Final Econ 2113
When the price of a product rises this could mean that...
the supply curve has shifted to the left
Unregulated markets are beneficial because
they generate the largest possible total surplus
Businesses know if they raise prices...
they will sell fewer units
A variable cost in the short run would be
wages for employees
Necessities have ____ demand
inelastic
price elasticity of supply
measures the responsiveness of the quantity supplied to a change in price
A professional hockey arena has a maximum seating capacity of 20,000. The price elasticity of supply is-
perfectly inelastic
Which of the following is a characteristic of a monopoly but not of a competitive market?
price>marginal cost
Normative statement
statement which describes how the world should be
Positive statement
statement which describes the world as it is
in the short run, if you are above the variable cost you are going to...
stay open
Absolute advantage
the ability to produce a good using fewer inputs than another producer
Total Revenue
the amount that consumers pay and sellers receive for goods and services (PxQ)
Producer Surplus
the difference between the willingness to sell a good and the price received for that good
Law of increasing relative cost
the opportunity cost of producing a good rises as a society produces more of it
When the price of an hour of tutoring increases,
the quantity demanded for tutoring decreases.
Why are binding price ceiling laws passed?
They make a good less expensive for those customers who are able to purchase the good in the legal market.
Demand Schedule
a table that shows the relationship between the price of a good and the quantity demanded
Has a negative cross-price elasticity of demand
coffee and cream
In the long run...
deadweight loss from a tax will be greater than it is in the short run
The demand curve for the product of a firm in a competitive market is __________.
horizontal
When can a firm lower prices and still increase revenue?
when the demand is elastic
The incidence of a tax reflects
who bears the burden of the tax
price elasticity of demand
a measure of responsiveness of quantity demanded to a change in price
Elasticity
a measure of the responsiveness of buyers and sellers to changes in price or income
natural monopoly
a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
Ceteris Paribus
economists examine a change in one variable while holding everything else constant
Luxuries have ____ demand
elastic
In the short run, the firm will shut down when
$<AVC
If the firm is maximizing the profits, profit is represented by the area
(A-B)xC
In the short run, ATC and AVC converge as output increases because
AFC continually decrease
Perfectly inelastic demand
Consumer will buy no matter what the price
What event would cause a supply curve to shift outward?
Firms entering the market
Which of the following would cause the demand curve to shift to the right?
Income decreases for an inferior good
When the average total cost curve is downward sloping, what must be true about the marginal cost curve?
It is below the average total cost curve.
Why does a surplus exist under a binding price floor?
It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.
Economists believe that optimal decisions are made up to the point where...
Marginal benefits=marginal costs
How would an economist explain a teenager's continued unemployment where there exists a minimum wage?
The minimum wage law made it such that the quantity of labor willing to work at that wage was greater than the quantity of labor demanded at that wage.
If a perfectly competitive firm is maximizing profits in the short run, what does this mean?
The profit can be negative, zero, or positive.
A binding price ceiling will have which of the following consequences?
The quantity demanded will always exceed the quantity supplied
Comparitive advantage
The situation where someone can produce a good at lower opportunity cost than someone else can
cross-price elasticity of demand
a measure of how much the quantity demanded of one good responds to a change in the price of a related good
Which of the following is a microeconomic question?
What are the variables that determine the price of a specific good?
What good is most likely to have an income elasticity of demand equal to 8?
a five star hotel
The pollution emitted by a car is an example of a
external cost
The Coase theorem suggests that private parties
can negotiate to correct a negative externality if there are no barriers to negotiation
Fixed costs
costs that remain constant as output changes; rent
Variable costs
costs that vary with the quantity of output produced; wages, utilities
Deadweight loss
decrease in economic activity caused by market distortions
Consumer Surplus
difference between willingness to pay for a good and the price actually paid to get the good
The difference between the price consumers pay and the price sellers receive after a tax is imposed is equal to the
dollar amount of the tax
Demand curve for the product of monopolist is ________.
downward sloping
If a firm s average total costs decrease as it increases its scale of production, the firm is experiencing
economies of scale
If a firm's average total costs decrease as it increases its scale of production, the firm is experiencing:
economies of scale
A major reason why public goods are NOT supplied in the market is the
free-rider problem
The amount an individual pays for gasoline for his or her car is an example of a
internal cost
in the long run supply is
most elastic
in the short run supply is
most inelastic
Control of resources, problems raising capital, and economies of scale are all examples of
natural barriers
Externalities exist because
property rights are not clearly defined
Demand is inelastic if
quantity demanded changes a small amount as the result of the price change
Demand is elastic if
quantity demanded changes significantly as the result of a price change
The tragedy of the commons occurs because the good being produced is
rival and non excludable
It is said that taxes drive a wedge between prices. This statement is true because taxes cause
the consumer price to increase and the producer price to decrease
The flatter the demand curve...
the greater the price elasticity of demand