Arec 202 Final Kroll
its very steep
"I spend more money on orange juice even as the price of orange juice rises" what does the demand curve look like?
perfectly horizontal at price $0
"i would never buy a Miley Cyrus CD! you couldn't give me one for nothing" the demand curve is?
what is the graph for thing positive negative or zero profit?
*ignore afc*
in the short run there many more __________ inputs than ___________ inputs
1 fixed 2 variable
Demand has gone up (the demand curve has shifted to the left)
According to a New York Times article, the number of car producers in China has gone up dramatically over the last decade. At the same time, Chinese consumers' incomes have risen,and cars are a normal good in china. What has happened to demand in the Chinese market for cars?
Supply has gone up (the supply curves has shifted to the left)
According to a New York Times article, the number of car producers in China has gone up dramatically over the last decade. At the same time, Chinese consumers' incomes have risen,and cars are a normal good in china. What has happened to supply in the Chinese market for cars?
The equilibrium price change cannot be determined with out additional information
According to a New York Times article, the number of car producers in China has gone up dramatically over the last decade. At the same time, Chinese consumers' incomes have risen,and cars are a normal good in china. Without additional information, what can you conclude from these two developments about what has happened to the equilibrium price in the Chinese market for cars?
Whats the difference between economic profit and accounting profit?
Accounting: Revenue minus explicit costs Economic: Revenue minus the opportunity cost
Price ceilings
Acrodin to chapter 5, of what is "rent control" an example of?
like a normal supply curve.
Because Picasso is dead and the likely hood of finding hidden paintings by him are very small the supply curve for Picasso paintings, at least in a certain price range looks
Economics is the study of?
Choice
What are sunk costs?
Costs that have occurred in the past and cannot be recovered.
elastic looks like an
E( more horizontal )
When each person gets his or her fair share?
Equity
what cost requires the outlay of actual money?
Explicit cost
Inelastic looks like an
I( more vertical )
the supply curve shifts to the right
If an invention improves the technology to make widgets the what happens to supply?
quantity demanded goes up over proportionally
If demand of a good is very elastic, what happens if price goes down
what cost is measured by the value of the benefits forgone?
Implicit cost
buyers and sellers price taker
In a competitive market thare are many __________&_________ and everyone is a _______________ ________
Demand goes up
In recent years wealthy people all over the world started thinking that having a real Picasso is a "must" for them. What happened to demand in the market for Picasso paintings in recent years because of this change in preferences?
What is the difference between micro and macro economics?
Micro: the study of individual choice Macro: the study of the national economy
Can the PPF be upward sloping?
No it cannot
In a world with just two goods and two countries, can a country have a comparative advantage for both goods?
No, only one country can have the comparative advantage in a good
$80,000
Sanjay likes his job so much that he would be willing to work for free, However his annual salary is $80,000 a year. what is his annual surplus?
What is the Production possibility frontier? (PPF)
The maximum quantity of one good that can be produced for any given production of the other.
what is the consumption bundle that maximizes a consumer's total utility?
The optimal consumption bundle
when the actual product or service is substituted with another product
What are substitutes in production?
goods that are used in conjunction with one another
What is a complement?
goods for which demand increases as income increases.
What is a normal good?
goods that can serve as replacements for one another
What is a substitute?
goods for which demand decreases as income increases
What is an inferior good?
Opportunity Costs
What you must give up in order to get a product or service.
Feasible: C,A Efficient: A Not Feasible: B
Which point on the PPF are Efficient/ not Feasible/Not Feasible ?
because as price goes up quality demanded goes down
Why is demand downward sloping?
because as price goes up quality suppled goes up
Why is supply upward sloping?
what is an external benefit?
a benefit that an individual or firm confers on others without receiving compensation. example: getting the flu vaccine
what is an implicit cost
a cost that does not require the outlay of money; it is measured by the value, in dollar terms, of forgone benefits.
what is an explicit cost?
a cost that requires the outlay of actual money
describe a monopoly
a firm that is the only producer of a good that has no close substitutes.
what is a public good?
a good that is both nonexcludable and nonrival in consumption.
perfectly elastic?
a perfectly horizontal line
perfectly in elastic?
a perfectly horizontal line
what is a good that is both excludable and rival in consumption?
a private good
what is a fixed input?
an input whose quantity is fixed for a period of time and cannot be varied
what is an variable input?
an input whose quantity the firm can be changed at any time
what is an external cost?
an uncompensated cost that an individual or firm imposes on others. example: pollution
3 cans
assume the price for can of Red Bull is $2. and you are willing to pay $4 for the first, $3.50 for the second can, $2.75 for the third and $1 for the fourth. How many cans should you buy?
Why do unregulated markets with externalities not generate the optimal level of output?
because firms will produce where out puts equal marginal cost which in most cases is above the optimal level of pollution
why were afghan poppy farmers happy about the disease that destroyed most of their crop?
because the demand for poppy product is very inelastic
why do monopolies have deadweight loss?
because the monopolist can charge a much higher price and cut out people willing to pay at equilibrium price up to the monopolist price.
what happens when a government imposes regulations on a good and and consumers and producers break that regulation?
black markets form
what type of diagram is this
circular flow diagram
What does the term "marginal" mean?
how much?
complements
if people demand less of product A when the price of B rises , then A and B are?
inferior good
if peoples income rise and they start going to outback steakhouse rather than going to McDonalds then McDonalds is a
there was more demand and less supply because the economy was doing better.
in chapter 3, what are the two main reasons why the price of natural gas was so much higher in 2006 compared to 2002?
elastic inelastic
in the market for cereal and ambulance, cereal is _________, while ambulances are more _____________
there are less farms(quantity has gone down), vets can make more money as small animal vets in cities versus the rural farms will pay less and are further away from more consumers.
in the story of farms and veterinarians, which supply shifting curve factor is the reason that the supply of farm veterinarians has gone down
what is the change in total utility generated by consuming one additional unit of a good or service.
marginal utility
what is a real world example of a price floor
minimum wage
what is cross price elasticity fro demand? and how is it calculated?
percent change in the quantity demanded of one good divided by the percent change in the other good's price.
what principle is the change in total utility generated by consuming one additional unit of a good or service.
principle of diminishing marginal utility
what is equilibrium?
quantity supplied and quantity demanded are equal
price ceilings
rent control is an example of
What is an Excise tax?
tax on sales of a good or service.
what is Pigovian tax?
taxes designed to reduce external costs.
what is marginal social cost of pollution?
the additional cost imposed on society as a whole by an additional unit of pollution.
what is marginal cost?
the additional cost incurred by producing one more unit of a good or service.
What are marginal costs?
the additional cost of conducting one more unit of the activity
what is marginal social benefit of pollution?
the additional gain to society as a whole from an additional unit of pollution.
what is average variable cost?
the average cost that depends on the quantity of output produced; the cost of a variable input.
What is the difference between the marginal revenue curve for a perfectly competitive firm and for a monopolist?
the curve for the monopolist is much more inelastic compared to the perfectly competitive market which is very elastic
what is the law of diminishing returns
the effect observed when an increase in the quantity of an input, while holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input.
whites tax incidence ?
the group that the tax falls upon(producers or consumers)
what is deadweight loss?
the loss in total surplus that occurs whenever an action or a policy reduces the quantity transacted below the efficient market equilibrium quantity.
$800,000 -$800,000
the number of seats in a football stadium is fixed at 40,000 tickets. The team rase the price from $50 at ticket to $70, and it still the price change caused a change in total consumer surplus of______________ and a change in total producer surplus of ___________
the explicit cost of tuition and fees the implicit cost of working instead of attending school
the opportunity cost of your college education cons tis of costs what are those costs(think similar to economic profit)
why does sales tax cause dead weight loss?
the price of the good increases and the quantity suppled decreases reducing total surplus
what is the profit-maximizing rule?
the proposition that in a profit-maximizing "how much" decision the optimal quantity is the largest quantity at which marginal benefit is greater than or equal to marginal cost.
What is the optimal level of pollution?
the quantity of pollution that society would choose if all the costs and benefits of pollution were fully accounted for.
what is total surplus?
the total net gain to consumers and producers from trading in a market; the sum of the consumer surplus and the producer surplus.
marginal benefits and marginal costs
to decide wether or not to increase an activity by one unit you should compare
what is average total cost?
total cost divided by quantity of output produced. Also referred to as average cost. fixed+variable= avt
in the long run all inputs are..
variable inputs
it goes down
what happens to the equilibrium price if demand stays the same and supplies goes up, what happens to equilibrium price?
supply stays the same
what happens to the supply curve if demand goes up?
it shifts to the left
what happens to the supply curve is input prices go down?
the more benefit the consumer get if his values the product more than what he/she actually paid for it
what is consumer surplus?
comparative advantage
what type of advantage do you have of you can produce a good at a lower opportunity cost that another person
what is the optimal level in terms of marginal cost/benefit ?
when Marginal benefit =marginal cost
what is unit elastic?
when elasticity is equal to 1
what is the law of demand
when price goes up quantity demanded goes down
what is the law of supply
when price goes up quantity supplied goes up
elastic
which a luxury is more_________ than a necessity
Because of a decrease in demand
why did cotton prices decrease dramatically by the end of 2011?
In a world with just two goods and two countries, can a country have an absolute advantage for both goods?
yes, a country can have the absolute advantage.
