Econ 22

a surplus of 160 units would be encountered if the price was

$1.60

suppose the price elasticity of demand for bread is 0.20. If the price of bread falls by 10 percent, the quantity demanded will increase by

2 percent and total expenditures on bread will rise

Over time, the equilibrium price of a gigabyte of computer memory has fallen conclude that

increases in the supply of computer memory have exceeded increases in demand

the production possibility curve

is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced

the demand for a necessity whose cost is a small portion of one's total income is

relatively price inelastic

the elasticity of demand for a product is likely to be greater

the greater the amount of time over which buyers adjust to a price change

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that

the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic

in a competitive market economy firms will select the least-cost production technique because: to do so will maximize the firms profit

to do so will maximize the firms profits

what two conditions must hold for a competitive market to produce efficient outcomes

Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay

At the equilibrium price

There are no pressures on price to either rise or fall

most demand curves are relatively elastic in the upper-left portion because the original price

from which the percentage price change is calculated is small and the original quantity from which the percentage change in quantity is calculated is large

unlike a private good, a public good

has benefits available to all, including nonpayers

the law of increasing opportunity costs states that

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so

if quantity demanded is completely unresponsive to price changes, demand is

perfectly inelastic

Allocative efficiency is concerned with

producing every good with the least-cost combination of inputs

non rivalry and non excludability are the main characteristics of

public goods

according to the concept of the invisible hand, if susie opens and operates a profitable childcare center

she has served society's interest by providing a desired good or service

an improvement in production technology

shift the supply curve to the right