ECONOMICS 202 MIDTERM

question

a decrease in the quantity demanded

answer

an increase in the price of a good will result in which of the following?

a change of the demand curve
a change of the supply curve
an increase in the quantity Demanded
a decrease in the quantity Demanded
a reversing of supply and demand

question

willingness to pay for a good or service

answer

demand is defined as a consumers'

willingness to change products
willingness to shop for discounts
willingness to pay for a good or service
willingness to return a broken product
none of the above

question

less benefits are achieved

answer

the law of diminishing marginal utility states that as additional units of a good are consumed

the price falls
less benefits are achieved
less costs are incurred
the more you are willing to pay
none of the above

question

all of the above shift demand

answer

which is NOT a factor that causes a shift in Demand?

preferences
income
expectations of future prices & prices of related goods
the number of buyers
all of the above shift demand

question

a business' willingness to produce and sell a product

answer

supply is defined as

a businesses' willingness to produce and sell a product
a businesses' ability to charge you more than you want to pay
making a profit
not sensitive to price and time
none of the above

question

as an incentive for businesses to produce more of a good

answer

higher prices act

as a way to tell consumers not to buy a good
negatively in relationship to quantity supplied
to deter poor people from wanting a good
to encourage consumers to bu more of a good
as an incentive for businesses to produce more of a good

question

price changes

answer

which is NOT a factor that shifts the supply curve?

price changes
expectations
number of sellers
price of relevant resources
technology

question

it shifts rightward

answer

if sellers find higher profits by producing a different product, what will happen to the supply curve for the different product over time?

it inverts
it shifts leftward
it shifts rightward
it stays the same
it gets steeper

question

all of the above are true

answer

when a market is in a supply and demand Model equilibrium, we can assume that

it is allocating resources efficiently
producer and consumer surpluses are maximized
consumers and producers have good information about the appropriate price
the government has not intervened in the market
all of the above are true

question

a surplus exists at this price point

answer

assume our market is in equilibrium. now assume the price has risen from its equilibrium level, to twice as much (for example, from 5$ per unit to $10 per unit).
what is the result of this disequilibrium?

a shortage exists at this price point
a surplus exists at this price point
the market is now efficient
the market cannot correct itself
none of the above

question

prices will rise

answer

a shortage exists in the market for beer. What does the supply and demand model tell us about what will happen over time?

supply and demand both shift
prices are unaffected
price will fall
prices will rise
demand will increase again

question

true

answer

t/f? prices act as a rationing device by ensuring that only producers who are willing to pay the price to acquire resources get them; and only consumers who are willing to pay for the goods get them.

question

true

answer

t/f? price transmits information about the relative scarcity of a good. Therefore, the more scarce, typically the higher the price of a good.

question

the maximum price of a good allowed by law

answer

a price ceiling is defined as:

the maximum price of a good allowed by law
the minimum price of a good allowed by law
the price that the government must pay for a good
the highest allowable price by suppliers
none of the above

question

a shortage

answer

the result of a government enacted price ceiling is:

a higher price
the same price
a surplus
a shortage
none of the above

question

all of the above

answer

which of these inefficiencies arise as the result of a price ceiling?

tie-in sales
consumers have false information about prices
illegal activity (insert your favorite crime here)
fewer exchanges
all of the above

question

a surplus

answer

a price floor results in a

shortage
surplus
lower price
happy consumers and producers
none of the above

question

CS and PS both get smaller

answer

when a price floor is enacted in the market for beer, this creates a surplus. what happens to the areas of producer surplus and consumer surplus when we graphs this circumstance?

CS gets larger
CS and PS both get larger
CS gets smaller, but PS gets larger
PS gets smaller, but CS gets larger
CS and PS both get smaller

question

dead weight loss

answer

when a surplus of goods exists at a price floor, the corresponding lost benefits to society are known as
an under-performing market

loss of surplus
dead lock loss
dead weight loss
dead weight lost

question

true

answer

t/f? absolute prices are prices in terms of dollars.

question

answer

if the absolute price of a bottle of wine is $20, and the absolute price of a box of cigars is $60, the relative price of cigars is _________ bottles of wine.

question

all of the above

answer

you are looking to purchase a flight to amsterdam. the airline claims to have booked the flight full. before you leave, the airline attendant mentions that if you apply for their rewards credit card and get approved, that you would have a priority privilege to bump another passenger and get a seat on the plane. this is an example of:

potentially illegal activity
a tie-in sale
a sales tactic
some straight bullsh*t
all of the above

question

true

answer

t/f? the price elasticity of demand is a way to determine how sensitive customers are to a given price change

question

change, price
50%, 50%

answer

the equation for price elasticity of demand can be specified as:

the percent __________ in quantity demanded divided by the percent change in ______________

question

elastic

answer

If ed (elasticity of demand) is equal to 4.23, the demand curve at that price point is described as

unit elastic
very inelastic
elastic
inelastic
perfectly elastic

question

0.50

answer

assume a demand curve where price is $50 and quantity demanded is 100 units.
now assume price goes up to $60, and the corresponding quantity demanded is now 90 units.
calculate the elasticity of demand and round to 2 decimal places (ex. 0.55 or 1.69). ed = __________ in this example.

question

inelastic

answer

if ed is calculated as 0.25, the demand curve is said to be:

very elastic
elastic
unit elastic
inelastic
perfectly elastic

question

unit elastic

answer

total revenue is highest when we are at a point on the demand curve that is:

perfectly elastic
inelastic
elastic
very elastic
unit elastic

question

all of the above

answer

the determinants of price elasticity of demand are
% of one's budget spent on the good

time
necessities or luxuries
number of substitutes
all of the above

question

normal good

answer

if income elasticity of demand is greater than zero, the good is known as a

special good
normal good
substitute
inferior good
complement

question

false

answer

t/f? if price elasticity of supply is perfectly inelastic, as price increases the quantity supplied will increase.

question

true

answer

t/f? the longer the period of time to adjust to a change in price, the higher the price elasticity of supply will be.

question

substitutes

answer

the cross elasticity of demand considers the change in quantity demanded one one good against the price change of another good. this information can help us determine whether two goods are:

question

false

answer

t/f? if dan's marginal utility from eating one apple is 100 utils and jorge's marginal utility from eating one apple is 200 utils, it follows that jorge likes apples more than dan, assuming that dan and jorge measure the marginal utility of apples in exactly the same way.

question

true

answer

t/f? it is possible for total utility to rise as marginal utility falls

question

true

answer

t/f? adam smith observed that often things that have the greatest value in use, or are the most useful, have a relatively low price, and things that have little or no value in use have a high price

question

false

answer

t/f? marginal utility analysis can be used to illustrate the law of demand

question

the satisfaction that results from the consumption of a good

answer

when an economist talks about utility, she is talking about

a company that provides electricity, water, gas, etc
the satisfaction, in terms of price, that a producer receives from selling his product
the satisfaction that results from the consumption of a good
the amount of one good that a person is willing to give up in order to get a unit of another good
the satisfaction that results from the consumption of a good minus the price that must be paid to get the good

question

90 utils

answer

suppose will receives 190 utils from consuming one banana and 280 utils from consuming two bananas. what is the marginal utility of the second banana?

470 utils
235 utils
90 utils
280 utils
none of the above

question

answer

suppose you are eating buffalo wings at a local happy hour. the total utils from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 146, respectively. the marginal utility of the seventh wing is __________ utils

14
146
10
20.9
12

question

the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases

answer

the law of diminishing marginal utility says that:

the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases.
the more of a particular good one consumes, the greater is the utility received from the consumption of that good.
the marginal utility gained by consuming equal successive units of a good will increase as the amount consumed increases
the more of a particular product one sells, the less utility one receives from selling
none of the above

question

no way, you fool! you could get negative utility from the fourth plateful

answer

suppose you just finished your third plateful of thanksgiving dinner and it yielded zero units of additional satisfaction. should you go back for more?
why not?

since the third plateful gave you zero units, the fourth can't give you any less than zero
no way, you fool! you could get negative utility from the fourth plateful
yes or no. it won't make any difference because your total utility is at its peak
yes. if you received zero units of satisfaction from the third, then obviously the law of diminishing marginal utility is not working in this case.
just loosen your belt, and hit the dessert table.

question

we do not know if any of the statements are true or false, because we do not know how much utility one person receives relative to another

answer

which of the following statements is false?

a millionaire definitely receives less utility from an additional dollar than a poor person
a poor person definitely receives less utility from an additional dollar than a rich person
a millionaire definitely receives the same utility from an additional dollar as a poor person
a millionaire generally receives less utility from an additional dollar than a poor person
we do not know if any of the statements are true or false, because we do not know how much utility one person receives relative to another

question

no, because there might be some cases where the resources used to produce peanut butter could have been better used to produce more of other products

answer

suppose the government provides peanut butter to everyone free of charge and everyone consumes it to the point at which he receives no additional satisfaction from another spoonful. is this necessarily good?

yes, because everyone is satisfied
no, because there might be some cases where the resources used to produce peanut butter could have been better used to produce more of other products
yes, because the law of diminishing marginal utility indicates that in order to get the greatest amount of satisfaction from the use of resources, people should consume as much of every good as they can
no, because jelly still costs money.
none of the above

question

true

answer

t/f? accounting profit is always greater than or equal to economic profit

question

true

answer

t/f? in the long run, only variable costs exist

question

true

answer

t/f? one of the reasons why economies of scale exist is that the opportunity for labor specialization tends to increase as the size of the firm grows

question

true

answer

t/f? as the marginal physical product of a variable input increases, the marginal cost decreases

question

wilson previously worked as an accountant, earning $3,000 a month

answer

five months ago wilson opened up a health club. which of the following is an implicit cost related to the health club?

wilson paid $120 for an outside laundry service to clean the towels used at the club
wilson paid $100 for the pest control exterminator to spray the health club
wilson previously worked as an accountant, earning $3,000 a month
wilson usually eats four hamburgers a day, priced at $3 each
none of the above

question

-$115,000

answer

consider the following information about a business diane opened last year: price = $20, quantity sold = 25,000; implicit cost = $255,000; explicit cost = $360,000. assuming that all relevant costs and revenue are noted, what was diane's economic profit?

$140,000
-$115,000
-$140,000
$220,000
$245,000

question

sunk

answer

an unrecoverable cost that should be disregarded in any current or future decision is also called a(n) __________ cost.

sunk
explicit
implicit
variable
none of the above

question

sunk; disregarded

answer

you paid $25 for your ticket to the football game, only to see your favorite team losing 28-0 at the end of the first quarter. that $25 should now be regarded as a(n) __________ cost that economists say should be __________ in your decision on whether or not to stay at the game or leave.

explicit; included
explicit; disregarded
sunk; included
sunk; disregarded
none of the above

question

cannot be changed as output changes in the short run

answer

a fixed input is an input whose quantity:

can be changed as output changes in the short run

cannot be changed as output changes in the short run

cannot be changed as output changes in the long run

a and c

b and c

question

since (total) fixed costs are constant as output changes in the short run, it follows that average fixed cost is constant in the short run

answer

which of the following statements is false?

since (total) fixed costs are constant as output changes in the short run, it follows that average fixed cost is constant in the short run

marginal cost is the cost of producing an additional unit of output

changes in variable costs are reflected dollar-for-dollar in changes in total cost

fixed costs exist in the short run, but not in the long run

total cost is the addition of both fixed costs and variable costs

question

$42; $34; $8

answer

at 1,000 units of output, total cost is $42,000 and total variable cost is $34,000. at 1,000 units of output, what is the value of average total cost, average variable cost, and average fixed cost, respectively?

$22; $14; $8
$42; $34; $8
$4.20; $3.40; $0.80
$340; $740; $60
$42; $34; There is not enough information provided to determine the average fixed cost

question

false, there is neither demand nor a buyer; there has to be both the willingness and ability to buy

answer

t/f? even if there is only the ability of a consumer to buy, there is still demand and a potential buyer.

question

they fail and dont find a solution to why buyers wont buy their product

answer

what is the number one thing entrepreneurs get wrong?

question

the law of demand

answer

-predictable
-states that as the price of a good rises, the quantity demanded of the good falls and that as the price of a good falls, the quantity demanded of the good rises

question

movement along the demand curve

answer

what type of shift is a change in price?

question

ceteris paribus

answer

a latin phrase that means "all other things held constant" (inversely related)

question

quantity demanded

answer

the number of units of a good that individuals are willing and able to buy at a particular price during a particular period; speaks to the willingness and ability of buyers to buy a specific quantity

question

words
symbols
demand schedule
demand curve

answer

what are four ways to represent the law of demand?

question

demand schedule

answer

the numerical representation of the law of demand; numerical tabulation of the quantity demanded of a good at different prices

question

demand curve

answer

the graphical representation of the inverse relationship between price and quantity demanded specified by the law of demand; a picture of the law of demand

question

true

answer

t/f? the law of demand states that price and quantity demanded are inversely related

question

people substitute lower priced goods for higher priced goods
law of diminishing marginal utility

answer

why does quantity demanded move in the direction opposite that of price? (inverse relationship between price and quantity demanded)

question

law of diminishing marginal utility

answer

over a given period, the marginal (or additional) utility or satisfaction gained by consuming equal successive units of a good will decline as the amount of the good consumed increases

question

the law of diminishing marginal utility and because people substitute lower priced goods for higher ones

answer

why does quantity demanded go down as price goes up?

question

individual demand curve

answer

represents the price quantity combinations of a particular good for a single buyer

question

market demand curve

answer

represents the price quantity combinations of a good for all buyers; the curve is derived by 'adding up' individual demand curves

question

quantity demanded

answer

the amount of a good that buyers are willing and able to purchase at a particular price

question

change in quantity demanded

answer

a movement from one point to another point on the same demand curve that is caused by a change in the price of the good

question

individuals are willing and able to buy more units of the good at each and every price

answer

what does an increase in demand mean?

question

rightward shift

answer

an increase in demand is represented by what type of shift in the demand curve?

question

leftward shift

answer

a decrease in demand is represented by what type of shift in the demand curve?

question

income, preferences, prices of related goods, the number of buyers, expectations of future prices

answer

the factors that cause the demand curve to shift

question

normal good

answer

a good for which demand rises as income rises
as demand falls, income falls

question

inferior good

answer

a good for which demand falls as income rises
as demand rises, income falls

question

neutral good

answer

a good for which demand does not change as income rises or falls

question

rightward

answer

a change in preference in favor of a good shifts the demand curve?

question

leftward

answer

a change in preferences away from the good shifts the demand curve?

question

true

answer

t/f? substitutes are two goods that satisfy similar needs or desires

question

complements

answer

two goods that are used jointly in consumption

question

false, verticial axis

answer

t/f? in many economic diagrams, the movement factor is on the horizontal axis.

question

law of supply

answer

as the price of a good rises, the quantity supplied of the good rises, and as the price of a good falls, the quantity supplied of the good falls, ceteris paribus

question

upward-sloping supply curve

answer

the graphical representation of the law of supply

question

supply schedule

answer

the numerical tabulation of the quantity supplied of a good at different prices; the numerical representation of the law of supply

question

price of relevant resources (inputs)
technology
prices of other goods
number of sellers
expectations
taxes and subsidies
government restrictions

answer

what factors cause the supply curve to shift?

question

subsidy

answer

a monetary payment by government to a producer of a good of service

question

false

answer

t/f? a change in supply is of the same nature as a change in quantity supplied. the same goes for demand and quantity demanded.

question

true

answer

t/f? the only factor that can directly cause a change in the quantity supplied of a good is a change in the price of the good.

question

a movement along a given supply curve

answer

a change in quantity supplied refers to what type of shift?

question

surplus

answer

over-supplies product to market requires decrease in price

question

shortage

answer

under-supplied product to market increase in price

question

equilbrium price

answer

market-clearing price; the price at which the quantity demanded of a good equals the quantity supplied

question

equilibrium quantity

answer

the quantity that corresponds to the equilibrium price; the quantity at which the amount of the good that buyers are willing and able to buy equals the amount that sellers are willing and able to sell, and both equal the amount actually bought and sold

question

disequilibrium price

answer

a price other than the equilibrium price; a price at which the quantity demanded does not equal the quantity supplied

question

disequilibrium

answer

a state of either surplus or shortage in a market; represents an imbalance, from which there is a tendency to move; something will happen

question

equilbrium

answer

"at rest"; in a market, it is the price-quantity combination from which buyers or sellers do not tend to move away; graphically, it is the intersection point of the supply and demand curves; represents a balance of forces from which there is no tendency to move

question

consumers' surplus (cs)

answer

the difference between the maximum price a buyer is willing and able to pay for a good or service and the price actually paid

question

producers' (sellers') surplus (ps)

answer

the difference between the price sellers receive for a good and the minimum or lowest price for which they would have sold the good

question

total surplus (ts)

answer

the sum of consumers' surplus and producers' surplus (total benefit to society)

question

spontaneous order

answer

the spontaneous and unintended emergence of order out of the self-interested actions of individuals; an unintended consequence of human action, with emphasis placed on the word "unintended."

question

transmit information
conserve resources that are more rare (relative scarcity)

answer

price performs two major jobs. what are they?

question

rationing device

answer

needed to determine who gets what of the available limited resources and goods; rations resources to producers who pays the price for the resources and goods to buyers who pay the price for the goods; needed because of scarcity

question

price ceiling
price floor

answer

what are the two types of price controls?

question

false, not always

answer

t/f? price is always allowed to have a rationing device.

question

price controls

answer

government intervention into "free" markets
generally leads to insufficiencies

question

price ceiling

answer

a government-mandated max price

question

tie-in sale

answer

a sale whereby one good can be purchased only if another good is also purchased

question

price floor

answer

a government-mandated minimum price

question

shortage
fewer exchanges
non-price rationing device
illegal activities
tie-in sales
high/lower prices
false information

answer

what are 7 examples of how price ceiling is mandated by the government?

question

the minimum wage

answer

a price floor which affects the market for unskilled labor

question

deadweight loss

answer

the loss to society of not producing the competitive, or supply-and-demand- determined, level of output

question

absolute (money) price

answer

the price of a good in money terms

question

relative price

answer

the price of a good in terms of another good

question

price elasticity of demand

answer

measuring sensitivity to price changes

question

elastic demand

answer

the demand that occurs when the percentage change in quantity demanded is greater than the percentage change in price; quantity demanded changes proportionately more than price changes

question

inelastic demand

answer

the demand that occurs when the percentage change in quantity demanded is less than the percentage change in price; quantity demanded changes proportionately less than price changes

question

unit elastic demand

answer

the demand that occurs when the percentage change in quantity demanded is equal to the percentage change in price; quantity demanded changes proportionately to price changes

question

perfectly elastic demand

answer

the demand that occurs when a small percentage change in price causes and extremely large percentage change in quantity demanded (from buying all to buying nothing)

question

perfectly inelastic demand

answer

the demand that occurs when quantity demanded does not changes as price changes

question

total revenue

answer

price times quantity sold

question

when price elasticity of demand equals one

answer

when is total revenue at its highest?

question

number of substitutes
necessities vs luxuries
percentage of one's budget spent on the good
time

answer

determinants of price elasticity of demand

question

cross elasticity of demand

answer

a measure of the responsiveness in quantity demanded of one good to changes in the price of another good; this concept is often used to determine whether two goods are substitutes for or complements to each other, and the degree to which one good is a substitute for or a complement to the other

question

a positive cross elasticity of demand

answer

a characteristic of goods that are substitutes

question

a negative cross elasticity of demand (if elasticity coefficient is negative)

answer

a characteristic of goods that are complements

question

income elasticity of demand

answer

a measure of the responsiveness of quantity demanded to changes in income

question

income elastic

answer

the condition that exists when the percentage change in quantity-demanded of a good is greater than the percentage change in income

question

income inelastic

answer

the condition that exists when the percentage change in quantity demanded of a good is less than the percentage change in income

question

income unit elastic

answer

the condition that exists when the percentage change in quantity demanded of a good is equal to the percentage change in income

question

price elasticity of demand

answer

a measure of the responsiveness of quantity demanded to changes in price

question

diamond water paradox

answer

adam smith's observation that things with the greatest value in use sometimes have little value in exchange, and things with little value in use sometimes have the greatest value in exchange (aka paradox of value) prices reflect marginal utility not total utility

question

utility

answer

a measure of the satisfaction, happiness, or benefit that results from the consumption of a good

question

util

answer

an artificial construct used to measure utility

question

total utility

answer

the total satisfaction a person receives from consuming a particular quantity of a good

question

marginal utility

answer

the additional utility a person receives from consuming an additional unit of a good

question

interpersonal utility comparison

answer

comparing the utility one person receives from a good, service, or activity with the utility another person receives from the same good, service, or activity

question

false, marginal utility

answer

t/f? prices reflect total utility

question

consumer equilibrium

answer

the equilibrium that occurs when the consumer has spent all of his or her income and the marginal utilities per dollar spent on each good purchased are equal

question

true

answer

t/f? maximization of utility is aligned with law of demand. an example is if a consumer who is in equilibrium with oranges and apples purchases more oranges if the price of oranges fall.

question

the endowment effect

answer

the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it

question

framing

answer

in economics, this term refers to how a problem is presented. it can influence the choices one makes and can lead to a reversal of preferences.

question

business firm

answer

an entity that employs factors of production (resources) to produce goods and services to be sold to consumers, other firms, or the government

question

market coordination

answer

the process in which individuals perform tasks, such as producing certain quantities of goods, on the basis of changes in market forces, such as supply, demand, and price

question

managerial coordination

answer

the process in which managers direct employees to perform certain tasks
(forming a team, leads to beneficial ohtones)

question

shirking

answer

the behavior of a worker who is putting forth less than the agreed-to-effort; "cheating effort"

question

monitor

answer

a person in business firm who coordinates team production and reduces shirking

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residual claimant

answer

persons who share in the profits of a business firm

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profit

answer

the difference between total revenue and total cost

question

explicit cost

answer

a cost paid for in money

question

implicit cost

answer

a cost that represents the value of resources used w/o actually paying for them

question

accounting profit

answer

the difference between total revenue and explicit costs

question

economic profit

answer

the difference between total revenue and total cost, including both explicit and implicit costs

question

normal profit

answer

zero economic profit, the level of profit necessary to keep resources employed in a firm; a firm that earns this type of profit is earning revenue equal to its total costs (explicit plus implicit costs)

question

fixed input

answer

an input whose quantity cannot be changed as output changes

question

variable input

answer

an input whose quantity can be changed as output changes

question

short run

answer

period of time where some inputs are fixed

question

long run

answer

period of time which all inputs can be changed; all costs become variable costs

question

marginal physical product (mpp)

answer

the change in output that results from changing the variable input by one unit, with all other inputs held fixed

question

law of diminishing marginal returns

answer

as ever larger amounts of a variable input are combined with fixed inputs, eventually the marginal physical product of the variable input will decline

question

fixed costs

answer

costs that do not vary with output; the costs associated with fixed inputs

question

variable costs

answer

costs that vary with output; the costs associated with variable inputs

question

average marginal rule

answer

when average cost is higher from marginal cost, average costs fall; when average cost is lower than marginal cost, average cost rises

question

sunk cost

answer

a cost incurred in the past that cannot be changed by current decisions and therefore cannot be recovered

question

long-run average total cost (lratc) curve

answer

a curve that shows the lowest (unit) cost at which a firm can produce any given level of output

question

economies of scale

answer

economies that exist when inputs are increased by some percentage and output increases by a greater percentage, causing unit costs to call

question

constant returns to scale

answer

the condition when inputs are increased by some percentage and output increases by an equal percentage, causing unit costs to remain constant

question

diseconomies of scale

answer

the condition when inputs are increased by some percentage and output increases by a smaller percentage, causing unit costs to rise

question

minimum efficient scale

answer

the lowest output level at which average total costs are minimized

question

taxes
input prices
technology

answer

shifts in cost curves

question

income
preferences
prices of related goods
number of buyers
expectations

answer

shifts in demand

question

dead weight loss

answer

loss to society because of inefficient markets

question

alcohol
tobacco

answer

name two taxed products.

question

ed > 1
very sensitive

answer

a number is elastic demand when _____________? this means it is?

question

ed = 1
perfectly sensitive

answer

when a number is unit elastic demand, it is?
this means it is?

question

ed < 1
very insensitive

answer

when a number is inelastic demand, it is?
this means it is?

question

wealth of nations

answer

18th century book written in 1776 by "godfather of economics", economist adam smith

question

invisible hand

answer

term economists use to describe the self-regulating nature of the marketplace

question

lease or purchase
workers' salary
furniture
building
factory

answer

examples of fixed inputs

question

people
utilities
raw materials
consumables
computer

answer

examples of variable inputs

question

labor and capital = 1

answer

production is a combination of?

question

marginal costs

answer

the cost of producing one more unit of a good

question

marginal utility

answer

satisfaction or usefulness obtained from acquiring one more unit of a product

question

labor productivity

answer

usually when this term is used in the newspaper and in government docs, it refers to the average hourly (physical) productivity of labor

question

false, average physical product

answer

t/f? when the press or laypersons use the word productivity, they are usually referring to marginal physical product.

1 of 187

question

a decrease in the quantity demanded

answer

question

willingness to pay for a good or service

answer

demand is defined as a consumers'

willingness to change products
willingness to shop for discounts
willingness to pay for a good or service
willingness to return a broken product
none of the above

question

less benefits are achieved

answer

question

all of the above shift demand

answer

which is NOT a factor that causes a shift in Demand?

preferences
income
expectations of future prices & prices of related goods
the number of buyers
all of the above shift demand

question

a business' willingness to produce and sell a product

answer

question

as an incentive for businesses to produce more of a good

answer

question

price changes

answer

which is NOT a factor that shifts the supply curve?

price changes
expectations
number of sellers
price of relevant resources
technology

question

it shifts rightward

answer

question

all of the above are true

answer

question

a surplus exists at this price point

answer

question

prices will rise

answer

question

true

answer

t/f? prices act as a rationing device by ensuring that only producers who are willing to pay the price to acquire resources get them; and only consumers who are willing to pay for the goods get them.

question

true

answer

t/f? price transmits information about the relative scarcity of a good. Therefore, the more scarce, typically the higher the price of a good.

question

the maximum price of a good allowed by law

answer

question

a shortage

answer

the result of a government enacted price ceiling is:

a higher price
the same price
a surplus
a shortage
none of the above

question

all of the above

answer

question

a surplus

answer

a price floor results in a

shortage
surplus
lower price
happy consumers and producers
none of the above

question

CS and PS both get smaller

answer

question

dead weight loss

answer

when a surplus of goods exists at a price floor, the corresponding lost benefits to society are known as
an under-performing market

loss of surplus
dead lock loss
dead weight loss
dead weight lost

question

true

answer

t/f? absolute prices are prices in terms of dollars.

question

answer

if the absolute price of a bottle of wine is $20, and the absolute price of a box of cigars is $60, the relative price of cigars is _________ bottles of wine.

question

all of the above

answer

question

true

answer

t/f? the price elasticity of demand is a way to determine how sensitive customers are to a given price change

question

change, price
50%, 50%

answer

the equation for price elasticity of demand can be specified as:

the percent __________ in quantity demanded divided by the percent change in ______________

question

elastic

answer

If ed (elasticity of demand) is equal to 4.23, the demand curve at that price point is described as

unit elastic
very inelastic
elastic
inelastic
perfectly elastic

question

0.50

answer

question

inelastic

answer

if ed is calculated as 0.25, the demand curve is said to be:

very elastic
elastic
unit elastic
inelastic
perfectly elastic

question

unit elastic

answer

total revenue is highest when we are at a point on the demand curve that is:

perfectly elastic
inelastic
elastic
very elastic
unit elastic

question

all of the above

answer

the determinants of price elasticity of demand are
% of one's budget spent on the good

time
necessities or luxuries
number of substitutes
all of the above

question

normal good

answer

if income elasticity of demand is greater than zero, the good is known as a

special good
normal good
substitute
inferior good
complement

question

false

answer

t/f? if price elasticity of supply is perfectly inelastic, as price increases the quantity supplied will increase.

question

true

answer

t/f? the longer the period of time to adjust to a change in price, the higher the price elasticity of supply will be.

question

substitutes

answer

the cross elasticity of demand considers the change in quantity demanded one one good against the price change of another good. this information can help us determine whether two goods are:

question

false

answer

question

true

answer

t/f? it is possible for total utility to rise as marginal utility falls

question

true

answer

t/f? adam smith observed that often things that have the greatest value in use, or are the most useful, have a relatively low price, and things that have little or no value in use have a high price

question

false

answer

t/f? marginal utility analysis can be used to illustrate the law of demand

question

the satisfaction that results from the consumption of a good

answer

question

90 utils

answer

question

answer

question

the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases

answer

question

no way, you fool! you could get negative utility from the fourth plateful

answer

question

we do not know if any of the statements are true or false, because we do not know how much utility one person receives relative to another

answer

question

no, because there might be some cases where the resources used to produce peanut butter could have been better used to produce more of other products

answer

question

true

answer

t/f? accounting profit is always greater than or equal to economic profit

question

true

answer

t/f? in the long run, only variable costs exist

question

true

answer

t/f? one of the reasons why economies of scale exist is that the opportunity for labor specialization tends to increase as the size of the firm grows

question

true

answer

t/f? as the marginal physical product of a variable input increases, the marginal cost decreases

question

wilson previously worked as an accountant, earning $3,000 a month

answer

question

-$115,000

answer

question

sunk

answer

an unrecoverable cost that should be disregarded in any current or future decision is also called a(n) __________ cost.

sunk
explicit
implicit
variable
none of the above

question

sunk; disregarded

answer

question

cannot be changed as output changes in the short run

answer

question

since (total) fixed costs are constant as output changes in the short run, it follows that average fixed cost is constant in the short run

answer

question

$42; $34; $8

answer

question

false, there is neither demand nor a buyer; there has to be both the willingness and ability to buy

answer

t/f? even if there is only the ability of a consumer to buy, there is still demand and a potential buyer.

question

they fail and dont find a solution to why buyers wont buy their product

answer

what is the number one thing entrepreneurs get wrong?

question

the law of demand

answer

-predictable
-states that as the price of a good rises, the quantity demanded of the good falls and that as the price of a good falls, the quantity demanded of the good rises

question

movement along the demand curve

answer

what type of shift is a change in price?

question

ceteris paribus

answer

a latin phrase that means "all other things held constant" (inversely related)

question

quantity demanded

answer

the number of units of a good that individuals are willing and able to buy at a particular price during a particular period; speaks to the willingness and ability of buyers to buy a specific quantity

question

words
symbols
demand schedule
demand curve

answer

what are four ways to represent the law of demand?

question

demand schedule

answer

the numerical representation of the law of demand; numerical tabulation of the quantity demanded of a good at different prices

question

demand curve

answer

the graphical representation of the inverse relationship between price and quantity demanded specified by the law of demand; a picture of the law of demand

question

true

answer

t/f? the law of demand states that price and quantity demanded are inversely related

question

people substitute lower priced goods for higher priced goods
law of diminishing marginal utility

answer

why does quantity demanded move in the direction opposite that of price? (inverse relationship between price and quantity demanded)

question

law of diminishing marginal utility

answer

over a given period, the marginal (or additional) utility or satisfaction gained by consuming equal successive units of a good will decline as the amount of the good consumed increases

question

the law of diminishing marginal utility and because people substitute lower priced goods for higher ones

answer

why does quantity demanded go down as price goes up?

question

individual demand curve

answer

represents the price quantity combinations of a particular good for a single buyer

question

market demand curve

answer

represents the price quantity combinations of a good for all buyers; the curve is derived by 'adding up' individual demand curves

question

quantity demanded

answer

the amount of a good that buyers are willing and able to purchase at a particular price

question

change in quantity demanded

answer

a movement from one point to another point on the same demand curve that is caused by a change in the price of the good

question

individuals are willing and able to buy more units of the good at each and every price

answer

what does an increase in demand mean?

question

rightward shift

answer

an increase in demand is represented by what type of shift in the demand curve?

question

leftward shift

answer

a decrease in demand is represented by what type of shift in the demand curve?

question

income, preferences, prices of related goods, the number of buyers, expectations of future prices

answer

the factors that cause the demand curve to shift

question

normal good

answer

a good for which demand rises as income rises
as demand falls, income falls

question

inferior good

answer

a good for which demand falls as income rises
as demand rises, income falls

question

neutral good

answer

a good for which demand does not change as income rises or falls

question

rightward

answer

a change in preference in favor of a good shifts the demand curve?

question

leftward

answer

a change in preferences away from the good shifts the demand curve?

question

true

answer

t/f? substitutes are two goods that satisfy similar needs or desires

question

complements

answer

two goods that are used jointly in consumption

question

false, verticial axis

answer

t/f? in many economic diagrams, the movement factor is on the horizontal axis.

question

law of supply

answer

as the price of a good rises, the quantity supplied of the good rises, and as the price of a good falls, the quantity supplied of the good falls, ceteris paribus

question

upward-sloping supply curve

answer

the graphical representation of the law of supply

question

supply schedule

answer

the numerical tabulation of the quantity supplied of a good at different prices; the numerical representation of the law of supply

question

price of relevant resources (inputs)
technology
prices of other goods
number of sellers
expectations
taxes and subsidies
government restrictions

answer

what factors cause the supply curve to shift?

question

subsidy

answer

a monetary payment by government to a producer of a good of service

question

false

answer

t/f? a change in supply is of the same nature as a change in quantity supplied. the same goes for demand and quantity demanded.

question

true

answer

t/f? the only factor that can directly cause a change in the quantity supplied of a good is a change in the price of the good.

question

a movement along a given supply curve

answer

a change in quantity supplied refers to what type of shift?

question

surplus

answer

over-supplies product to market requires decrease in price

question

shortage

answer

under-supplied product to market increase in price

question

equilbrium price

answer

market-clearing price; the price at which the quantity demanded of a good equals the quantity supplied

question

equilibrium quantity

answer

question

disequilibrium price

answer

a price other than the equilibrium price; a price at which the quantity demanded does not equal the quantity supplied

question

disequilibrium

answer

a state of either surplus or shortage in a market; represents an imbalance, from which there is a tendency to move; something will happen

question

equilbrium

answer

question

consumers' surplus (cs)

answer

the difference between the maximum price a buyer is willing and able to pay for a good or service and the price actually paid

question

producers' (sellers') surplus (ps)

answer

the difference between the price sellers receive for a good and the minimum or lowest price for which they would have sold the good

question

total surplus (ts)

answer

the sum of consumers' surplus and producers' surplus (total benefit to society)

question

spontaneous order

answer

the spontaneous and unintended emergence of order out of the self-interested actions of individuals; an unintended consequence of human action, with emphasis placed on the word "unintended."

question

transmit information
conserve resources that are more rare (relative scarcity)

answer

price performs two major jobs. what are they?

question

rationing device

answer

question

price ceiling
price floor

answer

what are the two types of price controls?

question

false, not always

answer

t/f? price is always allowed to have a rationing device.

question

price controls

answer

government intervention into "free" markets
generally leads to insufficiencies

question

price ceiling

answer

a government-mandated max price

question

tie-in sale

answer

a sale whereby one good can be purchased only if another good is also purchased

question

price floor

answer

a government-mandated minimum price

question

shortage
fewer exchanges
non-price rationing device
illegal activities
tie-in sales
high/lower prices
false information

answer

what are 7 examples of how price ceiling is mandated by the government?

question

the minimum wage

answer

a price floor which affects the market for unskilled labor

question

deadweight loss

answer

the loss to society of not producing the competitive, or supply-and-demand- determined, level of output

question

absolute (money) price

answer

the price of a good in money terms

question

relative price

answer

the price of a good in terms of another good

question

price elasticity of demand

answer

measuring sensitivity to price changes

question

elastic demand

answer

the demand that occurs when the percentage change in quantity demanded is greater than the percentage change in price; quantity demanded changes proportionately more than price changes

question

inelastic demand

answer

the demand that occurs when the percentage change in quantity demanded is less than the percentage change in price; quantity demanded changes proportionately less than price changes

question

unit elastic demand

answer

the demand that occurs when the percentage change in quantity demanded is equal to the percentage change in price; quantity demanded changes proportionately to price changes

question

perfectly elastic demand

answer

the demand that occurs when a small percentage change in price causes and extremely large percentage change in quantity demanded (from buying all to buying nothing)

question

perfectly inelastic demand

answer

the demand that occurs when quantity demanded does not changes as price changes

question

total revenue

answer

price times quantity sold

question

when price elasticity of demand equals one

answer

when is total revenue at its highest?

question

number of substitutes
necessities vs luxuries
percentage of one's budget spent on the good
time

answer

determinants of price elasticity of demand

question

cross elasticity of demand

answer

question

a positive cross elasticity of demand

answer

a characteristic of goods that are substitutes

question

a negative cross elasticity of demand (if elasticity coefficient is negative)

answer

a characteristic of goods that are complements

question

income elasticity of demand

answer

a measure of the responsiveness of quantity demanded to changes in income

question

income elastic

answer

the condition that exists when the percentage change in quantity-demanded of a good is greater than the percentage change in income

question

income inelastic

answer

the condition that exists when the percentage change in quantity demanded of a good is less than the percentage change in income

question

income unit elastic

answer

the condition that exists when the percentage change in quantity demanded of a good is equal to the percentage change in income

question

price elasticity of demand

answer

a measure of the responsiveness of quantity demanded to changes in price

question

diamond water paradox

answer

question

utility

answer

a measure of the satisfaction, happiness, or benefit that results from the consumption of a good

question

util

answer

an artificial construct used to measure utility

question

total utility

answer

the total satisfaction a person receives from consuming a particular quantity of a good

question

marginal utility

answer

the additional utility a person receives from consuming an additional unit of a good

question

interpersonal utility comparison

answer

comparing the utility one person receives from a good, service, or activity with the utility another person receives from the same good, service, or activity

question

false, marginal utility

answer

t/f? prices reflect total utility

question

consumer equilibrium

answer

the equilibrium that occurs when the consumer has spent all of his or her income and the marginal utilities per dollar spent on each good purchased are equal

question

true

answer

t/f? maximization of utility is aligned with law of demand. an example is if a consumer who is in equilibrium with oranges and apples purchases more oranges if the price of oranges fall.

question

the endowment effect

answer

question

framing

answer

in economics, this term refers to how a problem is presented. it can influence the choices one makes and can lead to a reversal of preferences.

question

business firm

answer

an entity that employs factors of production (resources) to produce goods and services to be sold to consumers, other firms, or the government

question

market coordination

answer

the process in which individuals perform tasks, such as producing certain quantities of goods, on the basis of changes in market forces, such as supply, demand, and price

question

managerial coordination

answer

the process in which managers direct employees to perform certain tasks
(forming a team, leads to beneficial ohtones)

question

shirking

answer

the behavior of a worker who is putting forth less than the agreed-to-effort; "cheating effort"

question

monitor

answer

a person in business firm who coordinates team production and reduces shirking

question

residual claimant

answer

persons who share in the profits of a business firm

question

profit

answer

the difference between total revenue and total cost

question

explicit cost

answer

a cost paid for in money

question

implicit cost

answer

a cost that represents the value of resources used w/o actually paying for them

question

accounting profit

answer

the difference between total revenue and explicit costs

question

economic profit

answer

the difference between total revenue and total cost, including both explicit and implicit costs

question

normal profit

answer

question

fixed input

answer

an input whose quantity cannot be changed as output changes

question

variable input

answer

an input whose quantity can be changed as output changes

question

short run

answer

period of time where some inputs are fixed

question

long run

answer

period of time which all inputs can be changed; all costs become variable costs

question

marginal physical product (mpp)

answer

the change in output that results from changing the variable input by one unit, with all other inputs held fixed

question

law of diminishing marginal returns

answer

as ever larger amounts of a variable input are combined with fixed inputs, eventually the marginal physical product of the variable input will decline

question

fixed costs

answer

costs that do not vary with output; the costs associated with fixed inputs

question

variable costs

answer

costs that vary with output; the costs associated with variable inputs

question

average marginal rule

answer

when average cost is higher from marginal cost, average costs fall; when average cost is lower than marginal cost, average cost rises

question

sunk cost

answer

a cost incurred in the past that cannot be changed by current decisions and therefore cannot be recovered

question

long-run average total cost (lratc) curve

answer

a curve that shows the lowest (unit) cost at which a firm can produce any given level of output

question

economies of scale

answer

economies that exist when inputs are increased by some percentage and output increases by a greater percentage, causing unit costs to call

question

constant returns to scale

answer

the condition when inputs are increased by some percentage and output increases by an equal percentage, causing unit costs to remain constant

question

diseconomies of scale

answer

the condition when inputs are increased by some percentage and output increases by a smaller percentage, causing unit costs to rise

question

minimum efficient scale

answer

the lowest output level at which average total costs are minimized

question

taxes
input prices
technology

answer

shifts in cost curves

question

income
preferences
prices of related goods
number of buyers
expectations

answer

shifts in demand

question

dead weight loss

answer

loss to society because of inefficient markets

question

alcohol
tobacco

answer

name two taxed products.

question

ed > 1
very sensitive

answer

a number is elastic demand when _____________? this means it is?

question

ed = 1
perfectly sensitive

answer

when a number is unit elastic demand, it is?
this means it is?

question

ed < 1
very insensitive

answer

when a number is inelastic demand, it is?
this means it is?

question

wealth of nations

answer

18th century book written in 1776 by "godfather of economics", economist adam smith

question

invisible hand

answer

term economists use to describe the self-regulating nature of the marketplace

question

lease or purchase
workers' salary
furniture
building
factory

answer

examples of fixed inputs

question

people
utilities
raw materials
consumables
computer

answer

examples of variable inputs

question

labor and capital = 1

answer

production is a combination of?

question

marginal costs

answer

the cost of producing one more unit of a good

question

marginal utility

answer

satisfaction or usefulness obtained from acquiring one more unit of a product

question

labor productivity

answer

usually when this term is used in the newspaper and in government docs, it refers to the average hourly (physical) productivity of labor

question

false, average physical product

answer

t/f? when the press or laypersons use the word productivity, they are usually referring to marginal physical product.

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