Micro Exam 2 Practice
total revenue will decrease
a 25 percent decrease in the price of breakfast leads to a 20 percent increase in the quantity of cereal demanded as a result
elastic
a price cut will increase the total revenue a firm receives if the demand for its product is
complements
consider the market for 7up. Suppose the price of Sprite increases for $2 to $2.50 er bottle. As a result, the demand for 7up decreases from 295 to 279 bottles. What are these two goods considered
average total cost
cost per unit of output is the average cost of production
efficiency
defined as producing a minimum cost
unit elastic
demand is said to be when quantity demanded changes at the same proportion as the price
elastic
demand is said to be when quantity demanded is very responsive to changes in price
inelastic
demand is said to be when the quantity demanded is not very responsive to changes in price
shutdown point
if a firm's revenues do not cover its average variable costs, then that firm has reached its
the quantity of output
in order to determine the average variable cost, the firm's variable costs are divided by
variable costs
include all of the costs of production that increase with the quantity produced
elasticity
is a measure of how responsive one thing is when something else changes
total revenue
is calculated by taking the quantity of everything that is sold and multiplying it by the sale price
fixed inputs
is one that can be varied only in the long run
total revenues
is price times quantity
utility
is the same as preferences
price taker
many firms and identical product
price elasticity of demand
measures the responsiveness of quantity demanded to a change in price
substitution effect
occurs simultaneously with income effect
cost structure
of all firms can be broken down into some common underlying patterns
price taker
refers to a firm operating in a perfectly competitive market that must take the prevailing market for its product
marginal revenue
refers to additional gained from selling one more unit
demand curve
shows how price is related to quantity demanded
inferior
suppose the income elasticity of demand for 7up is -.50. In this instance, 7up is considered
increasing returns to scale
term is synonymous with economies of scale
marginal cost
term is used to describe the additional cost of producing one more unit
utility
the ability of a good or a service to satisfy wants is called
price elasticity of demand
the percentage change in quantity demanded divided by the percentage change in price
water is more of a necessity
the price elasticity for water is likely to be more inelastic that the price elasticity of demand for Domino's Pizza because
marginal costs
under perfect competition, any profit-maximizing producer faces a market price equal to its
inelastic
when demand is this consumers are not very responsive to changes in price
