibrium quantity where the marginal buyer's reservation price exceeds the marginal seller's opportunity cost...
the height of the demand curve is above the height of the supply curve
If we know that the average product of labor is increasing, then we know that...
the marginal product of labor is greater than the average product of labor
What is a marginal seller?
the seller who produces the very last unit transacted in a market
Whenever the quantity demanded is not equal to the quantity supplied, the quantity that is actually sold in the market is usually...
the smaller of the quantity demanded and quantity supplied
One reason that variable factors of production tend to show diminishing returns in the short run is that...
there are too many workers using a fixed amount of productive resources
A leftward shift in supply shows how...
there is a decrease in supply
Moving in a south-eastern direction along a demand curve shows how...
there is more quantity demanded as a result of the price rising
Moving in a north-eastern direction along a supply curve shows how...
there is more quantity supplied as a result of the price ceiling