Econ test part 2
calculated the income elasticity if an 8 percent increase in income leads to a 4 percent increase quantity demand for organic produce
.04/.08 = .5
Suppose the value of the price elasticity of supply is 4. What does this mean
A 1 percent increase in the price of the good causees quantity supplied to increase by 4 percent
What area represents producer surplus at a price of P2
A B C
Marginal
Means extra
Whats the difference between physical capital and human capital
Physical is manufactured goods, human capital is educational goods
the formula for total fixed cost is
TFC = TC - TVC
Suppose hte firm produces 4,000 units. What does the shaded area labeled A represent
Total fixed cost
Scarcity
Wants are unlimited but resources are limited
which of the followign is a fixed cost
payment of hire a security worker to guard the gae to the factory around the clock
to maximize profit, a perfectly competitive firm
should product the quantity of output that resutls in the greatest difference between total revenue and total cost
A firm will make a profit when
P > ATC
if the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is
$40
what area represents the increase in producer surplsu when the market price rises from P1 to P2
A + B
if four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is
2 chairs
If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 untis, then the average product of 12 workers is
5 units. 56+6 / 12
The phrase "demand has increased" means taht
A demand curve has shifted to the right
which of the following would cause an increase in the supply of cheese
An increase in the number of firms that produce cheese
Economic efficiency in a competitive market is achieved when
Economic surplus is equal to consumer surplus
How does the construction of a market demand curve for a private good differ from that for a public good?
The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good.
Shrimp is an increasingly popular part of the American diet. Louisiana shrimpers who represent the bulk of the U.S. industry were almost all put out of business by Hurricane Katrina.ȱȱHow did this affect the equilibrium price and quantity of shrimp?
The supply curve for shrimp shifted to the left resulting in a higher equilibrium price and lower equilibrium quantity.
Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean?
a 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumptions
farmers can plant either corn or soybeans in their fields. Which of the following would cause the supply of soybeans to increase
a decrease in the price of corn
which fo the following is an example of a nonexcludable prodcut
a public library
perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit. This condition is referred to as
allocative efficiency
If the marginal cost is below the average variable cost curve, then
average variable cost is decreasing
Oligopoly differs from perfect competition and monopolistic competition in that
because oligopoly firms often react when other firms in their industry change their prices
which of the following goods would have the most inelastic demand
bread
A monopolgy is a firm that is the only seller of a good or service that does not have a
close substitute
if the corss price elasticity of demand for goods X and Y is negative, this means the two goods are
complemtns
IF when a firm doubles all its inputs, its average cost of production increases then production displays
diseconomies of scale
which of the following is not an assumption of perfectly competitive markets
each firm produces a similar but not identical product
the average total cost of production
equals total cost of production divided by the level of output
as a firm hires more labor in the short run, the
extra output of another worker may rise at first, but eventually must fall.
which of the followign is not a charactersitic of monopolostic competition
firms are price takers
the fraction of an industry sales that are accounted for by the largest firms is called the
four firm concentration ratio
When the governemnt wants to give an exclusive right to one firm to produce a product, it
grants a patent
If demand is price elastic, the absolute value of the price elasticity of demand is
greater than one
if demand is price elastic, the absoltue value of the price elasticiy of demand is
greater than one
A perfectly competitive firm faces a demand curve that is
horizontal
income elasticiy measures
how a goods quantity demanded responds to buyers income
price elasticiy of supply is used to gauge
how responsive suppleirs are to price changes
a price maker
is a firm that has some control over the price of the product it sells
The income effect of a price change results in a
movement along the demand curve due to a change in purchasing power brought about by the price change
when a firm faces a downward sloping demand curve, marginal revenue
is less than price because a firm must lower its price to sell more
The marginal revenue curve for a perfectly competitive firm
is the same as its demand curve
A monopoly firms demand curve
is the same as the market demand curve
which of the following statements is true about the price elasticity of demand along a downward sloping lienar demand curve
it is elastic at high prices and inelastic at low prices
if a perfectly competitive firm achieves product efficiency then
iti is producing the good it sells a thte lowest possible cost
which of the following activites create a negative externality
keeping a junked car parked on your front lawn
Increase in the price of an input
left
increase in the price of substitute in production
left
If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit. How are prices usually set in natural monopoly markets in the United States?
local or state
which of the following is not a characteristic of oligopoly
low barriers to entry
in long run equilibirum compared to a perfectly competitive market, a monopolostically comeptitive industry produces a
lower and higher price
economics surplus is maximized ina competitive market when
marginal benefit equals marginal cost
for a perfectly compettive firm, at profit maximization
marginal revenue equals marginal cost
decrease in the future price of a product
move to the right
Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is
negative, so sefton considers potatoes to be an inferior good
Tony's Italian Ice is a monopolistically competitive firm. If Tony's earns a profit in the short run, which of the following is most likely to occur?
new firms that sell itialian ice will enter the market and tonys demand curve will shift to the left
decrease in the current price of the product
no shift
the elasticity of demand is alwasy a negative value because
of the law of demand
if firms do not increase their quantity supplied when price changes then supply is
perfectly price inelastic
At market equlibrium
quantity demanded equals quantity supplied
if a firm raised its price and idsovered that its total revnue fell, then the demand for its product is
relatively elastic
when there are many good substitues avaiable for a good, demand tends to be
relatively elastic
increase in productivity
right
which of the follow is not a result of imposing a rent celing
some consumer surplus is converted to producer surplus
if an externality exists it will be experienced by
some people not directly involvedi n the production or consumption of the product
A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost. What shoudl this firm do to increase its profit or reduce its losses
the firm should lower its price
Marginal cost is
the additional cost to afirm of producing one more unit of a good or service
the total amount of producer surplus in a market is equal to
the area above the market supply curve and below the market price
The substitution effect of a price change refers to
the change in quantity demanded tha results from a change in price making a good more or less expensive relative to other goods that are substitues
The substitution effect of a price change refers to
the change in quantity demanded that results from a change in price making a good more or less expensive to other goods that are substitutes
suppose a decrease in the supply of bottled water resulted in a decrease in revenue this indicates that
the demand for bottled water is price elastic in the price range considered
Which of the followign statements is true above the price elasticiy of demand
the elastic portion of straight line downward sloping demand curve corresponds to the segment above the midpoint
when demand is price elastic, a fallin price causes total revenue to rise because t
the increase in quantity sold is large enough to offset the lower price
A consumer is willing to purchase a product up to the point where
the marginal benefit is equal to the price of the product
The average product of labor declines after L2 because
the marginal product of labor is below the average product of labor
A positive externality causes
the marginal social benefit to exceed the marginal private cost of the last unit produced
a negative externality existst if
the marginal social cost of producing a good or service exceeds the private cost
By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume taht the most improtant determinant of the demand for agood is
the price of a the good
According to a study of the US demand for alcoholic beverages, the pirce elasticiy of demand for beer is -0.23. Which of the following could explain why the price elasticity of demand for beer is low
the price of beer is relatively low and for many people it is a habit forming product
By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is
the price of the good
One would speak of a movement along a supply change curve fora good, rather than a change in supply
the price of the good changes
the demand for lobster is lower in the spring than in the summer. If the price of lobster is higher in the spring than in the summer the n
the supply of lobster is greater in summer than in spring
whenever a firm can charge a pirce greater than the marginal cost
there is some loss of economic efficiency
In the short run, a firm that is operating at a loss has two options. These options are
to shut down temporarily or continue to produce
which of the following cost will not change as output changes
total fixed cost
which of the followign is an example of a long run adjustment
walmart builds another supercenter
