Econ Chapter 5 Test
Which of the following formulas should be used to calculate price elasticity of supply?
% change in Q OVER % change in price
elasticity of supply
%change in quantity supplied/%change in price
5 determinants of supply
1. Technology 2. Number of producers 3. Price of inputs 4. Expectations 5. Price of related goods
When the price of pickles increased 20%, percent, the quantity supplied of pickles increased 80%, percent. What is the price elasticity of supply and how is that value interpreted?
4 Elastic
supply curve
A curve that shows the relationship between the price of a product and the quantity of the product supplied.
Name one thing that had happened to the young boy who loved to watch the birds
A scar on his head from being hit / neglected
short-run
A supply curve that shows the quantity of a product a firm in a purely competitive industry will offer to sell at various prices in the short run; the portion of the firm's short-run marginal cost curve that lies above its average-variable-cost curve.
Name some of the cultural blocks that were seen in the Devils Footpath
Education, health care, condoms, etc.
short run losses
MR is below minimum ATC and above minimum AVC curve, firm will have to consider whether to shut down its operation in the future
shutting down
Only valuable option when Production cost outruns money coming in
Supply vs. Quantity Supplied
Supply is the curve, but quantity supplied is a point on the curve.
Law of Supply
Tendency of suppliers to offer more of a good at a higher price
supply
The amount of goods available
what is "the devils footpath"
a 5,000 mile journey through conflict zones in Africa, including the Sudan.
Fixed cost
a cost that does not change, no matter how much of a good is produced
long-run average cost curve
a curve that shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed
long-run
a curve that shows the relationship in the long run between the price level and the quantity supplied
leftward shift of the supply curve
a result of cutting production
supply schedule
a table that shows the relationship between the price of a good and the quantity supplied
Jody owns a used CD store, where she buys and sells used CDs. Which of the following will cause a movement along her supply curve, and which will cause a shift in her supply curve?
a) Another CD store opens down the street that also buys used CDs, so she now has to pay more for the used CDs before she can sell them again. b) The landlord now includes utilities in her rent payment, so she no longer has to pay for electricity. c) There is an Elvis revival, and the market price of used Elvis CDs goes up.
fixed resources
any resource that cannot be varied in the short run
What causes a shift in the Supply Curve
causing a different quantity to be supplied at any given price, include input prices, natural conditions, changes in technology, and government taxes, regulations, or subsidies.
What causes a movement along the supply curve?
change in price
marginal cost formula
change in total cost / change in quantity
variable costs
costs that vary with the quantity of output produced
total cost
fixed costs plus variable costs
rightward shift of the supply curve
increase in supply
What is a firms minimum acceptable price in the short run?
price high enough to ensure that total revenue at least covers fixed cost.
marginal product curve
shows how marginal product is related to a variable input. is the slope of the total product curve. upward slope is due to increasing marginal returns; downward slope is due to decreasing marginal returns. reflects the law of diminishing marginal returns.
Marginal cost curve
shows how the cost of producing one more unit depends on the quantity that has already been produced
marginal revenue
the additional income from selling one more unit of a good; sometimes equal to price
marginal product
the increase in output that arises from an additional unit of input
law of diminishing returns
the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline
economies of scale
the property whereby long-run average total cost falls as the quantity of output increases
total product
total output produced by the firm
Profit formula
total revenue - total cost
