BEPP250 Midterm I

question

supply curve represents...

answer

willingness to sell

question

demand curve represents...

answer

willingness to pay

question

when demand goes up...

answer

price goes up, quantity goes up

question

when supply goes up

answer

price goes down, quantity goes up

question

solution for market equilibrium is when...

answer

demand equals supply

question

elasticity of demand

answer

how many % D changes as a result of a 1% increase in price

question

elasticity of supply

answer

how many % S changes as a result of a 1% increase in price

question

elasticity of x with respect to y

answer

(dX/dY) * y/x

question

formula for price elasticity of demand

answer

(dD/dP) * P/D

question

a perfectly inelastic curve is a...

answer

vertical line

question

a perfectly elastic curve is a...

answer

horizontal line

question

when a curve is inelastic...

answer

quantity demanded does not change a lot with price

question

when a curve is elastic...

answer

quantity demanded changes a lot with price

question

formula for budget constraint (consumer's problem)

answer

m = p1x1 + p2x2

question

formula for indifference curve (consumer's problem)

answer

u(x1, x2) = y

question

three properties of indifference curves

answer

there's a curve through every bundle, curves cannot cross, bundles in the upper right are better

question

utility is an...

answer

ordinal measure (magnitude does not matter; order matters)

question

how to calculate marginal utility

answer

partial derivative of utility function

question

the form of a Cobb Douglas utility function

answer

x1^a * x2^b OR alogx1 + blogx2

question

the form of a quasilinear utility function

answer

v(x1) + x2

question

spend all money equation

answer

m = p1x1 + p2x2

question

bang for buck equation

answer

MU1/p1 = MU2/p2

question

how to solve the consumer's problem (not quasilinear)

answer

1) solve spend all money, 2) plug into bang for buck

question

how to solve the consumer's problem (quasilinear)

answer

Set marginal utility of x (v'(x)) = p

question

why is bang for buck equation important?

answer

want utility of $1 spent on good 1 to be same as $1 spent on good 2

question

Production function tells you

answer

what combination of inputs are necessary to produce a quantity y

question

marginal product

answer

increase in output that arises from one more unit of input (partial derivative)

question

how to solve the cost minimization problem

answer

1) bang for buck, 2) produce y, 3) build cost function

question

demand function for an input

answer

in terms of price and income

question

fixed cost

answer

cost that doesn't change with the amount of output

question

variable cost

answer

cost that changes based on amount of output

question

quasi-fixed cost

answer

cost that is incurred with a positive quantity, independent of amount of output

question

long-term market price

answer

minimum of AC

question

short-run market price should be greater than...

answer

minimum of AVC

question

firm should produce more if...

answer

price > MC

question

average cost equation

answer

c(y)/y

question

marginal cost equation

answer

c'(y)

question

average variable cost equation

answer

cv(y)/y

question

how to find returns to scale

answer

take derivative of AC

question

increasing returns to scale when...

answer

AC decreasing

question

natural monopolies happen when...

answer

increasing returns to scale

question

four assumptions of perfect competition

answer

undifferentiated products, perfect information, buyers are small, sellers are small

question

in the short run, produce quantity where...

answer

p = mc(y)

question

firm profit equation

answer

(p-AC) * y

question

why should you produce at a loss in the short-run?

answer

cover AVC when selling, produce more to cover some fixed costs

question

perfectly elastic

answer

elasticity = infinity

question

perfectly inelastic

answer

elasticity = 0

question

if supply goes up, will quantity go up by that much?

answer

no, unless demand is perfectly elastic (horizontal line)

question

when MP1/w1 < MP2/w2 what should firm do?

answer

sell w1 and buy w2 until both sides equal

question

range of prices that in the short-run will result in the company making losses and yet producing

answer

price > AVC and price < AC

question

Takeaway of used car reading

answer

High demand for used cars; low supply of new cars means low supply of used cars

question

Takeaway of oil prices discussion

answer

Very steep supply curve; small changes in demand yield large changes in price

question

Takeaway of controlled slowdown of the housing market

answer

FICO scores higher; no systematic weaknesses in lending standards; interest rates not likely to crash market

question

Takeaway of the changing American consumer

answer

Consumers splurged on luxury products, appliances, cars, furniture; lots of fun spending

question

Takeaway of Amazon digitization/robots

answer

Amazon using robots for all tasks; robots increasing worker injury rates; Amazon trying to upskill workers

question

Takeaway of American railroad reading

answer

America's railways very profitable; strong demand for goods has overcome disruptions; shortage of labor in trucking industry

question

Takeaway of streaming companies

answer

Lots of competitors in the streaming industry; growth in subscribers is slowing; costs of filming growing

question

Takeaway of private student loans

answer

Biden wiped out $10,000 in student loans for people making less than $125k; critics said it benefits high-income individuals

question

If demand elasticity is greater than 1 and prices go up then revenues will...

answer

go down

question

What happened to average US household wealth during the pandemic recession?

answer

Households had lower income but higher savings, and household wealth increased

question

short-run price function

answer

set p = MC, solve for y in terms of p

1 of 61

question

supply curve represents...

answer

willingness to sell

question

demand curve represents...

answer

willingness to pay

question

when demand goes up...

answer

price goes up, quantity goes up

question

when supply goes up

answer

price goes down, quantity goes up

question

solution for market equilibrium is when...

answer

demand equals supply

question

elasticity of demand

answer

how many % D changes as a result of a 1% increase in price

question

elasticity of supply

answer

how many % S changes as a result of a 1% increase in price

question

elasticity of x with respect to y

answer

(dX/dY) * y/x

question

formula for price elasticity of demand

answer

(dD/dP) * P/D

question

a perfectly inelastic curve is a...

answer

vertical line

question

a perfectly elastic curve is a...

answer

horizontal line

question

when a curve is inelastic...

answer

quantity demanded does not change a lot with price

question

when a curve is elastic...

answer

quantity demanded changes a lot with price

question

formula for budget constraint (consumer's problem)

answer

m = p1x1 + p2x2

question

formula for indifference curve (consumer's problem)

answer

u(x1, x2) = y

question

three properties of indifference curves

answer

there's a curve through every bundle, curves cannot cross, bundles in the upper right are better

question

utility is an...

answer

ordinal measure (magnitude does not matter; order matters)

question

how to calculate marginal utility

answer

partial derivative of utility function

question

the form of a Cobb Douglas utility function

answer

x1^a * x2^b OR alogx1 + blogx2

question

the form of a quasilinear utility function

answer

v(x1) + x2

question

spend all money equation

answer

m = p1x1 + p2x2

question

bang for buck equation

answer

MU1/p1 = MU2/p2

question

how to solve the consumer's problem (not quasilinear)

answer

1) solve spend all money, 2) plug into bang for buck

question

how to solve the consumer's problem (quasilinear)

answer

Set marginal utility of x (v'(x)) = p

question

why is bang for buck equation important?

answer

want utility of $1 spent on good 1 to be same as $1 spent on good 2

question

Production function tells you

answer

what combination of inputs are necessary to produce a quantity y

question

marginal product

answer

increase in output that arises from one more unit of input (partial derivative)

question

how to solve the cost minimization problem

answer

1) bang for buck, 2) produce y, 3) build cost function

question

demand function for an input

answer

in terms of price and income

question

fixed cost

answer

cost that doesn't change with the amount of output

question

variable cost

answer

cost that changes based on amount of output

question

quasi-fixed cost

answer

cost that is incurred with a positive quantity, independent of amount of output

question

long-term market price

answer

minimum of AC

question

short-run market price should be greater than...

answer

minimum of AVC

question

firm should produce more if...

answer

price > MC

question

average cost equation

answer

c(y)/y

question

marginal cost equation

answer

c'(y)

question

average variable cost equation

answer

cv(y)/y

question

how to find returns to scale

answer

take derivative of AC

question

increasing returns to scale when...

answer

AC decreasing

question

natural monopolies happen when...

answer

increasing returns to scale

question

four assumptions of perfect competition

answer

undifferentiated products, perfect information, buyers are small, sellers are small

question

in the short run, produce quantity where...

answer

p = mc(y)

question

firm profit equation

answer

(p-AC) * y

question

why should you produce at a loss in the short-run?

answer

cover AVC when selling, produce more to cover some fixed costs

question

perfectly elastic

answer

elasticity = infinity

question

perfectly inelastic

answer

elasticity = 0

question

if supply goes up, will quantity go up by that much?

answer

no, unless demand is perfectly elastic (horizontal line)

question

when MP1/w1 < MP2/w2 what should firm do?

answer

sell w1 and buy w2 until both sides equal

question

range of prices that in the short-run will result in the company making losses and yet producing

answer

price > AVC and price < AC

question

Takeaway of used car reading

answer

High demand for used cars; low supply of new cars means low supply of used cars

question

Takeaway of oil prices discussion

answer

Very steep supply curve; small changes in demand yield large changes in price

question

Takeaway of controlled slowdown of the housing market

answer

FICO scores higher; no systematic weaknesses in lending standards; interest rates not likely to crash market

question

Takeaway of the changing American consumer

answer

Consumers splurged on luxury products, appliances, cars, furniture; lots of fun spending

question

Takeaway of Amazon digitization/robots

answer

Amazon using robots for all tasks; robots increasing worker injury rates; Amazon trying to upskill workers

question

Takeaway of American railroad reading

answer

America's railways very profitable; strong demand for goods has overcome disruptions; shortage of labor in trucking industry

question

Takeaway of streaming companies

answer

Lots of competitors in the streaming industry; growth in subscribers is slowing; costs of filming growing

question

Takeaway of private student loans

answer

Biden wiped out $10,000 in student loans for people making less than $125k; critics said it benefits high-income individuals

question

If demand elasticity is greater than 1 and prices go up then revenues will...

answer

go down

question

What happened to average US household wealth during the pandemic recession?

answer

Households had lower income but higher savings, and household wealth increased

question

short-run price function

answer

set p = MC, solve for y in terms of p

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BEPP250 Midterm I

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