Econ exam 2

price ceiling what and how effective?

A legal maximum price, that is below the equilibrium price.

price floor what and how effective?

A legal minimum price, that is above the equilibrium.

The law of diminishing marginal returns is the cause of ______________ marginal product and ______________ marginal cost.

decreasing, increasing

Rank the following from the least elastic (inelastic) to most elastic. demand for a dessert demand for Oreos demand for food demand for cookies

demand for food demand for a dessert demand for cookies demand for oreos

inelastic demand ________ mean that quantity demand is totally insensitive to changes in price

does not

if the additional revenue gained from higher prices is less than the losses from fewer pages sold, total revenue ____________

falls

If the additional revenue you make from increasing the price is greater than the loss from the fewer pages sold total revenue ____________

increases

Suppose that a factory is producing two automobiles per hour. The total fixed cost is $20,000. The total variable cost is $10,000. The average cost is ______________.

15000

At 1,000 units of output, the fixed cost of production is $12,500 per week. Total cost of producing 1,000 units per week is $28,500 per week. The variable cost of producing 1,000 units of output per week is equal to _____.

16000

Alicia is currently spending $6,000 per week on total variable costs to produce 500 hats. To produce 505 hats per week she would have to spend $6,100 per week. The marginal cost per hat is ______.

20

The production of 12,000 candy bars per day requires 60 workers. The average product of each worker is ______________ candy bars per day.

200

If at 500 units of output, total fixed cost is equal to $10,000 and total variable cost is equal to $15,000. Total cost is equal to _____.

25000

Santa Claus's only variable input is labor. The wage he must pay is 200 candy canes per week. What is Santa's total weekly variable cost if he hires 200 elves?

40000

Marcus has four employees. The four employees produce 55 floral arrangements in a day. Marcus hires a fifth employee. The five employees produce 60 floral arrangements in a day. The fifth employee's marginal product is __________.

5

statutory incidence

who bears the legal burden of a tax

economic incidence

who bears the true burden of a tax

Will a change in fixed costs change average cost?

yes

consumer surplus=

what you would be willing to pay vs what you actually pay

Juan wants to increase production at his confection shop. If he hires one more worker, he can increase output by 100 candies per week. A confection worker's weekly wage is $200. Juan's marginal cost of increasing output by 100 candies per week is ______.

$2

At 1,000 units of output the fixed cost of production is $12,500 per week. Total cost of producing 1,000 units per week is $28,500 per week. If labor is the only variable input and the weekly wage is $1,600, how much labor is being used produce 1,000 units of output?

10

The total cost of producing 1,000 units of output is equal to $55,000 per week. The total cost of producing 1,010 units is equal to $55,500 per week. The marginal cost of increasing output from 1,000 units per week to 1,010 units per week is .....

50

What does diminishing marginal productivity mean? As you increase the amount of a variable input, its average product eventually gets smaller. As you increase the amount of a variable input, its marginal product eventually gets smaller. As you increase the amount of a fixed input, its marginal product eventually gets smaller. As you increase the amount of a variable input, total output eventually declines.

As you increase the amount of a variable input, its marginal product eventually gets smaller.

What are two of the reasons that average cost tends to have a "bowl" shape? Fixed costs tend to dominate high levels of output and variable costs tend to dominate low levels of output Fixed costs tend to dominate low levels of output and variable costs tend to dominate high levels of output Fixed costs and variable costs tend to dominate low levels of output Fixed costs and variable costs tend to dominate high levels of output

Fixed costs tend to dominate low levels of output and variable costs tend to dominate high levels of output

If you were selling a product with an elasticity of 1.6 and you wanted to increase your revenue, what should you do to the price?

decrease the price

Diminishing Marginal Returns Causes...

Increasing Marginal Cost

Diminishing marginal returns means that marginal product will eventually ______________ and the total product function will ______________ as production increases.

decrease, not change

What would happen to the store's total revenue with this 10 percent price increase if quantity falls by 5 percent?

Since the percentage increase in price was greater than the percentage decrease in quantity they will continue to sell products but gain a higher return.

Compare the likely elasticity of demand for a college education with the likely elasticity of demand for a degree at one specific institution.

The demand for a college education is very inelastic, but the demand for a degree at one specific institution is elastic.

A production function can best be described as which of the following? -graphical depiction of what can and cannot be produced with a given amount of inputs -The quantity of inputs required to produce each unit of output in a given amount of time -The relationship between the quantity of inputs and quantity of outputs produced in a given amount of time -The quantity of outputs created by a given quantity of inputs in a given amount of time

The relationship between the quantity of inputs and quantity of outputs produced in a given amount of time

If demand were elastic, an increase of 10 percent in the price might cause a 20 percent decrease in quantity demanded. What would happen to the total revenue in this case?

The total revenue would decrease because substitutes, other options are available.

sin tax

a tax to discourage consumers from purchasing a product

When the federal government subsidizes higher education in the form of Pell grants to students, it results in

an increase in the demand for higher education

elastic formula

change in quantity demand/percent change in price >1

inelastic formula

change in quantity demanded/ percent change in price <1

marginal cost formula

change in total cost/change in total product

marginal product formula

change in total product/ change in labor

A business should ___________ (increase/decrease) the price of a good with an elastic demand if it wants to increase revenues.

decrease

# of substitutes will....

greater elasticity

marginal utility for all goods

has to be the same mua/pa= mub/pb= muc/pc

A business should ___________ (increase/decrease) the price of a good with an inelastic demand if it wants to increase revenues.

increase

If the quantity of an input is variable in the short run, its total cost will ______________ as output increases. decrease, increase, stay the same

increase

A major city was thinking about increasing its bus fares and commissioned a study to estimate the price elasticity of demand. The study estimated that elasticity was 0.4. What action should the city have taken to increase revenue from bus fares?

increase bus fares

if the % of income spent on a good is high

more elastic

if the good is a necessity

more inelastic

length of time for adjustment is longer

more inelastic

Situation A: When a $10 per unit tax is imposed on the producer of Bippies (a candy), the equilibrium price increases by $4. Situation B: When a $10 per unit tax is imposed on the producer of Bippies, the equilibrium price increases by $2. Based on the two situations above, Bippies in Situation A has a _________ elastic supply OR has a _________ elastic demand than exists in Situation B.

more, less

Will a change in fixed costs change marginal cost?

no

Will a change in fixed costs change total variable cost?

no

does a price ceiling or floor shift the curve?

no

what determines the elasticity of demand (4)

number of substitutes, Whether or not a Good is a Necessity, Percentage of Income Spent on Good, Length of Time for Adjustment

a change in price will also cause a change in ....

quantity supplied

Currently, the marginal product of labor is 45 units per week. The average product of labor at the current level of output is 32 units per week. If the employer hires one more worker, the marginal product of labor will be 47 units per week. The average product of labor will ______________. rise, fall, stay the same

rise

Variable cost ______________ while fixed cost ______________ as output ______________ in the short run.

rises, stays the same, increases

If the government imposes an effective price ceiling in a market, what will be the result?

shortage

inelastic demand curve vs elastic

steeper vs flatter

what is the primary influence on price elasticity of supply

the ability of the producer to increase production.

The Santa Fe minimum wage in 2017 will rise to $11.09. Describe how you would draw the supply and demand diagram.

the demand for jobs will go up but the supply will go down

total revenue =

the quantity sold

If the government taxes car producers, what will happen in the market for cars? on a graph

the supply curve will shift to the left

Marginal cost is the slope of _______.

the total cost curve

inelastic

the total demand is not sensitive to changes in price

elastic

the total demand is sensitive to changes in price

average cost formula

total cost at each output/total product

define total utility= vs marginal utility=

total level of satisfaction from consumption what happens with the next unit

average product of labor formula

total output produced/amount of labor hired

utilitarianism

try to maximize the total number of utils in society

the elasticity of a demand is = 1

unitary elasticity