Exam 2 Microeconomics

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Voluntary Exchanges

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___________ create value and can make everyone involved better off

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Willingness to pay (reservation price)

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The maximum price that a buyer would be willing to pay for a good or service

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Willingness to sell

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The minimum price that a seller is willing to accept in exchange for a good or service

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Surplus

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A way of measuring who benefits from transactions and by how much

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Consumer Surplus

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The net benefit that a consumer receives from purchasing a good or service, measured by the difference between willingness to pay and the actual price

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Producer Surplus

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The net benefit that a producer receives from the sale of a good or service, measured by the difference between the producer's willingness to sell and the actual price

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Surplus

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Using the concept of _________ is the best way to look at the benefits people receive from successful transactions.

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buyer's maximum willingness to pay for a good or service.

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The reservation price is each

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demand

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A line showing the maximum willingness to pay for all buyers is the ____ curve.

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supply

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The relationship showing producers' willingness to sell is the ____ curve.

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surplus

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__________ is a way of measuring who benefits from transactions, and by how much.

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buy something for less than they would have been willing to pay.

sell something for more than they would have been willing to accept.

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The concept of surplus measures the benefit that people receive when they:

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consumer

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___________ surplus is the net benefit that a consumer receives from purchasing a good or service.

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reservation

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Economists call the maximum price that a buyer is willing to pay the _____ price.

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producer

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The difference between the producer's willingness to sell and the actual price is the __________ surplus

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demand

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A line showing the maximum willingness to pay for all buyers is the ___________ curve.

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The area is 1/2 base x height: 1/2 (40x30)= 600

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Suppose a supply curve has a vertical intercept of (0,0); the equilibrium price is $30 and the equilibrium quantity is 40. The producer surplus, therefore, is _____ dollars.

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willing, inclined, likely, or driven

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The supply curve is upward sloping because producers are _________ to sell more at higher prices.

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producer

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Total ___________ surplus is represented by the area of the graph above the supply curve and below the equilibrium price.

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Surplus

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________ is a way of measuring who benefits from transactions, and by how much.

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combined benefits everyone receives from participating in an exchange.

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Total surplus is a measure of the

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consumer receives from purchasing a good or service.

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The difference between willingness to pay and the actual price is the net benefit that a

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triangular area between a supply or demand curve and the market price.

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graphically, assuming an upward sloping supply curve, economic surplus is represented as the

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Producer Surplus

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Which term do we use to describe the net benefit that a producer receives from the sale of a good or service?

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The area of total surplus is [(1/2(80 - 30) x 40) + (1/2(30 – 0) x 40)]. = 1600

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Suppose a demand curve has a vertical intercept of (0,80). Suppose a supply curve has a vertical intercept of (0,0). The equilibrium price is $30 and the equilibrium quantity is 40. The total surplus is _____ dollars.

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2000

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Suppose a supply curve has a vertical intercept of (0,0); the equilibrium price is $40 and the equilibrium quantity is 100. The producer surplus is _____ dollars.

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Consumer surplus

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_________ is represented graphically by the area underneath the demand curve and above the equilibrium price.

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can clearly show who benefits and who loses from policies such as taxes and minimum wages.

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Calculations of surplus

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-It is the sum of consumer and producer surplus

-It exists as a result of participation in market exchanges

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What is true about total surplus?

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triangular

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Graphically, surplus is represented as the __________ shaped area between a supply or demand curve and the market quantity.

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total

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In market equilibrium, ___________ surplus is maximized

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The area is 1/2 base x height: 1/2((100 - 0) x 60) = 3000

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Suppose a demand curve has a vertical intercept of (0,100). Suppose a supply curve has a vertical intercept of (0,0). The equilibrium price is $50 and the equilibrium quantity is 60. The total surplus is _____ dollars.

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The area is 1/2 base x height: 1/2(40 x 30) = 600

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Suppose a supply curve has a vertical intercept of (0,0); the equilibrium price is $30 and the equilibrium quantity is 40. The producer surplus, therefore, is _____ dollars.

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fewer trades take place, because some people are no longer willing to buy or sell.

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At prices above or below the market equilibrium price,

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surplus

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Calculations of _________ can clearly show who benefits and who loses from policies such as taxes and minimum wages.

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below , under, or lower

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When the price is ____________(one word) the equilibrium price, buyers gain some well-being at the expense of sellers, but they also lose some well-being because there are fewer transactions taking place.

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True

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The areas of consumer surplus and producer surplus make up the total surplus.

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buyers are perfectly matched to sellers.

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In market equilibrium,

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The area of total surplus is [(1/2(80 - 30) x 40) + (1/2(30 – 0) x 40)]. = 1600

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price is artificially increased.

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Part of consumer surplus is transferred to producers when __________

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no longer exists

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At prices above or below the market equilibrium price, fewer trades take place. When compared to a market at the equilibrium price, the value that would have been gained from voluntary trades

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equilibrium

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Deadweight loss is a loss of total surplus that occurs because the quantity traded is different from the market _____ quantity.

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False

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When the price is lowered below the equilibrium price, sellers gain some well-being at the expense of buyers; although both lose some well-being because there are fewer transactions taking place.

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combined benefits everyone receives from participating in an exchange.

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Total surplus is a measure of the

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missing

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When there are people who would like to make exchanges but cannot, for one reason or another, we say that a market is _________

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In market equilibrium

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Total surplus is maximized _________

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-Public policy prevents the market from existing

-Lack of technology that would make the exchanges possible

-Lack of accurate information or communication between potential buyers and sellers

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Markets can be missing for a variety of reasons, including which of the following?

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-Part of the consumer surplus is transferred to producers

-Part of the consumer and producer surplus is lost to both consumers and producers

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When the price is artificially high and some transactions no longer take place, what happens?

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deadweight

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__________ loss is a loss of total surplus that occurs because the quantity traded is different from the market equilibrium quantity.

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below

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When the price is ___________ (one word) the equilibrium price, buyers gain some well-being at the expense of sellers, but they also lose some well-being because there are fewer transactions taking place.

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missing

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When there are people who would like to make exchanges but cannot, for one reason or another, we say that a market is ___________

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True

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True or False? Lack of accurate information or communication between potential buyers and sellers, lack of technology that would make the exchanges possible, or public policy are all reasons why a market might be missing.

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when price is artificially increased.

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Part of consumer surplus is transferred to producers

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equilibrium

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Deadweight loss is a loss of total surplus that occurs because the quantity traded is different from the market _____ quantity.

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sellers gain some well-being at the expense of buyers

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When the price is raised above the equilibrium price, although sellers lose some well-being because there are fewer transactions taking place, ________.

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increased

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Part of consumer surplus is transferred to producers when price is artificially ________

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Efficient Market

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An arrangement such that no exchange can make anyone better off without someone worse off

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Deadweight Loss

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A loss of total surplus that occurs because the quantity of a good that is bought and sold is below the market equilibrium quantity

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utility

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___________ is a measure of the amount of satisfaction a person derives from something.

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utility or satisfaction

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People get __________ from the goods and services they consume and experiences they have.

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utility maximization

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When people make decisions by choosing to do the things they think will give them the most utility, economists call this method of decision-making

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subjective, mysterious, or relative

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Utility is a __________ measure of the satisfaction people derive from consuming goods and services.

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a formula for calculating the total utility a person gets from consuming a combination of goods.

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A utility function is _____

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Utility

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A way of describing the value that a person places on something, like receiving a gift, eating a meal, or experiencing something fun is

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unique combination of goods and services that a person could choose to consume.

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A bundle is a _______

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utility

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When you consume things you like, you increase your ________

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make decisions by choosing to do the things they think will give them the most utility.

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The method of decision-making known as utility maximization occurs when people _________

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Marginal utility

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The change in total utility that comes from consuming one additional unit of a good or service is called ______

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subjective

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Utility is a _________ measure of the satisfaction people derive from consuming goods and services.

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a utility function

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A formula for calculating the total utility a person gets from consuming a combination of goods is called _____

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decrease

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Suppose the chocolate bar that you just finished did not increase your total utility. If you consume another chocolate bar your total utility is likely to

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a bundle

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A unique combination of goods and services that a person could choose to consume is called _________

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is about how to select a combination of goods and activities that will maximize your utility.

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Within the limits of time and money available to you, choice ______________

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shifts

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When income changes, the entire budget line __________to show each new range of options available to the consumer.

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changes in the price of a good

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The income effect and the substitution effect are the result of ________

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subjective and hard to measure

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Utility is ______

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Consumers

Price

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According to the income effect, __________ can buy more things when the _________ of a good they usually purchase decreases.

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zero

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If consuming another unit of a good adds nothing to your total utility, the marginal utility of the additional unit is ________

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time constraints

income

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As economic actors we attempt to consume a bundle of goods that will maximize our utility, subject to _________

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normal

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Remember that _______ goods are those for which demand increases as income increases.

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True

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True or false: When income increases, people can afford more goods, and thus they consume more on average.

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The income effect

The substitution effect

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Changes in the price of a good have two important effects. What are these effects?

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change in consumption that results from increased effective wealth due to lower prices.

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The income effect describes the

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zero

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Suppose the chocolate bar that you just finished did not increase your total utility. The marginal utility of that bar was _______

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substitutes a good that is cheaper, in relative terms, for one that is more expensive

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The substitution effect occurs when a person _____.

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utility

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Some people do good deeds because they are selfless and some people do good deeds because they want to appear good. In both cases, good deeds increase _______

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consumption
prices

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The income effect describes the change in _______ that results from increased effective wealth due to lower ______

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utility

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The overall ________we get from consuming something is a mix of outside perceptions and inner preferences, both of which contribute to decision-making.

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whom you compare yourself with.

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We get utility from pleasures like eating a good meal, and from ________

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utility

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People may perform good deeds because they get _______ from an improved reputation.

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utility increases simply because someone else's utility increases.

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Altruism is a motive for action in which a person's ________

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direct effect of a product and other people's reactions to the product.

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Utility comes from two sources, the _______

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Reciprocity

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_______ involves doing good things for people who did good things for us.

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$34,000 at a firm where the average salary is $30,000.

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According to the text, when researchers asked people whether they would rather make $36,000 at a firm where the average salary is $40,000, or $34,000 at a firm where the average salary is $30,000, they said ______

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altruism

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_______ is a motive for action in which a person's utility increases simply because someone else's utility increases.

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Utility

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A measure of the amount of satisfaction a person derives from something

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Revealed Preference

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The idea that people's preferences can be determined by observing their choices and behavior

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Utility Function

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A formula for calculating the total utility that a particular person derives from consuming a combination of goods and services

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Bundle

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A unique combination of goods and services that a person could choose to consume

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Marginal Utility

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The change in total utility that comes from consuming one additional unity of a good or service

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Diminishing Marginal Utility

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The principle that additional utility gained from consuming successive units of a good or service tends to be smaller than the utility gained from the previous unit

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Budget Constraint

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A line that is composed of all the possible combinations of goods and services that a consumer can buy with their income

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Income Effect

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The change in consumption that results from a change in effective wealth due to higher or lower prices

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Substitution Effect

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The change in consumption that results from a change in the relative price of goods

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Veblen Good

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A good/ item for which the quantity demanded is higher when the prices are higher. People buy this because it is flashy and expensive. Buyers chose them to show others that they can afford flashy and expensive goods

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Altruism

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A motive for action in which a person's utility increases simply because someone else's utility increases

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Reciprocity

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Responding to another's action with a similar action

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Interest Rate

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The "price of money," typically expressed as a percentage per dollar per unit of time; for savers, it is the price received for letting a bank use money for a specified period of time; for borrowers, it is the price of using money for a specified period of time.

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Compounding

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The process of accumulation that results from the additional interest paid on previously earned interest

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Present Value

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How much a certain amount of money that will be obtained in the future is worth today

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Risk

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Exists when the costs or benefits of an event or choice are uncertain

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Expected Value

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The average of each possible outcome of a future event, weighed by its probability of occurring

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Risk-averse

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Having a low willingness to take on situations with risk; when faced with two options with equal expected value, the one with lower rise is preferred

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Risk-seeking

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Having a high willingness to take on situations with risk; when faced with two options with equal expected value, the one with higher rise is preferred

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Risk Pooling

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organizing people into a group to collectively absorb the risk faced by each individual

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Diversification

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The process by which risks are shared across many different assets or people, reducing the impact of any particular risk on any one individual

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Adverse Selection

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A state that occurs when buyers and sellers have different information about the quality of a good or the riskiness of a situation, and this asymmetric information results in failure to complete transactions that would have been possible if both sides had the same information

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Moral Hazard

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The tendency for people to behave in a riskier way or to renege on contracts when they do not face the full consequences of their actions

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prefer benefits that occur now to those they have to wait for.

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You win a prize where you can choose one of the following options:

Option A: You can have $100,000 now.

Option B: You can have $100,000 ten years from now.

Most people would choose option A because most people __________

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more money in the future in order to tip your choice to option B from option A.

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Suppose you win a prize and are given the following options:

Option A: You can have $100,000 now.

Option B: You can have $1,000,000 ten years from now.

If you strongly prefer to have cash in hand, then we’ll have to offer you a lot _______

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Interest

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When you save money at a bank, the bank usually pays you _________ on your deposit—in essence, the bank is borrowing money from you, the depositor.

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interest rate

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The opportunity cost to the bank of lending you money is represented by the ________________

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B, C

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What is the interest rate? select all that apply

a- The price the bank pays to let people borrow money

b- The price of money

c- The opportunity cost to the bank of lending money

d- The price you earn when you borrow money

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Interest

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Compounding is a process of accumulation when ________ is paid on interest that has already been earned.

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the opportunity cost of alternate uses for the money.

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Saving money at a bank involves ______

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present

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If we know the future value of a sum, we can rearrange the equation to calculate _________ value

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interest

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The opportunity cost to the bank of lending you money is represented by the _____ rate.

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now is worth in the future

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Present value is how much a certain amount of money that will be obtained _______

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uncertain

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Risk exists when the costs or benefits of an event or choice are ________

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we can rearrange the equation to calculate the present value.

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If we know the future value of a sum, ________

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average

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Expected value is the ___________ of each possible outcome of a future event, weighted by its probability of occurring.

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seeking

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People who enjoy a higher level of risk are risk-________

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uncertainty

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One approach to coping with ________ is to avoid taking greater risks than are strictly necessary.

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present

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________ value is how much a certain amount of money that will be obtained in the future is worth today.

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when the costs OR benefits of an event or choice are uncertain.

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Risk exists when ________

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future

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Expected value is the average of each possible outcome of a _____________ event, weighted by its probability of occurring.

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averse

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People who generally have low willingness to take on risk are said to be risk-________

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risk

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A common approach to coping with uncertainty is to manage ______

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in the future is worth today.

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Present value is how much a certain amount of money that will be obtained ______

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insurance

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One common way to manage risk is to buy _______

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would have trouble finding enough money to pay the expense of an unexpected event.

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The reason people are generally willing to pay for insurance is that they ________

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Uncertainty

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One approach to coping with ______ is to avoid taking greater risks than are strictly necessary.

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reallocates

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Insurance does not reduce the risks inherent in life, rather, it _________ the costs of an unexpected event.

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uncertainty/ risk

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An insurance policy is a product that lets people pay to reduce ______ in some aspects of their lives

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the cost of one emergency can be covered by other paying clients who are not making claims

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Insurance companies are profitable because _____.

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Insurance

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______ allows people to feel confident that, if they are suddenly faced with huge expenses, they won't face bankruptcy or be unable to pay for the services they need.

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Risk Pooling

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When people organize in a group to collectively absorb the cost of the risk faced by each individual it is called ________

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manage

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Other than avoiding risk, a common approach to coping with uncertainty is to _______ risk

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B, C

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Insurance reallocates the costs of an unexpected event through which of the two following mechanisms? (select all the apply)

a- Premium diversification

b- Risk diversification

c- Risk pooling

d- Asset diversification

e- Asset pooling

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risk pooling

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The foundational principle that makes insurance companies work is _____

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risk diversification

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Avoiding large risks by replacing them with smaller ones that are unrelated is called _______

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the average of each possible outcome of a future event, weighted by its probability of occurring.

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Expected value is _____

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adverse selection

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Two problems insurance companies face are moral hazard and _________ .

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organize in a group to collectively absorb the cost of the risk faced by each individual.

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Risk pooling occurs when people _______

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adverse

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_________ selection describes a situation in which asymmetric information makes a transaction unattractive for a buyer or seller.

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diversification

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Risk _______ means avoiding large risks by replacing them with smaller ones that are unrelated.

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Moral hazard and adverse selection

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What are two problems insurance companies face?

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asymmetric

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Adverse selection describes a situation in which ______ information makes a transaction unattractive for a buyer or seller.

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asymmetric information makes a transaction unattractive for a buyer or seller.

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Adverse selection describes a situation in which _______

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Total Revenue

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The amount that a firm receives from the sale of goods and services; calculated as the quantity sold multiplied by the price paid for each unit

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Total Cost

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The amount that a firm pays for all of the inputs that go into producing goods and services

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Profit

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The difference between total revenue and cost

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Fixed Costs

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Costs that do not depend on the quantity of output produced (E.X. Rent)

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Variable Costs

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Costs that depend on the quantity of output produced (E.X. Materials to make something)

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Explicit Costs

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Costs that require a firm to spend money

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Implicit Costs

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Costs that represent forgone opportunities

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Accounting Profit

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Total revenue minus explicit costs

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Economic Profit

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Total revenue minus all opportunity costs, explicit and implicit

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Production Function

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The relationship between quantity of inputs and the resulting quantity of outputs

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Marginal Product

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The increase in output that is generated by an additional unit of input

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Diminishing Marginal Product

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A principle stating that the marginal product of an input decreases as the quantity of the input increases

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Average Fixed Cost (AFC)

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fixed cost divided by the quantity of output

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Average Variable Cost (AVC)

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variable cost divided by the quantity of output

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Average Total Cost (ATC)

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total costs divided by quantity of output

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Marginal Cost

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The additional cost incurred by a firm when it produces one additional unit of output

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Economies of scale

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Returns that occur when an increase in the quantity of output decreases average total cost

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Diseconomies of scale

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Returns that occur when an increase in quantity of output increases average total cost

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Constant returns to scale

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Returns that occur when average total cost does not depend on the quantity of output

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Efficient scale

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The quantity of output at which average total cost is minimized

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profit

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When people refer to the bottom line, they are referring to the company's _________ which is shown on the bottom line in a company's income statement.

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revenue

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The amount that a firm receives from the sale of goods and services is its total __________

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fixed cost

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Costs that don't change as output increases or decreases are called

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opportunity or implicit

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True economic costs are __________ costs.

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accounting profit

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Total revenue minus explicit costs is

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that making a profit is the central goal of a business.

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In business, people frequently say, "It's all about the bottom line." What they mean by this is

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sold multiplied by the price paid per unit.

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Total revenue is the quantity ___________

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fixed

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costs are those that don't depend on the quantity of output produced.

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production

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The relationship between the quantity of inputs and the quantity of outputs is the __________ function.

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opportunity

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costs are what you give up in order to get something.

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accounting

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__________ profit is total revenue minus explicit costs.

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increase in the units of a product that can be produced by hiring an another employee.

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The marginal product of an employee is the ___________

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125-100 / (6-5) = 25

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Suppose with 5 workers you can produce 100 picture frames. With 6 workers you can produce 125 picture frames. The marginal product of the added worker is _________ picture frames.

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total revenue

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The quantity sold multiplied by the price paid per unit is _____

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inputs

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The production function shows the relationship between the quantity of _____________ and the quantity of outputs.

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fixed

variable

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Total costs = __________ costs + _________ costs.

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opportunity costs

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When economists think about a firm's costs, they are thinking about __________

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fixed

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Average fixed cost = ________ cost/quantity of output.

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marginal

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The increase in the number of units of a product that can be produced by hiring an additional employee is called the ___________ product of that employee.

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variable cost divided by quantity of output.

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Average variable cost equals

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65-50 / (2-1) = 15

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Suppose you are able to produce 50 basketballs. Hiring another employee enables you to produce 65 basketballs. The marginal product of the added worker is _____ basketballs.

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total cost divided by quantity.

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Average total cost equals

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revenue

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The amount that a firm receives from the sale of goods and services is its total ___________

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(10 × 2,500 + 5,000 / 3,500) = 8.57

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Gut Bombs sandwich shop pays $5,000 a month in rent space and equipment. It pays each of its 10 workers $2,500 a month and spends an average of $5,000 on food. There are no other production costs. Usually the shop sells 3,500 sandwiches per month for $10 each. The average variable cost per month per sandwich, rounded to the nearest penny, is _____.

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fixed costs + variable costs.

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Total costs =

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the slope of the total cost curve increases.

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Because of the principle of diminishing marginal product,

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fixed cost divided by quantity of output.

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Average fixed cost equals

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fixed costs remain the same as production increases.

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The average fixed cost curve trends downward because the

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variable

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Average variable cost = Total _________ cost/quantity of output.

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1- fixed

2- variable

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The minimum of the average total cost curve occurs at a higher output level than the minimum of the average variable costs curve because the average ____________ cost is lower than the average __________ cost and this pulls the average total cost down.

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total

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Average total cost = __________ cost/quantity of output

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is U-shaped.

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Because initially the first few employees have an increasing marginal product but eventually the principle of diminishing marginal product kicks in, the average variable cost curve

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10(2500) + 5000 + 5000= $35,000

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Gut Bombs sandwich shop pays $5,000 a month in rent space and equipment. It pays each of it 10 workers $2,500 a month and spends $5000 on food. There are no other production costs. Usually the shop sells 3,500 sandwiches per month for $10 each. Their total cost is

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marginal

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The increasing slope of the total cost curve reflects the principle of diminishing _______ product.

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fixed

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The average ___________ cost curve trends downward because as production increases, the cost per unit of production decreases.

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the average total cost curve is U-shaped.

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A firm's first few employees tend to have increasing marginal product. At some point, the principle of diminishing marginal product kicks in. As a result,

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1- increasing

2- decreasing

3- upward

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The average variable cost curve has its shape because, initially, the first few employees demonstrate (increasing/decreasing)

marginal product causing the average variable cost curve to slope (upward/downward)

but when the principle of diminishing marginal product kicks in, the curve slopes (upward/downward).

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the slope of the total cost curve increases.

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Because of the principle of diminishing marginal product,

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during which a firm can vary all of its inputs and their costs.

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Economists think of the long run as being the period of time

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fixed costs remain the same as production increases.

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The average fixed cost curve trends downward because the

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is U-shaped.

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Because initially the first few employees have an increasing marginal product but eventually the principle of diminishing marginal product kicks in, the average variable cost curve

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quantity of output and average total cost.

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Economies of scale, diseconomies of scale, and constant returns to scale describe the relationship between the

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1- Short

2- Long

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The cost of a lease (or any input) is fixed in the _________ run, but not fixed in the ________ run.

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fixed

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The average _________ cost curve trends downward because as production increases, the cost per unit of production decreases.

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the average total cost curve is U-shaped.

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A firm's first few employees tend to have increasing marginal product. At some point, the principle of diminishing marginal product kicks in. As a result,

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Constant returns to scale

Economies of scale

Diseconomies of scale

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Select all that apply

The relationship between the quantity of output and average total cost is described by which of the following?

- Constant returns to scale

- Marginal product

- Economies of scale

- Marginal cost

- Diseconomies of scale

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long

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Economists think of the ____________ run as being the period of time in which a firm can vary all of its costs.

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lower its average cost by producing more output

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When a firm realizes economies of scale, it can _____.

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fixed costs remain the same as production increases.

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The average fixed cost curve trends downward because the

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is U-shaped.

answer

Because initially the first few employees have an increasing marginal product but eventually the principle of diminishing marginal product kicks in, the average variable cost curve

question

economies of scale, diseconomies of scale, and constant returns to scale.

answer

The relationship between the quantity of output and average total cost is described by

question

economies of scale.

answer

If a small firm finds that operating on a larger scale enables it to lower its average cost, then the firm is facing

question

quantity of output and average total cost.

answer

Economies of scale, diseconomies of scale, and constant returns to scale describe the relationship between the

question

Goods A and B are complements

answer

If the cross price elasticity of good A and good B is equal to -0.35, what must be true?

question

a consumer surplus of $9 and Nathan experiences a producer surplus of $3.

answer

Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:

question

the individual’s budget constraint shifts straight out, maintaining the same slope.

answer

When a person’s income increases:

question

$515.

answer

The value of a loan of $500 after a year at 3 percent interest is:

question

5 %

answer

Assume you have two options: 1) to lend $500 to a friend for a year, 2) to use your $500 in an investment project that will pay you $525 after a year. what annual interest rate should your friend offer you to make you indifferent between two options?

question

reallocates the costs of unforeseen events, sparing any individual from taking the full hit.

answer

Insurance works because it:

question

at least one resource is fixed in the short run, while all resources are variable in the long run.

answer

The basic difference between the short run and the long run is the following:

question

are $1,250.

answer

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:

question

800 units.

answer

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output is:

question

answer

Suppose a firm's explicit cost is $100 and its implicit cost is $500. The firm always produces 100 hotdogs and sells these at $6/hotdog. What is the firm's economic profit?

question

answer

Suppose Tanya flips a fair coin. If it comes up heads, she wins $10, but if it comes up tails she gets $2. What is the expected amount of money she will earn from flipping this coin?

question

$115.76

answer

What is the future value of depositing $100 in 3 years given the annual interest rate is 5%? If you need to round, do so at the two decimals.

question

Natural monopoly

answer

If economies of scales extend beyond the market size, the conditions for a __________ are produced

question

minimum efficient scale (MES)

answer

If ________ is reached at a low level of output, there will be many firms in an industry

question

efficient

answer

When the average total cost is at its minimum, an ____________ scale is achieved

question

extended

answer

When there is an __________ range of constant returns to scale, relatively large and small firms co-exist

question

...

answer

Total utility is maximized when marginal utility becomes _________

question

zero

answer

Costs that require a firm to spend money

question

explicit costs

answer

Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur

question

implicit costs

answer

The principal of diminishing marginal product states that the marginal product of an input __________

question

Decrease as the quantity of the input increases

answer

_______ trends downward, while _________ and ________ are U-shaped

question

AFC

ATC

AVC

answer

Reductions in minimum average costs that come about through increase in the size of plant and equipment

question

Economies of scale

answer

When an increase in plant size results in reducing operating efficiency

question

Diseconomies of scale

answer

Variable costs depend on the quantity of output produced. True or False?

question

True

answer

Fixed cost depends on the quantity of output produced. True or False?

question

False

answer

The increase of output that is generated by an additional unit of input

question

Marginal Product

answer

undefined

1 of 259

question

Voluntary Exchanges

answer

___________ create value and can make everyone involved better off

question

Willingness to pay (reservation price)

answer

The maximum price that a buyer would be willing to pay for a good or service

question

Willingness to sell

answer

The minimum price that a seller is willing to accept in exchange for a good or service

question

Surplus

answer

A way of measuring who benefits from transactions and by how much

question

Consumer Surplus

answer

The net benefit that a consumer receives from purchasing a good or service, measured by the difference between willingness to pay and the actual price

question

Producer Surplus

answer

The net benefit that a producer receives from the sale of a good or service, measured by the difference between the producer's willingness to sell and the actual price

question

Surplus

answer

Using the concept of _________ is the best way to look at the benefits people receive from successful transactions.

question

buyer's maximum willingness to pay for a good or service.

answer

The reservation price is each

question

demand

answer

A line showing the maximum willingness to pay for all buyers is the ____ curve.

question

supply

answer

The relationship showing producers' willingness to sell is the ____ curve.

question

surplus

answer

__________ is a way of measuring who benefits from transactions, and by how much.

question

buy something for less than they would have been willing to pay.

sell something for more than they would have been willing to accept.

answer

The concept of surplus measures the benefit that people receive when they:

question

consumer

answer

___________ surplus is the net benefit that a consumer receives from purchasing a good or service.

question

reservation

answer

Economists call the maximum price that a buyer is willing to pay the _____ price.

question

producer

answer

The difference between the producer's willingness to sell and the actual price is the __________ surplus

question

demand

answer

A line showing the maximum willingness to pay for all buyers is the ___________ curve.

question

The area is 1/2 base x height: 1/2 (40x30)= 600

answer

Suppose a supply curve has a vertical intercept of (0,0); the equilibrium price is $30 and the equilibrium quantity is 40. The producer surplus, therefore, is _____ dollars.

question

willing, inclined, likely, or driven

answer

The supply curve is upward sloping because producers are _________ to sell more at higher prices.

question

producer

answer

Total ___________ surplus is represented by the area of the graph above the supply curve and below the equilibrium price.

question

Surplus

answer

________ is a way of measuring who benefits from transactions, and by how much.

question

combined benefits everyone receives from participating in an exchange.

answer

Total surplus is a measure of the

question

consumer receives from purchasing a good or service.

answer

The difference between willingness to pay and the actual price is the net benefit that a

question

triangular area between a supply or demand curve and the market price.

answer

graphically, assuming an upward sloping supply curve, economic surplus is represented as the

question

Producer Surplus

answer

Which term do we use to describe the net benefit that a producer receives from the sale of a good or service?

question

The area of total surplus is [(1/2(80 - 30) x 40) + (1/2(30 – 0) x 40)]. = 1600

answer

question

2000

answer

Suppose a supply curve has a vertical intercept of (0,0); the equilibrium price is $40 and the equilibrium quantity is 100. The producer surplus is _____ dollars.

question

Consumer surplus

answer

_________ is represented graphically by the area underneath the demand curve and above the equilibrium price.

question

can clearly show who benefits and who loses from policies such as taxes and minimum wages.

answer

Calculations of surplus

question

-It is the sum of consumer and producer surplus

-It exists as a result of participation in market exchanges

answer

What is true about total surplus?

question

triangular

answer

Graphically, surplus is represented as the __________ shaped area between a supply or demand curve and the market quantity.

question

total

answer

In market equilibrium, ___________ surplus is maximized

question

The area is 1/2 base x height: 1/2((100 - 0) x 60) = 3000

answer

question

The area is 1/2 base x height: 1/2(40 x 30) = 600

answer

Suppose a supply curve has a vertical intercept of (0,0); the equilibrium price is $30 and the equilibrium quantity is 40. The producer surplus, therefore, is _____ dollars.

question

fewer trades take place, because some people are no longer willing to buy or sell.

answer

At prices above or below the market equilibrium price,

question

surplus

answer

Calculations of _________ can clearly show who benefits and who loses from policies such as taxes and minimum wages.

question

below , under, or lower

answer

question

True

answer

The areas of consumer surplus and producer surplus make up the total surplus.

question

buyers are perfectly matched to sellers.

answer

In market equilibrium,

question

The area of total surplus is [(1/2(80 - 30) x 40) + (1/2(30 – 0) x 40)]. = 1600

answer

question

price is artificially increased.

answer

Part of consumer surplus is transferred to producers when __________

question

no longer exists

answer

At prices above or below the market equilibrium price, fewer trades take place. When compared to a market at the equilibrium price, the value that would have been gained from voluntary trades

question

equilibrium

answer

Deadweight loss is a loss of total surplus that occurs because the quantity traded is different from the market _____ quantity.

question

False

answer

When the price is lowered below the equilibrium price, sellers gain some well-being at the expense of buyers; although both lose some well-being because there are fewer transactions taking place.

question

combined benefits everyone receives from participating in an exchange.

answer

Total surplus is a measure of the

question

missing

answer

When there are people who would like to make exchanges but cannot, for one reason or another, we say that a market is _________

question

In market equilibrium

answer

Total surplus is maximized _________

question

-Public policy prevents the market from existing

-Lack of technology that would make the exchanges possible

-Lack of accurate information or communication between potential buyers and sellers

answer

Markets can be missing for a variety of reasons, including which of the following?

question

-Part of the consumer surplus is transferred to producers

-Part of the consumer and producer surplus is lost to both consumers and producers

answer

When the price is artificially high and some transactions no longer take place, what happens?

question

deadweight

answer

__________ loss is a loss of total surplus that occurs because the quantity traded is different from the market equilibrium quantity.

question

below

answer

question

missing

answer

When there are people who would like to make exchanges but cannot, for one reason or another, we say that a market is ___________

question

True

answer

question

when price is artificially increased.

answer

Part of consumer surplus is transferred to producers

question

equilibrium

answer

Deadweight loss is a loss of total surplus that occurs because the quantity traded is different from the market _____ quantity.

question

sellers gain some well-being at the expense of buyers

answer

When the price is raised above the equilibrium price, although sellers lose some well-being because there are fewer transactions taking place, ________.

question

increased

answer

Part of consumer surplus is transferred to producers when price is artificially ________

question

Efficient Market

answer

An arrangement such that no exchange can make anyone better off without someone worse off

question

Deadweight Loss

answer

A loss of total surplus that occurs because the quantity of a good that is bought and sold is below the market equilibrium quantity

question

utility

answer

___________ is a measure of the amount of satisfaction a person derives from something.

question

utility or satisfaction

answer

People get __________ from the goods and services they consume and experiences they have.

question

utility maximization

answer

When people make decisions by choosing to do the things they think will give them the most utility, economists call this method of decision-making

question

subjective, mysterious, or relative

answer

Utility is a __________ measure of the satisfaction people derive from consuming goods and services.

question

a formula for calculating the total utility a person gets from consuming a combination of goods.

answer

A utility function is _____

question

Utility

answer

A way of describing the value that a person places on something, like receiving a gift, eating a meal, or experiencing something fun is

question

unique combination of goods and services that a person could choose to consume.

answer

A bundle is a _______

question

utility

answer

When you consume things you like, you increase your ________

question

make decisions by choosing to do the things they think will give them the most utility.

answer

The method of decision-making known as utility maximization occurs when people _________

question

Marginal utility

answer

The change in total utility that comes from consuming one additional unit of a good or service is called ______

question

subjective

answer

Utility is a _________ measure of the satisfaction people derive from consuming goods and services.

question

a utility function

answer

A formula for calculating the total utility a person gets from consuming a combination of goods is called _____

question

decrease

answer

Suppose the chocolate bar that you just finished did not increase your total utility. If you consume another chocolate bar your total utility is likely to

question

a bundle

answer

A unique combination of goods and services that a person could choose to consume is called _________

question

is about how to select a combination of goods and activities that will maximize your utility.

answer

Within the limits of time and money available to you, choice ______________

question

shifts

answer

When income changes, the entire budget line __________to show each new range of options available to the consumer.

question

changes in the price of a good

answer

The income effect and the substitution effect are the result of ________

question

subjective and hard to measure

answer

Utility is ______

question

Consumers

Price

answer

According to the income effect, __________ can buy more things when the _________ of a good they usually purchase decreases.

question

zero

answer

If consuming another unit of a good adds nothing to your total utility, the marginal utility of the additional unit is ________

question

time constraints

income

answer

As economic actors we attempt to consume a bundle of goods that will maximize our utility, subject to _________

question

normal

answer

Remember that _______ goods are those for which demand increases as income increases.

question

True

answer

True or false: When income increases, people can afford more goods, and thus they consume more on average.

question

The income effect

The substitution effect

answer

Changes in the price of a good have two important effects. What are these effects?

question

change in consumption that results from increased effective wealth due to lower prices.

answer

The income effect describes the

question

zero

answer

Suppose the chocolate bar that you just finished did not increase your total utility. The marginal utility of that bar was _______

question

substitutes a good that is cheaper, in relative terms, for one that is more expensive

answer

The substitution effect occurs when a person _____.

question

utility

answer

Some people do good deeds because they are selfless and some people do good deeds because they want to appear good. In both cases, good deeds increase _______

question

consumption
prices

answer

The income effect describes the change in _______ that results from increased effective wealth due to lower ______

question

utility

answer

The overall ________we get from consuming something is a mix of outside perceptions and inner preferences, both of which contribute to decision-making.

question

whom you compare yourself with.

answer

We get utility from pleasures like eating a good meal, and from ________

question

utility

answer

People may perform good deeds because they get _______ from an improved reputation.

question

utility increases simply because someone else's utility increases.

answer

Altruism is a motive for action in which a person's ________

question

direct effect of a product and other people's reactions to the product.

answer

Utility comes from two sources, the _______

question

Reciprocity

answer

_______ involves doing good things for people who did good things for us.

question

$34,000 at a firm where the average salary is $30,000.

answer

question

altruism

answer

_______ is a motive for action in which a person's utility increases simply because someone else's utility increases.

question

Utility

answer

A measure of the amount of satisfaction a person derives from something

question

Revealed Preference

answer

The idea that people's preferences can be determined by observing their choices and behavior

question

Utility Function

answer

A formula for calculating the total utility that a particular person derives from consuming a combination of goods and services

question

Bundle

answer

A unique combination of goods and services that a person could choose to consume

question

Marginal Utility

answer

The change in total utility that comes from consuming one additional unity of a good or service

question

Diminishing Marginal Utility

answer

The principle that additional utility gained from consuming successive units of a good or service tends to be smaller than the utility gained from the previous unit

question

Budget Constraint

answer

A line that is composed of all the possible combinations of goods and services that a consumer can buy with their income

question

Income Effect

answer

The change in consumption that results from a change in effective wealth due to higher or lower prices

question

Substitution Effect

answer

The change in consumption that results from a change in the relative price of goods

question

Veblen Good

answer

question

Altruism

answer

A motive for action in which a person's utility increases simply because someone else's utility increases

question

Reciprocity

answer

Responding to another's action with a similar action

question

Interest Rate

answer

question

Compounding

answer

The process of accumulation that results from the additional interest paid on previously earned interest

question

Present Value

answer

How much a certain amount of money that will be obtained in the future is worth today

question

Risk

answer

Exists when the costs or benefits of an event or choice are uncertain

question

Expected Value

answer

The average of each possible outcome of a future event, weighed by its probability of occurring

question

Risk-averse

answer

Having a low willingness to take on situations with risk; when faced with two options with equal expected value, the one with lower rise is preferred

question

Risk-seeking

answer

Having a high willingness to take on situations with risk; when faced with two options with equal expected value, the one with higher rise is preferred

question

Risk Pooling

answer

organizing people into a group to collectively absorb the risk faced by each individual

question

Diversification

answer

The process by which risks are shared across many different assets or people, reducing the impact of any particular risk on any one individual

question

Adverse Selection

answer

question

Moral Hazard

answer

The tendency for people to behave in a riskier way or to renege on contracts when they do not face the full consequences of their actions

question

prefer benefits that occur now to those they have to wait for.

answer

You win a prize where you can choose one of the following options:

Option A: You can have $100,000 now.

Option B: You can have $100,000 ten years from now.

Most people would choose option A because most people __________

question

more money in the future in order to tip your choice to option B from option A.

answer

Suppose you win a prize and are given the following options:

Option A: You can have $100,000 now.

Option B: You can have $1,000,000 ten years from now.

If you strongly prefer to have cash in hand, then we’ll have to offer you a lot _______

question

Interest

answer

When you save money at a bank, the bank usually pays you _________ on your deposit—in essence, the bank is borrowing money from you, the depositor.

question

interest rate

answer

The opportunity cost to the bank of lending you money is represented by the ________________

question

B, C

answer

What is the interest rate? select all that apply

a- The price the bank pays to let people borrow money

b- The price of money

c- The opportunity cost to the bank of lending money

d- The price you earn when you borrow money

question

Interest

answer

Compounding is a process of accumulation when ________ is paid on interest that has already been earned.

question

the opportunity cost of alternate uses for the money.

answer

Saving money at a bank involves ______

question

present

answer

If we know the future value of a sum, we can rearrange the equation to calculate _________ value

question

interest

answer

The opportunity cost to the bank of lending you money is represented by the _____ rate.

question

now is worth in the future

answer

Present value is how much a certain amount of money that will be obtained _______

question

uncertain

answer

Risk exists when the costs or benefits of an event or choice are ________

question

we can rearrange the equation to calculate the present value.

answer

If we know the future value of a sum, ________

question

average

answer

Expected value is the ___________ of each possible outcome of a future event, weighted by its probability of occurring.

question

seeking

answer

People who enjoy a higher level of risk are risk-________

question

uncertainty

answer

One approach to coping with ________ is to avoid taking greater risks than are strictly necessary.

question

present

answer

________ value is how much a certain amount of money that will be obtained in the future is worth today.

question

when the costs OR benefits of an event or choice are uncertain.

answer

Risk exists when ________

question

future

answer

Expected value is the average of each possible outcome of a _____________ event, weighted by its probability of occurring.

question

averse

answer

People who generally have low willingness to take on risk are said to be risk-________

question

risk

answer

A common approach to coping with uncertainty is to manage ______

question

in the future is worth today.

answer

Present value is how much a certain amount of money that will be obtained ______

question

insurance

answer

One common way to manage risk is to buy _______

question

would have trouble finding enough money to pay the expense of an unexpected event.

answer

The reason people are generally willing to pay for insurance is that they ________

question

Uncertainty

answer

One approach to coping with ______ is to avoid taking greater risks than are strictly necessary.

question

reallocates

answer

Insurance does not reduce the risks inherent in life, rather, it _________ the costs of an unexpected event.

question

uncertainty/ risk

answer

An insurance policy is a product that lets people pay to reduce ______ in some aspects of their lives

question

the cost of one emergency can be covered by other paying clients who are not making claims

answer

Insurance companies are profitable because _____.

question

Insurance

answer

______ allows people to feel confident that, if they are suddenly faced with huge expenses, they won't face bankruptcy or be unable to pay for the services they need.

question

Risk Pooling

answer

When people organize in a group to collectively absorb the cost of the risk faced by each individual it is called ________

question

manage

answer

Other than avoiding risk, a common approach to coping with uncertainty is to _______ risk

question

B, C

answer

Insurance reallocates the costs of an unexpected event through which of the two following mechanisms? (select all the apply)

a- Premium diversification

b- Risk diversification

c- Risk pooling

d- Asset diversification

e- Asset pooling

question

risk pooling

answer

The foundational principle that makes insurance companies work is _____

question

risk diversification

answer

Avoiding large risks by replacing them with smaller ones that are unrelated is called _______

question

the average of each possible outcome of a future event, weighted by its probability of occurring.

answer

Expected value is _____

question

adverse selection

answer

Two problems insurance companies face are moral hazard and _________ .

question

organize in a group to collectively absorb the cost of the risk faced by each individual.

answer

Risk pooling occurs when people _______

question

adverse

answer

_________ selection describes a situation in which asymmetric information makes a transaction unattractive for a buyer or seller.

question

diversification

answer

Risk _______ means avoiding large risks by replacing them with smaller ones that are unrelated.

question

Moral hazard and adverse selection

answer

What are two problems insurance companies face?

question

asymmetric

answer

Adverse selection describes a situation in which ______ information makes a transaction unattractive for a buyer or seller.

question

asymmetric information makes a transaction unattractive for a buyer or seller.

answer

Adverse selection describes a situation in which _______

question

Total Revenue

answer

The amount that a firm receives from the sale of goods and services; calculated as the quantity sold multiplied by the price paid for each unit

question

Total Cost

answer

The amount that a firm pays for all of the inputs that go into producing goods and services

question

Profit

answer

The difference between total revenue and cost

question

Fixed Costs

answer

Costs that do not depend on the quantity of output produced (E.X. Rent)

question

Variable Costs

answer

Costs that depend on the quantity of output produced (E.X. Materials to make something)

question

Explicit Costs

answer

Costs that require a firm to spend money

question

Implicit Costs

answer

Costs that represent forgone opportunities

question

Accounting Profit

answer

Total revenue minus explicit costs

question

Economic Profit

answer

Total revenue minus all opportunity costs, explicit and implicit

question

Production Function

answer

The relationship between quantity of inputs and the resulting quantity of outputs

question

Marginal Product

answer

The increase in output that is generated by an additional unit of input

question

Diminishing Marginal Product

answer

A principle stating that the marginal product of an input decreases as the quantity of the input increases

question

Average Fixed Cost (AFC)

answer

fixed cost divided by the quantity of output

question

Average Variable Cost (AVC)

answer

variable cost divided by the quantity of output

question

Average Total Cost (ATC)

answer

total costs divided by quantity of output

question

Marginal Cost

answer

The additional cost incurred by a firm when it produces one additional unit of output

question

Economies of scale

answer

Returns that occur when an increase in the quantity of output decreases average total cost

question

Diseconomies of scale

answer

Returns that occur when an increase in quantity of output increases average total cost

question

Constant returns to scale

answer

Returns that occur when average total cost does not depend on the quantity of output

question

Efficient scale

answer

The quantity of output at which average total cost is minimized

question

profit

answer

When people refer to the bottom line, they are referring to the company's _________ which is shown on the bottom line in a company's income statement.

question

revenue

answer

The amount that a firm receives from the sale of goods and services is its total __________

question

fixed cost

answer

Costs that don't change as output increases or decreases are called

question

opportunity or implicit

answer

True economic costs are __________ costs.

question

accounting profit

answer

Total revenue minus explicit costs is

question

that making a profit is the central goal of a business.

answer

In business, people frequently say, "It's all about the bottom line." What they mean by this is

question

sold multiplied by the price paid per unit.

answer

Total revenue is the quantity ___________

question

fixed

answer

costs are those that don't depend on the quantity of output produced.

question

production

answer

The relationship between the quantity of inputs and the quantity of outputs is the __________ function.

question

opportunity

answer

costs are what you give up in order to get something.

question

accounting

answer

__________ profit is total revenue minus explicit costs.

question

increase in the units of a product that can be produced by hiring an another employee.

answer

The marginal product of an employee is the ___________

question

125-100 / (6-5) = 25

answer

Suppose with 5 workers you can produce 100 picture frames. With 6 workers you can produce 125 picture frames. The marginal product of the added worker is _________ picture frames.

question

total revenue

answer

The quantity sold multiplied by the price paid per unit is _____

question

inputs

answer

The production function shows the relationship between the quantity of _____________ and the quantity of outputs.

question

fixed

variable

answer

Total costs = __________ costs + _________ costs.

question

opportunity costs

answer

When economists think about a firm's costs, they are thinking about __________

question

fixed

answer

Average fixed cost = ________ cost/quantity of output.

question

marginal

answer

The increase in the number of units of a product that can be produced by hiring an additional employee is called the ___________ product of that employee.

question

variable cost divided by quantity of output.

answer

Average variable cost equals

question

65-50 / (2-1) = 15

answer

Suppose you are able to produce 50 basketballs. Hiring another employee enables you to produce 65 basketballs. The marginal product of the added worker is _____ basketballs.

question

total cost divided by quantity.

answer

Average total cost equals

question

revenue

answer

The amount that a firm receives from the sale of goods and services is its total ___________

question

(10 × 2,500 + 5,000 / 3,500) = 8.57

answer

question

fixed costs + variable costs.

answer

Total costs =

question

the slope of the total cost curve increases.

answer

Because of the principle of diminishing marginal product,

question

fixed cost divided by quantity of output.

answer

Average fixed cost equals

question

fixed costs remain the same as production increases.

answer

The average fixed cost curve trends downward because the

question

variable

answer

Average variable cost = Total _________ cost/quantity of output.

question

1- fixed

2- variable

answer

question

total

answer

Average total cost = __________ cost/quantity of output

question

is U-shaped.

answer

Because initially the first few employees have an increasing marginal product but eventually the principle of diminishing marginal product kicks in, the average variable cost curve

question

10(2500) + 5000 + 5000= $35,000

answer

question

marginal

answer

The increasing slope of the total cost curve reflects the principle of diminishing _______ product.

question

fixed

answer

The average ___________ cost curve trends downward because as production increases, the cost per unit of production decreases.

question

the average total cost curve is U-shaped.

answer

A firm's first few employees tend to have increasing marginal product. At some point, the principle of diminishing marginal product kicks in. As a result,

question

1- increasing

2- decreasing

3- upward

answer

The average variable cost curve has its shape because, initially, the first few employees demonstrate (increasing/decreasing)

marginal product causing the average variable cost curve to slope (upward/downward)

but when the principle of diminishing marginal product kicks in, the curve slopes (upward/downward).

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the slope of the total cost curve increases.

answer

Because of the principle of diminishing marginal product,

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during which a firm can vary all of its inputs and their costs.

answer

Economists think of the long run as being the period of time

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fixed costs remain the same as production increases.

answer

The average fixed cost curve trends downward because the

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is U-shaped.

answer

Because initially the first few employees have an increasing marginal product but eventually the principle of diminishing marginal product kicks in, the average variable cost curve

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quantity of output and average total cost.

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Economies of scale, diseconomies of scale, and constant returns to scale describe the relationship between the

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1- Short

2- Long

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The cost of a lease (or any input) is fixed in the _________ run, but not fixed in the ________ run.

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fixed

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The average _________ cost curve trends downward because as production increases, the cost per unit of production decreases.

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the average total cost curve is U-shaped.

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A firm's first few employees tend to have increasing marginal product. At some point, the principle of diminishing marginal product kicks in. As a result,

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Constant returns to scale

Economies of scale

Diseconomies of scale

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Select all that apply

The relationship between the quantity of output and average total cost is described by which of the following?

- Constant returns to scale

- Marginal product

- Economies of scale

- Marginal cost

- Diseconomies of scale

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long

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Economists think of the ____________ run as being the period of time in which a firm can vary all of its costs.

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lower its average cost by producing more output

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When a firm realizes economies of scale, it can _____.

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fixed costs remain the same as production increases.

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The average fixed cost curve trends downward because the

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is U-shaped.

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Because initially the first few employees have an increasing marginal product but eventually the principle of diminishing marginal product kicks in, the average variable cost curve

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economies of scale, diseconomies of scale, and constant returns to scale.

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The relationship between the quantity of output and average total cost is described by

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economies of scale.

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If a small firm finds that operating on a larger scale enables it to lower its average cost, then the firm is facing

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quantity of output and average total cost.

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Economies of scale, diseconomies of scale, and constant returns to scale describe the relationship between the

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Goods A and B are complements

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If the cross price elasticity of good A and good B is equal to -0.35, what must be true?

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a consumer surplus of $9 and Nathan experiences a producer surplus of $3.

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Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:

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the individual’s budget constraint shifts straight out, maintaining the same slope.

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When a person’s income increases:

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$515.

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The value of a loan of $500 after a year at 3 percent interest is:

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5 %

answer

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reallocates the costs of unforeseen events, sparing any individual from taking the full hit.

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Insurance works because it:

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at least one resource is fixed in the short run, while all resources are variable in the long run.

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The basic difference between the short run and the long run is the following:

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are $1,250.

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In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:

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800 units.

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With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output is:

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answer

Suppose a firm's explicit cost is $100 and its implicit cost is $500. The firm always produces 100 hotdogs and sells these at $6/hotdog. What is the firm's economic profit?

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answer

Suppose Tanya flips a fair coin. If it comes up heads, she wins $10, but if it comes up tails she gets $2. What is the expected amount of money she will earn from flipping this coin?

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$115.76

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What is the future value of depositing $100 in 3 years given the annual interest rate is 5%? If you need to round, do so at the two decimals.

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Natural monopoly

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If economies of scales extend beyond the market size, the conditions for a __________ are produced

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minimum efficient scale (MES)

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If ________ is reached at a low level of output, there will be many firms in an industry

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efficient

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When the average total cost is at its minimum, an ____________ scale is achieved

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extended

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When there is an __________ range of constant returns to scale, relatively large and small firms co-exist

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...

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Total utility is maximized when marginal utility becomes _________

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zero

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Costs that require a firm to spend money

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explicit costs

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Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur

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implicit costs

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The principal of diminishing marginal product states that the marginal product of an input __________

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Decrease as the quantity of the input increases

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_______ trends downward, while _________ and ________ are U-shaped

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AFC

ATC

AVC

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Reductions in minimum average costs that come about through increase in the size of plant and equipment

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Economies of scale

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When an increase in plant size results in reducing operating efficiency

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Diseconomies of scale

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Variable costs depend on the quantity of output produced. True or False?

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True

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Fixed cost depends on the quantity of output produced. True or False?

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False

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The increase of output that is generated by an additional unit of input

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Marginal Product

answer

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Exam 2 Microeconomics

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