Econ Questions
Revenue
A firm's revenue is the money that it receives in exchange for the goods it sells, and is calculated by multiplying the quantity sold times the price at which the goods are sold.
Fixed Cost
A fixed cost is the cost of an input whose quantity does not rise when output goes up, one that the firm requires to produce any output at all. The total cost of such indivisible inputs does not change when the output changes. Any other cost of the firm's operation is called a variable cost.
Shortage
A shortage is an excess of quantity demanded over quantity supplied. When there is a shortage, buyers cannot purchase the quantities they desire at the current price.
Supply Curve
A supply curve is a graphical depiction of a supply schedule. It shows how the quantity supplied of a product will change as the price of that product changes during a specified period of time, holding all other determinants of quantity supplied constant.
Variable Cost
A variable cost is any cost of the firm's operation that depends on the firm's level of output.
Which of the following factors could cause a change in the quantity demanded? A. Change in price B. Change in consumer preferences C. Change in income D. hange in price of substitute good
A. Change in Price
Equilibrium
An equilibrium is a situation in which there are no inherent forces that produce change. Changes away from an equilibrium position will occur only as a result of "outside events" that disturb the status quo.
What is true about the point of equilibrium? A. There exists no surplus B. There exists no shortage C. Markets not currently in equilibrium will tend to the point of equilibrium D. All of the above
D. All of the above
Which of the following could cause a change in supply? A. New technology B. Number of sellers C. Cost of production D. All of the above
D. All of the above
Which of the following statements about the law of supply is false? A. Graphically, a supply curve is generally upward sloping. B. Under the law of supply, there is a direct relationship between price and quantity. C. As the price increases, so will the quantity supplied. D. As the price increases, the quantity supplied decreases.
D. As the price increases, the quantity supplied decreases.
True or False Movement along the demand curve represents a change in demand.
False
True or False The law of supply represents a relationship between price and quantity from a buyer's perspective.
False
Income elasticity of demand
Income elasticity of demand is the ratio of the percentage change in quantity demanded to the percentage change in income.
Speculation
Individuals who engage in speculation deliberately store goods, hoping to obtain profits from future changes in the prices of these goods.
Inferior Goods
Inferior goods are commodities whose quantity demanded falls when the purchaser's real income rises, all other things remaining equal.
Invisible hand
Invisible hand is a phrase used by Adam Smith to describe how, by pursuing their own self-interests, people in a market system are "led by an invisible hand" to promote the well-being of the community.
An effective price floor results in:
Market prices being above the equilibrium price.
Normal goods
Normal goods are commodities whose quantity demanded rises when the purchaser's real income rises, all other things remaining equal.
Price ceilings
Price ceilings are maximum that the prices charged for a commodity cannot legally exceed.
Price floors
Price floors are legal minimum below which the prices charged for a commodity are not permitted to fall.
increasing returns to scale (or economies of scale)
Production is said to involve economies of scale, also referred to as increasing returns to scale, if, when all input quantities are increased by x percent, the quantity of output rises by more than x percent.
Price ceilings are designed to benefit:
Purchasers
Supply Schedule
Supply schedules are tables showing how the quantity supplied of some products change as the price of those products change during a specified period of time, holding all other determinants of quantity supplied constant.
Supply-demand diagrams
Supply-demand diagrams graph the supply and demand curves together. They also determine the equilibrium price and quantity.
A surplus is an excess of quantity supplied over quantity demanded. When there is a surplus, sellers cannot sell the quantities they desire to supply at the current price.
Surplus
(price) elasticity of demand
The (price) elasticity of demand is the ratio of the percentage change in quantity demanded to the percentage change in price that brings about the change in quantity demanded.
Average Physical Product (APP)
The average physical product (APP) is the total physical product (TPP) divided by the quantity of input.
Average Variable Cost
The average variable cost is the total cost divided by the quantity of output.
cross elasticity of demand
The cross elasticity of demand for product X to a change in the price of another product, Y, is the ratio of the percentage change in quantity demanded of X to the percentage change in the price of Y that brings about the change in quantity demanded.
Total Physical Product (TPP)
The firm's total physical product (TPP) is the amount of output it obtains in total from a given quantity of input.
Law of Supply and Demand
The law of supply and demand states that in a free market the forces of supply and demand generally push the price toward the level at which quantity supplied and quantity demanded are equal.
Long Run
The long run is a period of time long enough for all of the firm's current commitments to come to an end.
Marginal Physical Product (MPP)
The marginal physical product (MPP) of an input is the increase in output that results from a one-unit increase in the use of the input, holding the amounts of all other inputs constant.
marginal revenue product (MRP)
The marginal revenue product (MRP) of an input is the money value of the additional sales that a firm obtains by selling the marginal physical product of that input.
Marginal Variable Cost
The marginal variable cost of an output is the increase in total cost that results from a one-unit increase in the output quantity, holding the amounts of all other inputs constant.
Quantity Demanded
The quantity demanded is the number of units of a good that consumers are willing and can afford to buy over a specified period of time.
Quantity Supplied
The quantity supplied is the number of units that sellers want to sell over a specified period of time.
Short Run
The short run is a period of time during which some of the firm's cost commitments will not have ended.
True or False A change in supply is represented by a shift in the supply curve.
True
True or False Equilibrium occurs when the quantity supplied equals the quantity demanded.
True
Complements
Two goods are called complements if an increase in the quantity consumed of one increases the quantity demanded of the other, all other things remaining constant.
Substitutes
Two goods are called substitutes if an increase in the quantity consumed of one cuts the quantity demanded of the other, all other things remaining constant.
Demand Schedule
A demand schedule is a table showing how the quantity demanded of some product during a specified period of time changes as the price of that product changes, holding all other determinants of quantity demanded constant.
Demand Curve
A demand curve is a graphical depiction of a demand schedule. It shows how the quantity demanded of some product will change as the price of that product changes during a specified period of time, holding all other determinants of quantity demanded constant.
elastic and inelastic demand curves
A demand curve is elastic when a given percentage price change leads to a larger percentage change in quantity demanded.
expenditure
Customers' expenditure on good is the money they pay in exchange for the goods they buy, and is calculated by multiplying the quantity purchased times the price at which the goods are bought. Because every sale must involve some customer's purchase, a firm's revenue is equal to its customers' expenditures.