ECON
If the demand for bicycles increases,
quantity supplied will increase.
A tax imposed on the sellers of a good will
raise the price paid by buyers and lower the equilibrium quantity.
A decrease in the price of flour will shift the supply curve for donuts
rightward, causing the equilibrium price to decrease and equilibrium quantity to increase.
Sunk or "historical" costs are costs
that have already been incurred as the result of past decisions.
Economic profit is
total revenues minus total costs.
Anne Teek works full time as the manager of her used furniture store in which she has invested $40,000. Last year, her total revenues were $90,000 and her costs were $60,000 for merchandise, gas, electricity, and other explicit-cost items. Ms. Teek pays herself a "competitive" salary of $30,000 per year. An economist would consider her profits for the year to be
$0 minus the opportunity cost of the $40,000 of capital invested in the store.
The firm's average total costs will be a minimum at the output level where the
marginal cost curve crosses the firm's average total cost curve.
As output is expanded, if MC is less than ATC,
ATC must be decreasing.
If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?
Encourage farmers to produce less milk.
In economics, the statement, "There is no such thing as a free lunch," refers to which of the following?
Production of a good requires the use of scarce resources regardless of whether it is supplied free to the consumers.
At a price of $5, Sam buys 10 units of a product; when the price increases to $6, Sam buys 8 units. Which of the following is correct about Sam's behavior?
Sam's quantity demanded has decreased, and his demand has not changed.
Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?
When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output.
Which of the following would increase the supply of laptop computers?
a technological improvement that lowers the cost of producing laptop computers
Which of the following would cause the price of automobiles to rise?
an increase in consumer income
cause the price of automobiles to rise
an increase in consumer income
Use the table below to answer the following question. "Units of Output" "Total Fixed Cost (dollars)" "Total Variable Cost (dollars)" 1 1,000 1,200 2 1,000 2,400 3 1,000 3,600 4 1,000 5,000 5 1,000 6,600
b. $1,500
If consumer purchases of a good are not very sensitive to the price of the good, this is illustrated by a
demand curve that is relatively steep (more vertical).
The law of diminishing returns
explains why marginal cost eventually increases as output expands.
An increase in the demand for tattoos will lead to a
higher price and a larger quantity sold.
If the demand for a good is relatively elastic, this means that consumer purchases of the good are
highly sensitive to the price of the good.
If the supply of a good is relatively elastic, this means that the quantity supplied of the good is
highly sensitive to the price of the good.
If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing
increasing returns to scale.
Consumer surplus
is the difference between total willingness to pay and the total amount actually paid.
If a firm enlarges its factory size and realizes higher average costs of production then
it has experienced diseconomies of scale.
Suppose that the federal government levies a 50-cent excise tax on gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the burden of the tax
will fall primarily on consumers.
