Econ

For two goods, X and Y, to be classified as substitutes, it must be the case that:

when the price of X rises, the demand for Y increases.

At a price of 25 cents, the firm should produce 80 doughnuts per day because at that quantity, marginal cost equals 25 cents. At 80 doughnuts a day, the firm's total revenue is

$20 (= 0.25 × 80) and its total cost is $12 (= 0.15 × 80), so its economic profit is $8.

If the government provides a subsidy of $500 per ton, then consumer surplus will be ______ per day.

$9,000

A firm's profit equals

(P − ATC) × Q [(price minus average total cost) times the quantity sold].

If 20 percent increase in the price of a good leads to a 60 percent decrease in the quantity demanded, then what is the price elasticity of demand?

3

Which of the following will cause an increase market supply?

A technological innovation that lowers the marginal cost of producing the good

If restaurants could charge no more than $25 per meal, this would lower both the amount that sellers receive for a meal and the number of meals sold.

As a result, producer surplus would fall.

Consumer surplus is the area of the triangle below the demand curve and above the equilibrium price.

The area of any triangle is equal to ½(b × h), where b = base and h = height. So here, consumer surplus is equal to ½(5 × 3) = $7.50.

Producer surplus is the area of the triangular region below market price and above the supply curve.

The area of any triangle is ½ × base × height, so producer surplus in this market equals ½ × 10 × $25.

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to:

a decrease in the firms supply

The long run is best defined as

a period of time sufficiently long that all factors of production are variable.

The short run is best defined as

a period of time sufficiently short that at least one factor of production is fixed.

Perfectly competitive market =

all companies sell the same product

According to the law of diminishing marginal utility:

as you consume less of something, your marginal utility from consuming that good will increase.

As the market price of this good increases, the quantity produced by this seller will

increase

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. After the third pie, your total utility:

decreased.

150 output and 3 workers, and 300 output and 8 workers =

diminishing returns

If a firm shuts down in the short run, then its:

economic loss will equal its fixed costs.

An increase in the price a firm receives for its output will lead the firm to:

expand output

If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should:

expand output to earn greater profits or smaller losses.

A price-taker faces a demand curve that is:

horizontal at the market price

An increase in the number of buyers

increases market demand.

Individual supply curves generally slope upward because of

increasing opportunity cost

The price elasticity of demand is typically expressed as a positive number because:

it's convenient to use absolute values.

If the demand for a good is highly elastic, that good is likely to have:

many close substitutes.

A seller's supply curve shows the seller's:

opportunity cost of producing an additional unit of output at each quantity.

If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that:the market for vegetables is

perfectly competitive.

If the market for butter is perfectly competitive, then the demand curve facing a firm that produces butter will be:

perfectly elastic.

The price elasticity of demand for a good measures the responsiveness of:

quantity demanded to a 1 percent change in price of that good

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:

shift into producing good Y.

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:

should not shut down if its total variable cost is less than $750.

Adam Smith's theory of the invisible hand posits that the most efficient allocation of resources is often achieved by:

the actions of independent, self-interested buyers and sellers.

If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:

the price elasticity of demand at the original price was greater than one.

Economic profit equals total revenue minus total cost. At 100 pizzas a day,

total revenue is $2,000 (= $20 × 100) and total cost is $1,350 (= $500 + $850).

Economic profit is equal to:

total revenue minus the sum of explicit and implicit costs.