Econ Midterm

Q: unit elastic

change in price is exactly the same as the change in quantity, elasticity = 1

Q: elastic

a small change in price, quantity changes greatly, elasticity >1

question

Perfectly inelastic

answer

egardless of the change in price, quantity remains the same , elasticity = 0

question

inelastic

answer

for a big change in price, quantity changes slightly, elasticity <1

question

unit elastic

answer

change in price is exactly the same as the change in quantity, elasticity = 1

question

elastic

answer

a small change in price, quantity changes greatly, elasticity >1

question

perfectly elastic

answer

a really small change in price, quantity changes drastically, elasticity is infinity

question

price elasticity of demand

answer

the percentage change in quantity demanded relative to a percentage change in price

question

price elasticity of supply

answer

the percentage change in quantity supplied divided by the percentage change in price

question

income elasticity of demand

answer

% change in quantity demanded / % change in income

question

normal good

answer

a good that consumers demand more of when their incomes increase

question

inferior good

answer

a good that consumers demand less of when their incomes increase

question

substitute good

answer

Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises.

question

complimentary good

answer

Bought with another good, increase in price leads to decrease in demand of its complimentary good and vice versa

question

market equilibrium

answer

condition of price stability where the quantity demanded equals the quantity supplied

question

price ceiling

answer

A legal maximum on the price at which a good can be sold

question

price floor

answer

A legal minimum on the price at which a good can be sold

question

movement along the curve

answer

occurs when the price of the same good changes

question

shift in the curve

answer

occurs when something other than the good changes

question

the incidence of tax

answer

just a portion of tax that is shared between buyers and sellers

question

Price that buyers pay - tax

answer

= the price sellers receive

question

cross-price elasticity of demand

answer

the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good

question

If demand is more elastic than supply,

answer

it is easier for buyers to leave the market thus the burden is more on sellers as it is an elastic demand

question

insulin is an inelastic good which would be more of a burden on buyers who need the insulin while sellers can leave the market easier

answer

supply is more elastic than demand

question

consumer surplus

answer

the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays

question

producer surplus

answer

the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives

question

total surplus

answer

consumer surplus + producer surplus

question

dead weight loss

answer

the reduction in economic surplus resulting from a market not being in competitive equilibrium

question

explicit cost

answer

a cost that requires an outlay of money

question

implicit cost

answer

the opportunity cost that arises when a firm uses owner-supplied resources

question

production function

answer

relationship between quantity of inputs used to produce a good and the quantity of inputs uses to produce a good and the quantity of output of that good

question

marginal product

answer

the increase in output that arises from an additional unit of input

question

marginal product of labor

answer

the increase in the amount of output from an additional unit of labor

= change in Q (output)/ change in labor

question

Law of diminishing marginal product of labor

answer

marginal product of an input declines as the quantity of the input increases

question

marginal cost

answer

change in total cost / change in quantity

question

fixed costs

answer

Costs that do not vary with the quantity of output produced

question

variable costs

answer

costs that vary with the quantity of output produced

question

total cost

answer

fixed cost + variable cost

question

average fixed costs

answer

fixed costs / quantity

question

average variable cost

answer

variable costs / quantity

question

average total costs

answer

total costs / quantity

question

profit

answer

= total revenue - total costs

question

total revenue

answer

Price x Quantity

question

marginal revenue

answer

change in total revenue / change in quantity

question

efficient scale

answer

the quantity that minimizes ATC

MC/ATC = 1

question

average revenue

answer

total cost / quantity

question

change in profit

answer

MR-MC

question

Shutdown

answer

a short-run decision not to produce anything because of market conditions but continue to pay fixed costs

question

exit

answer

a long-run decision to leave the market

question

shutdown if

answer

TR<VC or P<AVC

question

exit if

answer

P is less than ATC

question

sunk cost

answer

a cost that has already been committed and cannot be recovered

question

enter the market if

answer

TR>TC or P>ATC

question

profit maximization

answer

MR=MC

question

perfect competition

answer

P = MR

question

Competitive equilibrium

answer

Price = MC

question

zero profit condition

answer

P = MC = ATC

1 of 55

question

Perfectly inelastic

answer

egardless of the change in price, quantity remains the same , elasticity = 0

question

inelastic

answer

for a big change in price, quantity changes slightly, elasticity <1

question

unit elastic

answer

change in price is exactly the same as the change in quantity, elasticity = 1

question

elastic

answer

a small change in price, quantity changes greatly, elasticity >1

question

perfectly elastic

answer

a really small change in price, quantity changes drastically, elasticity is infinity

question

price elasticity of demand

answer

the percentage change in quantity demanded relative to a percentage change in price

question

price elasticity of supply

answer

the percentage change in quantity supplied divided by the percentage change in price

question

income elasticity of demand

answer

% change in quantity demanded / % change in income

question

normal good

answer

a good that consumers demand more of when their incomes increase

question

inferior good

answer

a good that consumers demand less of when their incomes increase

question

substitute good

answer

question

complimentary good

answer

Bought with another good, increase in price leads to decrease in demand of its complimentary good and vice versa

question

market equilibrium

answer

condition of price stability where the quantity demanded equals the quantity supplied

question

price ceiling

answer

A legal maximum on the price at which a good can be sold

question

price floor

answer

A legal minimum on the price at which a good can be sold

question

movement along the curve

answer

occurs when the price of the same good changes

question

shift in the curve

answer

occurs when something other than the good changes

question

the incidence of tax

answer

just a portion of tax that is shared between buyers and sellers

question

Price that buyers pay - tax

answer

= the price sellers receive

question

cross-price elasticity of demand

answer

the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good

question

If demand is more elastic than supply,

answer

it is easier for buyers to leave the market thus the burden is more on sellers as it is an elastic demand

question

insulin is an inelastic good which would be more of a burden on buyers who need the insulin while sellers can leave the market easier

answer

supply is more elastic than demand

question

consumer surplus

answer

the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays

question

producer surplus

answer

the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives

question

total surplus

answer

consumer surplus + producer surplus

question

dead weight loss

answer

the reduction in economic surplus resulting from a market not being in competitive equilibrium

question

explicit cost

answer

a cost that requires an outlay of money

question

implicit cost

answer

the opportunity cost that arises when a firm uses owner-supplied resources

question

production function

answer

relationship between quantity of inputs used to produce a good and the quantity of inputs uses to produce a good and the quantity of output of that good

question

marginal product

answer

the increase in output that arises from an additional unit of input

question

marginal product of labor

answer

the increase in the amount of output from an additional unit of labor

= change in Q (output)/ change in labor

question

Law of diminishing marginal product of labor

answer

marginal product of an input declines as the quantity of the input increases

question

marginal cost

answer

change in total cost / change in quantity

question

fixed costs

answer

Costs that do not vary with the quantity of output produced

question

variable costs

answer

costs that vary with the quantity of output produced

question

total cost

answer

fixed cost + variable cost

question

average fixed costs

answer

fixed costs / quantity

question

average variable cost

answer

variable costs / quantity

question

average total costs

answer

total costs / quantity

question

profit

answer

= total revenue - total costs

question

total revenue

answer

Price x Quantity

question

marginal revenue

answer

change in total revenue / change in quantity

question

efficient scale

answer

the quantity that minimizes ATC

MC/ATC = 1

question

average revenue

answer

total cost / quantity

question

change in profit

answer

MR-MC

question

Shutdown

answer

a short-run decision not to produce anything because of market conditions but continue to pay fixed costs

question

exit

answer

a long-run decision to leave the market

question

shutdown if

answer

TR<VC or P<AVC

question

exit if

answer

P is less than ATC

question

sunk cost

answer

a cost that has already been committed and cannot be recovered

question

enter the market if

answer

TR>TC or P>ATC

question

profit maximization

answer

MR=MC

question

perfect competition

answer

P = MR

question

Competitive equilibrium

answer

Price = MC

question

zero profit condition

answer

P = MC = ATC

Continue to order Get a quote

Econ Midterm

Recent Posts

Recent Comments

Calculate the price of your order

Our guarantees

Money-back guarantee

Zero-plagiarism guarantee

Free-revision policy

Privacy policy

Fair-cooperation guarantee