BEPP250 Midterm I - Custom Scholars
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# BEPP250 Midterm I

question
supply curve represents...
willingness to sell
question
demand curve represents...
willingness to pay
question
when demand goes up...
price goes up, quantity goes up
question
when supply goes up
price goes down, quantity goes up
question
solution for market equilibrium is when...
demand equals supply
question
elasticity of demand
how many % D changes as a result of a 1% increase in price
question
elasticity of supply
how many % S changes as a result of a 1% increase in price
question
elasticity of x with respect to y
(dX/dY) * y/x
question
formula for price elasticity of demand
(dD/dP) * P/D
question
a perfectly inelastic curve is a...
vertical line
question
a perfectly elastic curve is a...
horizontal line
question
when a curve is inelastic...
quantity demanded does not change a lot with price
question
when a curve is elastic...
quantity demanded changes a lot with price
question
formula for budget constraint (consumer's problem)
m = p1x1 + p2x2
question
formula for indifference curve (consumer's problem)
u(x1, x2) = y
question
three properties of indifference curves
there's a curve through every bundle, curves cannot cross, bundles in the upper right are better
question
utility is an...
ordinal measure (magnitude does not matter; order matters)
question
how to calculate marginal utility
partial derivative of utility function
question
the form of a Cobb Douglas utility function
x1^a * x2^b OR alogx1 + blogx2
question
the form of a quasilinear utility function
v(x1) + x2
question
spend all money equation
m = p1x1 + p2x2
question
bang for buck equation
MU1/p1 = MU2/p2
question
how to solve the consumer's problem (not quasilinear)
1) solve spend all money, 2) plug into bang for buck
question
how to solve the consumer's problem (quasilinear)
Set marginal utility of x (v'(x)) = p
question
why is bang for buck equation important?
want utility of \$1 spent on good 1 to be same as \$1 spent on good 2
question
Production function tells you
what combination of inputs are necessary to produce a quantity y
question
marginal product
increase in output that arises from one more unit of input (partial derivative)
question
how to solve the cost minimization problem
1) bang for buck, 2) produce y, 3) build cost function
question
demand function for an input
in terms of price and income
question
fixed cost
cost that doesn't change with the amount of output
question
variable cost
cost that changes based on amount of output
question
quasi-fixed cost
cost that is incurred with a positive quantity, independent of amount of output
question
long-term market price
minimum of AC
question
short-run market price should be greater than...
minimum of AVC
question
firm should produce more if...
price > MC
question
average cost equation
c(y)/y
question
marginal cost equation
c'(y)
question
average variable cost equation
cv(y)/y
question
how to find returns to scale
take derivative of AC
question
increasing returns to scale when...
AC decreasing
question
natural monopolies happen when...
increasing returns to scale
question
four assumptions of perfect competition
undifferentiated products, perfect information, buyers are small, sellers are small
question
in the short run, produce quantity where...
p = mc(y)
question
firm profit equation
(p-AC) * y
question
why should you produce at a loss in the short-run?
cover AVC when selling, produce more to cover some fixed costs
question
perfectly elastic
elasticity = infinity
question
perfectly inelastic
elasticity = 0
question
if supply goes up, will quantity go up by that much?
no, unless demand is perfectly elastic (horizontal line)
question
when MP1/w1 < MP2/w2 what should firm do?
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
price > AVC and price < AC
question
Takeaway of used car reading
High demand for used cars; low supply of new cars means low supply of used cars
question
Takeaway of oil prices discussion
Very steep supply curve; small changes in demand yield large changes in price
question
Takeaway of controlled slowdown of the housing market
FICO scores higher; no systematic weaknesses in lending standards; interest rates not likely to crash market
question
Takeaway of the changing American consumer
Consumers splurged on luxury products, appliances, cars, furniture; lots of fun spending
question
Takeaway of Amazon digitization/robots
Amazon using robots for all tasks; robots increasing worker injury rates; Amazon trying to upskill workers
question
America's railways very profitable; strong demand for goods has overcome disruptions; shortage of labor in trucking industry
question
Takeaway of streaming companies
Lots of competitors in the streaming industry; growth in subscribers is slowing; costs of filming growing
question
Takeaway of private student loans
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...
go down
question
What happened to average US household wealth during the pandemic recession?
Households had lower income but higher savings, and household wealth increased
question
short-run price function
set p = MC, solve for y in terms of p
1 of 61
question
supply curve represents...
willingness to sell
question
demand curve represents...
willingness to pay
question
when demand goes up...
price goes up, quantity goes up
question
when supply goes up
price goes down, quantity goes up
question
solution for market equilibrium is when...
demand equals supply
question
elasticity of demand
how many % D changes as a result of a 1% increase in price
question
elasticity of supply
how many % S changes as a result of a 1% increase in price
question
elasticity of x with respect to y
(dX/dY) * y/x
question
formula for price elasticity of demand
(dD/dP) * P/D
question
a perfectly inelastic curve is a...
vertical line
question
a perfectly elastic curve is a...
horizontal line
question
when a curve is inelastic...
quantity demanded does not change a lot with price
question
when a curve is elastic...
quantity demanded changes a lot with price
question
formula for budget constraint (consumer's problem)
m = p1x1 + p2x2
question
formula for indifference curve (consumer's problem)
u(x1, x2) = y
question
three properties of indifference curves
there's a curve through every bundle, curves cannot cross, bundles in the upper right are better
question
utility is an...
ordinal measure (magnitude does not matter; order matters)
question
how to calculate marginal utility
partial derivative of utility function
question
the form of a Cobb Douglas utility function
x1^a * x2^b OR alogx1 + blogx2
question
the form of a quasilinear utility function
v(x1) + x2
question
spend all money equation
m = p1x1 + p2x2
question
bang for buck equation
MU1/p1 = MU2/p2
question
how to solve the consumer's problem (not quasilinear)
1) solve spend all money, 2) plug into bang for buck
question
how to solve the consumer's problem (quasilinear)
Set marginal utility of x (v'(x)) = p
question
why is bang for buck equation important?
want utility of \$1 spent on good 1 to be same as \$1 spent on good 2
question
Production function tells you
what combination of inputs are necessary to produce a quantity y
question
marginal product
increase in output that arises from one more unit of input (partial derivative)
question
how to solve the cost minimization problem
1) bang for buck, 2) produce y, 3) build cost function
question
demand function for an input
in terms of price and income
question
fixed cost
cost that doesn't change with the amount of output
question
variable cost
cost that changes based on amount of output
question
quasi-fixed cost
cost that is incurred with a positive quantity, independent of amount of output
question
long-term market price
minimum of AC
question
short-run market price should be greater than...
minimum of AVC
question
firm should produce more if...
price > MC
question
average cost equation
c(y)/y
question
marginal cost equation
c'(y)
question
average variable cost equation
cv(y)/y
question
how to find returns to scale
take derivative of AC
question
increasing returns to scale when...
AC decreasing
question
natural monopolies happen when...
increasing returns to scale
question
four assumptions of perfect competition
undifferentiated products, perfect information, buyers are small, sellers are small
question
in the short run, produce quantity where...
p = mc(y)
question
firm profit equation
(p-AC) * y
question
why should you produce at a loss in the short-run?
cover AVC when selling, produce more to cover some fixed costs
question
perfectly elastic
elasticity = infinity
question
perfectly inelastic
elasticity = 0
question
if supply goes up, will quantity go up by that much?
no, unless demand is perfectly elastic (horizontal line)
question
when MP1/w1 < MP2/w2 what should firm do?
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
price > AVC and price < AC
question
Takeaway of used car reading
High demand for used cars; low supply of new cars means low supply of used cars
question
Takeaway of oil prices discussion
Very steep supply curve; small changes in demand yield large changes in price
question
Takeaway of controlled slowdown of the housing market
FICO scores higher; no systematic weaknesses in lending standards; interest rates not likely to crash market
question
Takeaway of the changing American consumer
Consumers splurged on luxury products, appliances, cars, furniture; lots of fun spending
question
Takeaway of Amazon digitization/robots
Amazon using robots for all tasks; robots increasing worker injury rates; Amazon trying to upskill workers
question
America's railways very profitable; strong demand for goods has overcome disruptions; shortage of labor in trucking industry
question
Takeaway of streaming companies
Lots of competitors in the streaming industry; growth in subscribers is slowing; costs of filming growing
question
Takeaway of private student loans
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...
go down
question
What happened to average US household wealth during the pandemic recession?
Households had lower income but higher savings, and household wealth increased
question
short-run price function
set p = MC, solve for y in terms of p

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