ECON 315 EXAM
Goods y and x are substitutes B>0, an increase in Py, increases quantity demanded for good x.
Suppose the demand for good X is given by QxD=10aPx+BPy+yI, if B is positive then?
The greater is the marginal product relative to that of marginal product of capital
The steeper an isoquant?
Consumer surplus
The value consumes get from a good but do not pay for
A movement along the demand curve, only price can cause movement
A change in income will NOT lead to? Why?
Greater than 1
A demand is elastic when the price elasticity of demand is?
Elastic, inelastic
A flat demand is? A steep demand is?
Constant returns to scale
A given percentage change in all inputs causes an equal percentage change in output
Parallel to itself by the amount of tax (up to the left)
A per-unit tax shits the supply curve?
To become steeper
A percentage tax causes the supply function?
Vertical/Perfectly inelastic/Slop is infinite
A price elasticity of zero corresponds to a demand curve that is?
Increase by less than $1
A tax of $1 on sellers always does what to the equilibrium price by $1?
1) raise the price the buyers pay 2) lowers the price producers receiver 3) shrinks the market because of dead weight losses
A tax on the sellers of coffee will?
Will increase as well
An increase (shift) in demand will increase both the equilibrium price and equilibrium quantity, this means quantity supplied?
The marginal product of the input
At any given point on the curve, the slope of the total product curve always equals?
Isoquants
-Do not cross -Downward slope -Convex to the origin Properties of?
Price decreases, quantity decreases
Beer and pretzels are complements. Suppose that higher minimum wage in breweries has reduced the amount of beer in the market. What impact does this have on equilibrium price and quantity for pretzels?
Marginal product of an input
Change in total output attributable to the last unit of an input
The demand curve and the equilibrium price
Consumer surplus can be measured as the area between?
Elasticity is large
Demand --> Flat = small slope =?
When more of an input is used, output increases but at a diminishing rate
Diminishing marginal returns
Shortage
Excess demand
Surplus
Excess supply
Slope of an isoquant
Gives the sustainability of inputs while keeping output constant
Elastic
Goods with close substitutes tend to have more of what kind of demand, compared to goods without close ones?
Marginal Rate of Technical Substitution
How many workers can do the job for one compute, keeping output constant is shown by?
The firm is experiencing a diminishing marginal rate of technical substitution
If a firm hires on worker and eliminates four units of capital, and hires one more worker and replaces three more units of capital, keeping output constant then?
Perfectly vertical
If a good is produced only by manual labor, the graph of the isoquant will be?
Price to increase
If a quantity shortage exists in a market, the natural tendency is for?
The firm moves to a new isoquant
If capital is fixed, but a firm varies labor?
Marginal product curve is negatively slopped
If each additional unit of input increases total output at a smaller rate then?
The current supply curve shifts to the left
If firms expect prices to be higher in the future and the product is not perishable, then?
Price ad quantity would both decrease
If steak is a normal good, what would happen to equilibrium price and quantity during a recession?
Complements
If the cross-price elasticity between good A and B is negative, we know the goods are?
Zero because first derivative of a linear function is a constant which means a horizontal line
If the graph of a production function which uses only labor is a linear function, then the slope of MPPL is?
Positive
If the last unit of input increases total product we know that the marginal product is?
A2>0
If two goods are complements, then a2?
Decreases
If we move downward along an isoquant, the MRTS?
Decrease
In an elastic demand scenario, the firm should do what to the price to increase revenue?
Perfect substitutes
Isoquants that are downward-sloping straight lines imply that the inputs are?
Must be used together in a certain propotion
L-shaped isoquants imply that production requires that the inputs?
Elasticity
Measures how responsive quantity is to changes in price
As labor increases and capital decreased, MPL falls while MPK rises
One way to explain the convexity of isoquants is to say that?
A seller is paid minus the cost of production
Producer surplus is the amount?
Production Function
Represents the technology available for turning inputs into outputs
All inputs increase proportionately
Returns to scale refers to the change in output when?
Slope of an isoquant
The decrease in capital necessary to keep output constant when labor increases by one unite
A perfectly elastic good
The demand curve for a good is horizontal when it is?
Marginal product is negative
Total product begins to fall when?
Normal good Inferior good
What does it mean when a3>0 and when a3<0?
Linear
What production function is an input for perfect substitutions?
Are unable to sell all they want due to decrease in demand
When the market price is above the equilibrium price, suppliers?
Decrease
When there is a market surplus, the market price will?
Capital is not productive
With capital on the vertical axis and labor on the horizontal axis, vertical isoquants imply that?
In which at least one input is fixed
With respect to production, the short run is best defined as a time period?