Econ Exam #2
Increases in inputs eventually lead to less additional output.
Law of diminishing returns
Period of time when all of a firm's inputs can be varied.
Long run
The change in total production associated with using one more unit of input.
Marginal product
Machines and equipment that can be used for production.
Physical Capital
Early in 2012, Starbucks, a global coffeehouse company, raised the prices of some of its beverages in certain parts of the country, mostly the Northeast and the southern states. While some thought that this was not a good idea, most analysts agreed that the price increase would not adversely affect its revenues. What would have to be true for the analysts' claim (that Starbucks' revenues would not fall) to hold? (Check all that apply.) A. Starbucks beverages will represent a relatively small fraction of people's budget share. .B. A very limited time horizon on the part of those analysts that expected no adverse revenue effects. .C. Buyers of Starbucks coffee will tend to be sophisticated consumers. D. A perception on the part of customers that few good substitutes exist for Starbucks coffee.
A B D
Which of the following is not one of the three conditions that characterizes a perfectly competitive market? A. Buyers are price takers and cannot influence the price charged. B. Sellers in the market produce identical goods. C. There are no barriers to entry or exit in the market. D. Firms have pricing power and can set their prices freely.
Firms have pricing power and can set their prices freely.
If the income elasticity of demand for a good is negative, the good is ?
Inferior
Given that bacon and eggs are complementary goods, if the price of eggs decreases the demand for both goods will rise. Is this an accurate statement?
It is somewhat inaccurate. The decrease in the price of eggs will increase the quantity demanded (not the demand) for eggs. It will, however, as the statement claims, increase the demand for bacon.
Salmon fishing in Alaska is a seasonal business; May through September is the best time to bait salmon and halibut. Toland Fisheries, a small commercial fishery, recorded its highest ever catch last year. They started this year's fishing season with the same number of workers and equipment. With the new season also starting well, Toland has increased hiring substantially. However, the fishery did not make any additional investment in trawlers and other fishing equipment. Other things remaining unchanged, what is likely to happen to the marginal product of each new worker in the short run? A. It will be the same as the previous workers hired, meaning each additional worker will have the same marginal product of labor as the previous one hired. B. It will be increasing at a decreasing rate, meaning each additional worker will have a lower marginal product of labor than the previous one hired C. It will be increasing at an increasing rate, meaning each additional worker will have a higher marginal product of labor than the previous one hired. D. It will change cyclically, meaning that it will cycle up and down as more workers are hired. In the long run, if Toland Fisheries would like to increase the productivity of its workers, it will need to ____________. A. charge less for its services. B. hire more workers. C. increase its amount of capital and equipment. D. charge more for its services.
It will be increasing at a decreasing rate, meaning each additional worker will have a lower marginal product of labor than the previous one hired. increase its amount of capital and equipment.
For two goods that are substitutes, the cross-price elasticity of demand will be ?
Postive
The process of transforming inputs into output.
Production
What does the Mid Point formula/Price Elasticity of demand formula look like?
Q2-Q1/(Q1+Q2)/2 x100/ P2-P1/(P1+P2)/2x100
Period of time when at least one of a firm's inputs is fixed.
Short run
The result of workers developing a certain skill set in order to increase total productivity.
Specialization
Suppose Hershey's increases the price of its chocolate syrup by 17 percent. In response, the quantity demanded of Nesquik chocolate syrup rises by 12 percent and the quantity demanded of Breyer's vanilla ice cream falls by 33 percent. The cross-price elasticity of demand between Hershey's syrup and Nesquik's syrup is ___________ , implying these two goods are ___________ . The cross-price elasticity of demand between Hershey's syrup and Breyer's vanilla ice cream is _______ , implying these two goods are _________ . Suppose that incomes rise by 9 percent given the price change cited above. As a result, Hershey's experiences a 5 percent increase in sales volume. Given this information, Hershey's syrup is a __________ good.
The cross-price elasticity of demand between Hershey's syrup and Nesquik's syrup is positive , implying these two goods are substitutes . The cross-price elasticity of demand between Hershey's syrup and Breyer's vanilla ice cream is negative , implying these two goods are complements . Suppose that incomes rise by 9 percent given the price change cited above. As a result, Hershey's experiences a 5 percent increase in sales volume. Given this information, Hershey's syrup is a normal good.
Moves in what direction when less than 1, greater than 1, and equal to 1?
moves in the same direction as price when elasticity is less than 1, in the opposite direction when elasticity is greater than 1, and remains unchanged when elasticity is equal to 1.
In a perfectly competitive market, a seller cannot choose to raise the price of its good since all sellers in the market produce identical goods , so raising the price would result in losing all its customers . All firms in a perfectly competitive market are said to be __________. A. price leaders. B. profitable in the long run. C. price takers. D. price neutral.
price takers.
The amount of money the firm brings in from the sale of its outputs is called _________________ , while the change in total revenue associated with producing one more unit of output is called ________________ .
revenue;marginal revenue
