 Exam 2 Microeconomics - Custom Scholars
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# Exam 2 Microeconomics

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Voluntary Exchanges
___________ create value and can make everyone involved better off
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Willingness to pay (reservation price)
The maximum price that a buyer would be willing to pay for a good or service
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Willingness to sell

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

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

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
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
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.
The reservation price is each
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demand
A line showing the maximum willingness to pay for all buyers is the ____ curve.
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supply
The relationship showing producers' willingness to sell is the ____ curve.
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surplus
__________ 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.

The concept of surplus measures the benefit that people receive when they:
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consumer
___________ surplus is the net benefit that a consumer receives from purchasing a good or service.
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reservation
Economists call the maximum price that a buyer is willing to pay the _____ price.
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producer
The difference between the producer's willingness to sell and the actual price is the __________ surplus
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demand
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
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

The supply curve is upward sloping because producers are _________ to sell more at higher prices.
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producer
Total ___________ surplus is represented by the area of the graph above the supply curve and below the equilibrium price.
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Surplus
________ 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.
Total surplus is a measure of the
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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.
graphically, assuming an upward sloping supply curve, economic surplus is represented as the
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Producer Surplus
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

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
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
_________ 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.
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

What is true about total surplus?
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triangular
Graphically, surplus is represented as the __________ shaped area between a supply or demand curve and the market quantity.
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total
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
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
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.
At prices above or below the market equilibrium price,
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surplus
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

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
The areas of consumer surplus and producer surplus make up the total surplus.
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buyers are perfectly matched to sellers.
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

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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price is artificially increased.
Part of consumer surplus is transferred to producers when __________
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no longer exists
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
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
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.
Total surplus is a measure of the
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missing
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
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

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

When the price is artificially high and some transactions no longer take place, what happens?
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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
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
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
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.
Part of consumer surplus is transferred to producers
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equilibrium
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
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
Part of consumer surplus is transferred to producers when price is artificially ________
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Efficient Market

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

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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
___________ is a measure of the amount of satisfaction a person derives from something.
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utility or satisfaction
People get __________ from the goods and services they consume and experiences they have.
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utility maximization
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
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.
A utility function is _____
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Utility
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.
A bundle is a _______
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utility
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.
The method of decision-making known as utility maximization occurs when people _________
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Marginal utility
The change in total utility that comes from consuming one additional unit of a good or service is called ______
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subjective
Utility is a _________ measure of the satisfaction people derive from consuming goods and services.
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a utility function
A formula for calculating the total utility a person gets from consuming a combination of goods is called _____
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decrease
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
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.
Within the limits of time and money available to you, choice ______________
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shifts
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
The income effect and the substitution effect are the result of ________
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subjective and hard to measure
Utility is ______
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Consumers

Price

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

As economic actors we attempt to consume a bundle of goods that will maximize our utility, subject to _________
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normal
Remember that _______ goods are those for which demand increases as income increases.
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True
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

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.
The income effect describes the
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zero
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
The substitution effect occurs when a person _____.
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utility
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
The income effect describes the change in _______ that results from increased effective wealth due to lower ______
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utility
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.
We get utility from pleasures like eating a good meal, and from ________
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utility
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.
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.
Utility comes from two sources, the _______
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Reciprocity
_______ 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.
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
_______ is a motive for action in which a person's utility increases simply because someone else's utility increases.
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Utility
A measure of the amount of satisfaction a person derives from something
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Revealed Preference
The idea that people's preferences can be determined by observing their choices and behavior
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Utility Function
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
A unique combination of goods and services that a person could choose to consume
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Marginal Utility
The change in total utility that comes from consuming one additional unity of a good or service
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Diminishing Marginal Utility
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
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
The change in consumption that results from a change in effective wealth due to higher or lower prices
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Substitution Effect
The change in consumption that results from a change in the relative price of goods
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Veblen Good
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
A motive for action in which a person's utility increases simply because someone else's utility increases
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Reciprocity
Responding to another's action with a similar action
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Interest Rate

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
The process of accumulation that results from the additional interest paid on previously earned interest
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Present Value
How much a certain amount of money that will be obtained in the future is worth today
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Risk
Exists when the costs or benefits of an event or choice are uncertain
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Expected Value
The average of each possible outcome of a future event, weighed by its probability of occurring
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Risk-averse
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

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

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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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
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.

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.

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

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
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.
Saving money at a bank involves ______
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present
If we know the future value of a sum, we can rearrange the equation to calculate _________ value
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interest
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
Present value is how much a certain amount of money that will be obtained _______
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uncertain
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.
If we know the future value of a sum, ________
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average
Expected value is the ___________ of each possible outcome of a future event, weighted by its probability of occurring.
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seeking
People who enjoy a higher level of risk are risk-________
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uncertainty
One approach to coping with ________ is to avoid taking greater risks than are strictly necessary.
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present
________ 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.
Risk exists when ________
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future
Expected value is the average of each possible outcome of a _____________ event, weighted by its probability of occurring.
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averse
People who generally have low willingness to take on risk are said to be risk-________
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risk
A common approach to coping with uncertainty is to manage ______
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in the future is worth today.
Present value is how much a certain amount of money that will be obtained ______
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insurance
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.
The reason people are generally willing to pay for insurance is that they ________
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Uncertainty
One approach to coping with ______ is to avoid taking greater risks than are strictly necessary.
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reallocates
Insurance does not reduce the risks inherent in life, rather, it _________ the costs of an unexpected event.
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uncertainty/ risk
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
Insurance companies are profitable because _____.
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Insurance
______ 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
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
Other than avoiding risk, a common approach to coping with uncertainty is to _______ risk
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B, C

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

b- Risk diversification

c- Risk pooling

d- Asset diversification

e- Asset pooling

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risk pooling
The foundational principle that makes insurance companies work is _____
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risk diversification
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.
Expected value is _____
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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.
Risk pooling occurs when people _______
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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
Risk _______ means avoiding large risks by replacing them with smaller ones that are unrelated.
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What are two problems insurance companies face?

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asymmetric
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.
Adverse selection describes a situation in which _______
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Total Revenue
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
The amount that a firm pays for all of the inputs that go into producing goods and services
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Profit
The difference between total revenue and cost
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Fixed Costs
Costs that do not depend on the quantity of output produced (E.X. Rent)
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Variable Costs
Costs that depend on the quantity of output produced (E.X. Materials to make something)
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Explicit Costs
Costs that require a firm to spend money
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Implicit Costs
Costs that represent forgone opportunities
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Accounting Profit
Total revenue minus explicit costs
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Economic Profit
Total revenue minus all opportunity costs, explicit and implicit
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Production Function
The relationship between quantity of inputs and the resulting quantity of outputs
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Marginal Product
The increase in output that is generated by an additional unit of input
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Diminishing Marginal Product
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)
fixed cost divided by the quantity of output
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Average Variable Cost (AVC)
variable cost divided by the quantity of output
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Average Total Cost (ATC)
total costs divided by quantity of output
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Marginal Cost
The additional cost incurred by a firm when it produces one additional unit of output
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Economies of scale
Returns that occur when an increase in the quantity of output decreases average total cost
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Diseconomies of scale
Returns that occur when an increase in quantity of output increases average total cost
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Constant returns to scale
Returns that occur when average total cost does not depend on the quantity of output
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Efficient scale
The quantity of output at which average total cost is minimized
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profit
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
The amount that a firm receives from the sale of goods and services is its total __________
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fixed cost
Costs that don't change as output increases or decreases are called
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opportunity or implicit
True economic costs are __________ costs.
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accounting profit
Total revenue minus explicit costs is
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that making a profit is the central goal of a business.
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.
Total revenue is the quantity ___________
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fixed
costs are those that don't depend on the quantity of output produced.
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production
The relationship between the quantity of inputs and the quantity of outputs is the __________ function.
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opportunity
costs are what you give up in order to get something.
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accounting
__________ 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.
The marginal product of an employee is the ___________
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125-100 / (6-5) = 25
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
The quantity sold multiplied by the price paid per unit is _____
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inputs
The production function shows the relationship between the quantity of _____________ and the quantity of outputs.
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fixed

variable

Total costs = __________ costs + _________ costs.
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opportunity costs

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

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fixed
Average fixed cost = ________ cost/quantity of output.
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marginal
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.
Average variable cost equals
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65-50 / (2-1) = 15
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.
Average total cost equals
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revenue
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
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.
Total costs =
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the slope of the total cost curve increases.
Because of the principle of diminishing marginal product,
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fixed cost divided by quantity of output.
Average fixed cost equals
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fixed costs remain the same as production increases.
The average fixed cost curve trends downward because the
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variable
Average variable cost = Total _________ cost/quantity of output.
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1- fixed

2- variable

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
Average total cost = __________ cost/quantity of output
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is U-shaped.
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
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
The increasing slope of the total cost curve reflects the principle of diminishing _______ product.
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fixed
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.
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

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.
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.
Economists think of the long run as being the period of time
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fixed costs remain the same as production increases.
The average fixed cost curve trends downward because the
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is U-shaped.
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.
Economies of scale, diseconomies of scale, and constant returns to scale describe the relationship between the
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1- Short

2- Long

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

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
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
When a firm realizes economies of scale, it can _____.
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fixed costs remain the same as production increases.
The average fixed cost curve trends downward because the
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is U-shaped.
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.
The relationship between the quantity of output and average total cost is described by
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economies of scale.
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.
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
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.
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.

When a person’s income increases:

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\$515.
The value of a loan of \$500 after a year at 3 percent interest is:
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5 %
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?
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reallocates the costs of unforeseen events, sparing any individual from taking the full hit.
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.
The basic difference between the short run and the long run is the following:
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are \$1,250.
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.
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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\$0
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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\$6
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
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
If economies of scales extend beyond the market size, the conditions for a __________ are produced
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minimum efficient scale (MES)

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

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efficient
When the average total cost is at its minimum, an ____________ scale is achieved
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extended
When there is an __________ range of constant returns to scale, relatively large and small firms co-exist
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...
Total utility is maximized when marginal utility becomes _________
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zero
Costs that require a firm to spend money
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explicit costs
Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur
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implicit costs
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
_______ trends downward, while _________ and ________ are U-shaped
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AFC

ATC

AVC

Reductions in minimum average costs that come about through increase in the size of plant and equipment
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Economies of scale
When an increase in plant size results in reducing operating efficiency
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Diseconomies of scale
Variable costs depend on the quantity of output produced. True or False?
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True
Fixed cost depends on the quantity of output produced. True or False?
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False
The increase of output that is generated by an additional unit of input
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Marginal Product
undefined
1 of 259
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Voluntary Exchanges
___________ create value and can make everyone involved better off
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Willingness to pay (reservation price)
The maximum price that a buyer would be willing to pay for a good or service
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Willingness to sell

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

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

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
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
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.
The reservation price is each
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demand
A line showing the maximum willingness to pay for all buyers is the ____ curve.
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supply
The relationship showing producers' willingness to sell is the ____ curve.
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surplus
__________ 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.

The concept of surplus measures the benefit that people receive when they:
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consumer
___________ surplus is the net benefit that a consumer receives from purchasing a good or service.
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reservation
Economists call the maximum price that a buyer is willing to pay the _____ price.
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producer
The difference between the producer's willingness to sell and the actual price is the __________ surplus
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demand
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
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

The supply curve is upward sloping because producers are _________ to sell more at higher prices.
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producer
Total ___________ surplus is represented by the area of the graph above the supply curve and below the equilibrium price.
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Surplus
________ 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.
Total surplus is a measure of the
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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.
graphically, assuming an upward sloping supply curve, economic surplus is represented as the
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Producer Surplus
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

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
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
_________ 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.
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

What is true about total surplus?
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triangular
Graphically, surplus is represented as the __________ shaped area between a supply or demand curve and the market quantity.
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total
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
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
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.
At prices above or below the market equilibrium price,
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surplus
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

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
The areas of consumer surplus and producer surplus make up the total surplus.
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buyers are perfectly matched to sellers.
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

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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price is artificially increased.
Part of consumer surplus is transferred to producers when __________
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no longer exists
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
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
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.
Total surplus is a measure of the
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missing
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
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

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

When the price is artificially high and some transactions no longer take place, what happens?
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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
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
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
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.
Part of consumer surplus is transferred to producers
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equilibrium
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
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
Part of consumer surplus is transferred to producers when price is artificially ________
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Efficient Market

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

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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
___________ is a measure of the amount of satisfaction a person derives from something.
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utility or satisfaction
People get __________ from the goods and services they consume and experiences they have.
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utility maximization
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
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.
A utility function is _____
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Utility
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.
A bundle is a _______
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utility
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.
The method of decision-making known as utility maximization occurs when people _________
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Marginal utility
The change in total utility that comes from consuming one additional unit of a good or service is called ______
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subjective
Utility is a _________ measure of the satisfaction people derive from consuming goods and services.
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a utility function
A formula for calculating the total utility a person gets from consuming a combination of goods is called _____
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decrease
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
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.
Within the limits of time and money available to you, choice ______________
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shifts
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
The income effect and the substitution effect are the result of ________
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subjective and hard to measure
Utility is ______
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Consumers

Price

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

As economic actors we attempt to consume a bundle of goods that will maximize our utility, subject to _________
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normal
Remember that _______ goods are those for which demand increases as income increases.
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True
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

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.
The income effect describes the
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zero
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
The substitution effect occurs when a person _____.
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utility
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
The income effect describes the change in _______ that results from increased effective wealth due to lower ______
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utility
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.
We get utility from pleasures like eating a good meal, and from ________
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utility
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.
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.
Utility comes from two sources, the _______
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Reciprocity
_______ 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.
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
_______ is a motive for action in which a person's utility increases simply because someone else's utility increases.
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Utility
A measure of the amount of satisfaction a person derives from something
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Revealed Preference
The idea that people's preferences can be determined by observing their choices and behavior
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Utility Function
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
A unique combination of goods and services that a person could choose to consume
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Marginal Utility
The change in total utility that comes from consuming one additional unity of a good or service
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Diminishing Marginal Utility
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
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
The change in consumption that results from a change in effective wealth due to higher or lower prices
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Substitution Effect
The change in consumption that results from a change in the relative price of goods
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Veblen Good
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
A motive for action in which a person's utility increases simply because someone else's utility increases
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Reciprocity
Responding to another's action with a similar action
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Interest Rate

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
The process of accumulation that results from the additional interest paid on previously earned interest
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Present Value
How much a certain amount of money that will be obtained in the future is worth today
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Risk
Exists when the costs or benefits of an event or choice are uncertain
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Expected Value
The average of each possible outcome of a future event, weighed by its probability of occurring
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Risk-averse
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

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

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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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
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.

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.

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

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
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.
Saving money at a bank involves ______
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present
If we know the future value of a sum, we can rearrange the equation to calculate _________ value
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interest
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
Present value is how much a certain amount of money that will be obtained _______
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uncertain
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.
If we know the future value of a sum, ________
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average
Expected value is the ___________ of each possible outcome of a future event, weighted by its probability of occurring.
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seeking
People who enjoy a higher level of risk are risk-________
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uncertainty
One approach to coping with ________ is to avoid taking greater risks than are strictly necessary.
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present
________ 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.
Risk exists when ________
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future
Expected value is the average of each possible outcome of a _____________ event, weighted by its probability of occurring.
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averse
People who generally have low willingness to take on risk are said to be risk-________
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risk
A common approach to coping with uncertainty is to manage ______
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in the future is worth today.
Present value is how much a certain amount of money that will be obtained ______
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insurance
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.
The reason people are generally willing to pay for insurance is that they ________
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Uncertainty
One approach to coping with ______ is to avoid taking greater risks than are strictly necessary.
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reallocates
Insurance does not reduce the risks inherent in life, rather, it _________ the costs of an unexpected event.
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uncertainty/ risk
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
Insurance companies are profitable because _____.
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Insurance
______ 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
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
Other than avoiding risk, a common approach to coping with uncertainty is to _______ risk
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B, C

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

b- Risk diversification

c- Risk pooling

d- Asset diversification

e- Asset pooling

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risk pooling
The foundational principle that makes insurance companies work is _____
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risk diversification
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.
Expected value is _____
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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.
Risk pooling occurs when people _______
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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
Risk _______ means avoiding large risks by replacing them with smaller ones that are unrelated.
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What are two problems insurance companies face?

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asymmetric
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.
Adverse selection describes a situation in which _______
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Total Revenue
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
The amount that a firm pays for all of the inputs that go into producing goods and services
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Profit
The difference between total revenue and cost
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Fixed Costs
Costs that do not depend on the quantity of output produced (E.X. Rent)
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Variable Costs
Costs that depend on the quantity of output produced (E.X. Materials to make something)
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Explicit Costs
Costs that require a firm to spend money
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Implicit Costs
Costs that represent forgone opportunities
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Accounting Profit
Total revenue minus explicit costs
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Economic Profit
Total revenue minus all opportunity costs, explicit and implicit
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Production Function
The relationship between quantity of inputs and the resulting quantity of outputs
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Marginal Product
The increase in output that is generated by an additional unit of input
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Diminishing Marginal Product
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)
fixed cost divided by the quantity of output
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Average Variable Cost (AVC)
variable cost divided by the quantity of output
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Average Total Cost (ATC)
total costs divided by quantity of output
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Marginal Cost
The additional cost incurred by a firm when it produces one additional unit of output
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Economies of scale
Returns that occur when an increase in the quantity of output decreases average total cost
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Diseconomies of scale
Returns that occur when an increase in quantity of output increases average total cost
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Constant returns to scale
Returns that occur when average total cost does not depend on the quantity of output
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Efficient scale
The quantity of output at which average total cost is minimized
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profit
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
The amount that a firm receives from the sale of goods and services is its total __________
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fixed cost
Costs that don't change as output increases or decreases are called
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opportunity or implicit
True economic costs are __________ costs.
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accounting profit
Total revenue minus explicit costs is
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that making a profit is the central goal of a business.
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.
Total revenue is the quantity ___________
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fixed
costs are those that don't depend on the quantity of output produced.
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production
The relationship between the quantity of inputs and the quantity of outputs is the __________ function.
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opportunity
costs are what you give up in order to get something.
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accounting
__________ 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.
The marginal product of an employee is the ___________
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125-100 / (6-5) = 25
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
The quantity sold multiplied by the price paid per unit is _____
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inputs
The production function shows the relationship between the quantity of _____________ and the quantity of outputs.
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fixed

variable

Total costs = __________ costs + _________ costs.
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opportunity costs

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

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fixed
Average fixed cost = ________ cost/quantity of output.
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marginal
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.
Average variable cost equals
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65-50 / (2-1) = 15
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.
Average total cost equals
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revenue
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
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.
Total costs =
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the slope of the total cost curve increases.
Because of the principle of diminishing marginal product,
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fixed cost divided by quantity of output.
Average fixed cost equals
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fixed costs remain the same as production increases.
The average fixed cost curve trends downward because the
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variable
Average variable cost = Total _________ cost/quantity of output.
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1- fixed

2- variable

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
Average total cost = __________ cost/quantity of output
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is U-shaped.
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
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
The increasing slope of the total cost curve reflects the principle of diminishing _______ product.
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fixed
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.
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

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.
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.
Economists think of the long run as being the period of time
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fixed costs remain the same as production increases.
The average fixed cost curve trends downward because the
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is U-shaped.
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.
Economies of scale, diseconomies of scale, and constant returns to scale describe the relationship between the
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1- Short

2- Long

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

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
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
When a firm realizes economies of scale, it can _____.
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fixed costs remain the same as production increases.
The average fixed cost curve trends downward because the
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is U-shaped.
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.
The relationship between the quantity of output and average total cost is described by
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economies of scale.
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.
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
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.
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.

When a person’s income increases:

question
\$515.
The value of a loan of \$500 after a year at 3 percent interest is:
question
5 %
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.
Insurance works because it:
question
at least one resource is fixed in the short run, while all resources are variable in the long run.
The basic difference between the short run and the long run is the following:
question
are \$1,250.
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.
With fixed costs of \$400, a firm has average total costs of \$3 and average variable costs of \$2.50. Its output is:
question
\$0
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
\$6
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
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
If economies of scales extend beyond the market size, the conditions for a __________ are produced
question
minimum efficient scale (MES)

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

question
efficient
When the average total cost is at its minimum, an ____________ scale is achieved
question
extended
When there is an __________ range of constant returns to scale, relatively large and small firms co-exist
question
...
Total utility is maximized when marginal utility becomes _________
question
zero
Costs that require a firm to spend money
question
explicit costs
Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur
question
implicit costs
The principal of diminishing marginal product states that the marginal product of an input __________
question
Decrease as the quantity of the input increases
_______ trends downward, while _________ and ________ are U-shaped
question

AFC

ATC

AVC

Reductions in minimum average costs that come about through increase in the size of plant and equipment
question
Economies of scale
When an increase in plant size results in reducing operating efficiency
question
Diseconomies of scale
Variable costs depend on the quantity of output produced. True or False?
question
True
Fixed cost depends on the quantity of output produced. True or False?
question
False
The increase of output that is generated by an additional unit of input
question
Marginal Product
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