Econ 221- microeconomics final exam review
producer that requires a smaller quantity inputs to produce a good is said to have an
absolute advantage
under monopolistic competition, firms will continue entering market until
economic profit is zero
Long run average cost curve
L shape
explicit costs
monetary costs
The value of money or income in terms of the quantity of goods the money can buy is called
real value
Diminishing marginal returns implies that firms
require more and more workers to produce each additional unit of output.
payoff matrix
shows payoff or consequences for each player
If price of the good or service is held constant and something else changes -- like technology --
then it is a change in demand or supply and the entire curve shifts.
if the price of the good or service changes and everything else is held constant,
then it is a change in quantity demanded or supplied and there is movement along the curve.
Accounting profit is larger than economic profit- T/F
true
The price elasticity of demand tends to be smaller when consumers have less time to adjust to price changes
true
product differentiation
process used by firms to distinguish their products from others
the difference between the price a producer receives for a product and the minimum amount a producer is willing to accept for that product is
producer surplus
When a business advertises that its product has unique features that make it superior to other similar products, it is engaging in:
product differentiation
Economic models are:
simplifications of reality that focus only on key relationships and ignore less relevant details
In the short run
some of the factors of production are fixed but not all
HHI
square the market share of each and add together
game theory
study of decision making in strategic
If real salaries increase but nominal salaries do not
this means that prices have fallen
Normative statements are not essential components of an economic model
true
Which of the following products has the most elastic demand? A.Ben and Jerry's Chunky Monkey ice cream in the pint container .B. all Ben and Jerry's ice cream C. all premium ice cream D.all ice cream
A
ATC
AVC+AFC
AFC
FC/Q
short run average total cost is what shape
U shape
AVC
VC/Q
The short run is a period of time where __________ while the long run is a period of time where __________.
at least one input is fixed, all inputs are variable in the long run, you can change all variables
A firm experiences diminishing marginal returns because
at least one of the variables is fixed
public good
available for everyone, regardless of who pays for it
The marginal cost curve intersects the shortminus−run average total cost curve where
average total costs are minimized in the short run
Which of the following is a longminus−run adjustment? A. A farmer buys twice her usual amount of herbicide. B. Two firms exit the asbestos removal industry. .C. A firm lays off two workers. D.A manufacturer increases its purchase of raw materials.
b
__________ equals the firm's revenues minus all implicit and explicit costs.
economic profit
More elastic if takes up a bigger/smaller portion of consumers budget
bigger
Who are the price takers in a perfectly competitive market?
both buyers and sellers
Production possibilities curve
can only produce more of one product if it produces less of another
The "all things equal" assumption is also known as
ceteris paribus
marginal costs (MC)
change in TC/quantity
the ability of one person or nation to produce a good at a lower absolute cost than another is called a(n)
comparative advantage
private good
consumed by one person or household
substitution effect
decreases amount of leisure time
Perfectly elastic demand
demand is infinite
The downward sloping part of the long run average total cost curve is where the firm is achieving:
diseconomies of scale
The demand curve in a monopoly is
downward sloping
demand curve in a monopoly is
downward sloping
If the price elasticity of demand is very elastic, which of the following could be a possible value of the elasticity?
elastic is anything greater than 1, ex: 2
Unit elastic
equal to 1- so % change in quantity equals % change in price
Perfectly inelastic demand
equals zero
normative statements
expresses a value judgment about whether a situation is desirable or undesirable. It looks at the world as it "should" be.
marginal revenue product
extra revenue generated by one additional unit of of labor
The price elasticity of demand tends to be greater when a product accounts for a smaller portion of the consumer's budget
false
In the short-run, the cost that is independent of the amount of output produced is called __________.
fixed cost bc it does NOT change with the level of output
total costs
fixed costs + variable costs
industry is highly concentrated
higher than 1800
marginal revenue product measures
how much labor to hire at a specific price
Economics is concerned with what?
how people respond to incentives
Opportunity Cost:
incorporates notion of scarcity, no matter what we do- there is always tradeoffs
As the number of substitutes for a particular product increases, the price elasticity of demand for the produce
increases
income effect
increases amount of leisure time
If a product is a necessity and has no substitutes at all, demand for the product is most likely to be
inelastic
The firmminus−specific demand curve in a perfectly competitive market The demand curve in a monopoly is downward sloping.
is horizontal
the firm−specific demand curve in a perfectly competitive market
is horizontal
If an economy is represented by a point along its production possibilities curve
it can produce more of one product only if it produces less of another product.
A good is said to be "normal" if
it has a positive income elasticity of demand. "increase in income increases demand
oligarchy
just a few firms, working off of incentives
If HHI shows industry is not concentrated
less than 1000
diseconomies of scale
long run average cost of production increases as output increases
economies of scale
long term cost of production decreases as the output increases
__________ is the additional cost to the firm of producing one more unit of a good or service.
marginal cost
to stay in market long curve ATC must meet
marginal cost
do we include personal expenses in opportunity costs?
no
face value amount of money
nominal value
in the long run
none of the factors of production are fixed
implicit costs
opportunity costs that come along
Diminishing returns
output will increase at a decreasing rate, one of the variables if FIXED
In a market for a homogeneous good, if sellers and buyers can enter or exit a market freely , the market is most likely:
perfectly competitive market
free rider
person who gets the benefit from a good but does not pay for it
Midpoint formula
(Q of new-initial/new+initial/2)/ (P of new-initial/new+initial/2)
Possible value of elasticity if inelastic
.5, must be less than 1
MRP=
marginal product x price of output
Factors of Production
natural, labor, physical capital, human capital , entrepreneurship