MicroEconomics

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What is an example of a private non-profit?

A private school not keeping a crazy teacher around

For many types of production ________ can produce more efficiently than households.

Firms

What is the absence of residual claimants in nonprofit firms likely to lead to?

1) More Shirking 2) Top administrators spending excess funds to benefit themselves

List two of the determinants of demand.

1- number of buyers 2-preferences

Who might try to limit shirking behavior?

A Manager who is a residual client

Cost of Production (Decrease)

A decrease in the cost of production will cause an increase in supply.

Buisness Firms

All types of business firms are assumed to pursue profit-maximization as their chief goal.

Cost of Production (increase)

An increase in the cost of production will cause a decrease in supply (the supply curve shifts left)

What is the definition of shirking?

Avoiding the performance of an obligation

What is an example of a nonprofit firm?

Church

The price and quantity supplied of a good one are _______ related.

DIRECTLY RELATED ** (Test Q)

What happens to demand if income goes down?

Demand goes down

What is the formula for Cross Elasticity of Demand?

Ec= Percentage change in quantity of demand good Y / Percentage change in $ Good X

What is the formula for Price elasticity of demand?

Ed = percentage change in quantity demanded / percentage change in price

A decrease in the number of buyers will cause equilibrium price to increase. True or False?

False

Surplus

If a market price is above the equilibrium price, the quantity supplied will exceed the quantity demanded

Shortage

If the market price is below the equilibrium price, the quantity demanded will exceed the quantity supplied.

What are the 5 determinants of demand?

Income, Preferences, Prices of related goods, Number of buyers, and Expectations of future price.

If any change happens in the 5 determinants of demand will it change the quantity demand?

Yes

What are the three types of Business Firms?

Proprietorship, Partnership, and corporations

Change in Demand

Refers to a shift in demand curve, and it is caused by change in the determinants of demand

What is an example of the principle-agent problem?

Shirking

A price below equilibrium results in __________

Shortage

___________ is the willingness and ability of SELLERS to sell different quantities of a good at different prices.

Supply

A price above equilibrium results in a ___________

Surplus

_________ production may be more productive than individual production.

Team

Extensive use of Capital

Team production may allow for the use of large amounts of highly specialized and highly productive capital.

Privat Non-Profit Firm is finance by what?

The voluntary actions of private individuals (costumers or contributors)

What is the biggest factor affecting price elasticity of supply?

Time

Firms can reduce _______

Transaction costs

A price floor will tend to create a surplus. true or False?

True

True or False. A proprietorship is easy to form and dissolve.

True

True or False. Partnerships can specialize more than proprietorships.

True. Parters have unlimited liability.

Why do we care about Price Elasticity?

We care because it helps us predict burden of a new tax, or change in price on revenue.

Equilibrium

Where two lines intersect on the graph

What is a proprietorship?

a firm owned and operated by ONE individual.

What is a partnership?

a firm owned and operated by TWO or more co-owners.

Free market

a market in which price is free to adjust

Free Market

a market in which price is free to adjust up or down in response to demand and supply.

Price Ceiling

a maximum legal price

Elasticity

a measure of the responsiveness of one variable to changes in another variable

Utility

a measure of the satisfaction received from the consumption of a good.

Price Floor

a minimum legal price

What is a corporation?

an organization owned by stockholders that is considered a separate legal person, separate from its owners.

What happens to demand if income goes up?

demand increases

Nonprofit Firms

have no residual claimants. They are not seeking to maximize profits

Specialization of Labor

in individual production, the individual must attempt to master every step in the production process

Public non-profit firms are financed by what?

involuntary contributions (Taxes)

Change in Quantity Demanded

refers to a movement along the demand curve, and it is caused by a change in price

Marginal Utility

the additional Utility received from consuming an additional unit of a good.

Law of diminishing marginal Utility

the marginal utility from consuming additional units of a good eventually declines

Law of Demand

the price and the quantity demanded of a good are inversely related

Law of Supply

the price and the quantity supplied of a good are directly related.

Equilibrium Price

the price where quantity demanded equals quantity supplied.

Supply

the willingness and ability of sellers to sell different quantities of a good at different prices.

Demand

the willingness and ability to buy different quantities of a good at different prices

What is a disadvantage of a proprietorship?

they have unlimited liability (personal assets are subject to business debts)


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