micro economics final

question

Over time equilibrium price in a market is?

answer

The price where quantity demanded = quantity supplied

question

What is scarcity in economics?

answer

the power of the supreme court to declare laws and actions of local, state,
and national govts unconstitutional

question

Describe monopolistic competition -

answer

Pure competition but with different products

question

Define price elastic of demand

answer

A measure of the change in quantity purchased of a product in relation to the change in price

question

Define price inelastic of demand

answer

When the price of a good or service changes, consumers buying habits don't change

question

Ceteris paribus in the law of demand means

answer

the lower the price, the greater the quantity demanded

question

Define diminishing marginal utility -

answer

as you consume more of a good, the less satisfaction you obtain from each unit

question

Define price ceiling

answer

Govt regulation on how high a price can be charged for a good or service

question

Define price floor

answer

Govt regulation on how low a price can be charged for a good or service

question

What is game theory?

answer

Used by economists to analyze mutual interdependence within oligopolies

question

What is the Lorenz curve?

answer

A graphical representation of the distribution of income

question

What is a kinked demand curve?

answer

A firm has a kink at the price level. Consumers responded to a price increase less than a price decrease

question

What is the short-run?

answer

One factor of production is fixed in quantity and/or quality

question

How are economies of scale illustrated?

answer

By a decreasing long-run ATC curve as more output is produced

question

A decrease in the price of substitutes for brand X in the future could cause?

answer

A decrease in consumer demand for brand X

question

When does total revenue decline?

answer

Prices rise and demand is elastic

question

In an industry with low barriers for entry with an increase in economic profits, we can expect?

answer

New firms enter the industry

question

When the demand for an input is downsloping on a graph, which law is being demonstrated?

answer

Diminishing returns

question

Why is a firm's average revenue curve horizontal?

answer

Price remains constant

question

The govt imposes an excise tax on production of a product. This tax will be paid by

answer

More for sellers than buyer

question

Concave production possibilities curves imply?

answer

Opportunity costs of goods increase

question

Why are monopolies inefficient?

answer

Price is greater than MC

question

Business X is selling hot chocolate for .25 when a cold front comes through. It raises the price to .40 and the demand for hot chocolate goes up.

answer

demand for hot chocolate is increased

question

Cross elasticity coefficient of demand is negative. This means?

answer

The goods are complements

question

A perfectly competitive firm has the following: output, 5000 units; market price $2; fixed costs, $2500; variable costs $2500; marginal cost, $2 and rising. What should the firm do with output to maximize profit?

answer

nothing

question

In a competitive industry, the marginal revenue product (MRP) of the last hair dresser is $40, the MRP of the last shampooer is $20, and a salon must pay stylists $45 and cleaning crew $15 per day. The salon should hire?

answer

Fewer hair dressers and more shampooers

question

In a rightward shift of a supply curve with ceteris paribus, what will happen?

answer

Greater quantity supplied at a lower price

question

When will price elasticity of demand for a good increase?

answer

Consumers spend more of the budget on the good

question

Monopolistic competitive firms may make profits in the short and long runs because?

answer

Can make economic profits, but fails to make economic profits in the long-run b/c new firms enter

question

What happens in the short-run, in an oligopoly, when firms agree to collude and one violates the agreement and sells at a lower price?

answer

The firm that cheats will earn higher profits, industry profits will be lower

question

A decrease in capital goods would cause a production possibilities curve to?

answer

shift outward

question

Downward slopes of demand curves demonstrate?

answer

As price falls, people are willing to purchase the good

question

As household incomes decrease, what could be predicted?

answer

Demand curves shift to the right for inferior goods

question

When consumers expect Company A to offer a rebate, what will happen to demand and quantity?

answer

Decrease demand for the good now

question

Define price taker

answer

A firm has no control over price

question

In a competitive market, if the marginal revenue product (MRP) of labor is less than the wage rate, then?

answer

Employ less labor

question

Give 3 examples that would cause a rightward shift in the demand schedule for a normal good.

answer

Increase for consumers' preference for a good, decrease in the price for a complementary good, increase Consumer income

question

Why is an average cost curve flat when output changes?

answer

MC = AC

question

Kinked demand curves demonstrate what with opposing oligopolies?

answer

A price decrease but not an increase

question

Since resources in the US are scarce, they can be?

answer

Resources can't meet all our wants

question

Give 3 determinants for demand of a good.

answer

Consumer income, price of substitutes, tastes & preferences

question

An increase in the price of beef shifts the demand for potatoes which direction?

answer

To the left because they are complements

question

If the price of beef increases, what will happen to pork?

answer

Demand will increase

question

Suppose marginal product of capital is 30 and capital costs $10 per unit, marginal product of labor is 15 and labor costs are $5 per unit. Under these conditions, how would a firm minimize costs?

answer

Hire more labor and use less capital

question

If ATC is falling and AVC is rising, MC lies where?

answer

Between AVC and ATC

question

A university doesn't have enough seats for the crowds. How can they minimize crowds and maximize revenue?

answer

Raise ticket prices b/c demand for them are elastic

question

Competitive firms are incurring losses, what should be expected as the move into long-run equilibrium?

answer

Higher prices and fewer firms

question

A hurricane reduces the shrimp population, what will happen to the price and quantity of shrimp?

answer

Increase price, decrease quantity

question

Cory has a game card for $30. He's going to download 10 songs and 6 games. Songs are $1.50 and games are $2.50. MU for the 10th song is 20. MU for the 6th game is 50. How can he increase utility?

answer

Buy more games and fewer songs

question

Price ceilings cause?

answer

Shortages

question

When goods are inferior, income elasticity is?

answer

Less than 0

question

In perfect competition, if firms can cover variable costs they will continue to produce during which phase?

answer

The Short run

question

With a competitive labor market, increases in productivity result in?

answer

More labor being employed

question

Airlines arguments against deregulation of airfares saying decline in prices would lower total revenue; however, it rose instead. What can be concluded?

answer

Quantity increased greater than fall in price

1 of 54

question

Over time equilibrium price in a market is?

answer

The price where quantity demanded = quantity supplied

question

What is scarcity in economics?

answer

the power of the supreme court to declare laws and actions of local, state,
and national govts unconstitutional

question

Describe monopolistic competition -

answer

Pure competition but with different products

question

Define price elastic of demand

answer

A measure of the change in quantity purchased of a product in relation to the change in price

question

Define price inelastic of demand

answer

When the price of a good or service changes, consumers buying habits don't change

question

Ceteris paribus in the law of demand means

answer

the lower the price, the greater the quantity demanded

question

Define diminishing marginal utility -

answer

as you consume more of a good, the less satisfaction you obtain from each unit

question

Define price ceiling

answer

Govt regulation on how high a price can be charged for a good or service

question

Define price floor

answer

Govt regulation on how low a price can be charged for a good or service

question

What is game theory?

answer

Used by economists to analyze mutual interdependence within oligopolies

question

What is the Lorenz curve?

answer

A graphical representation of the distribution of income

question

What is a kinked demand curve?

answer

A firm has a kink at the price level. Consumers responded to a price increase less than a price decrease

question

What is the short-run?

answer

One factor of production is fixed in quantity and/or quality

question

How are economies of scale illustrated?

answer

By a decreasing long-run ATC curve as more output is produced

question

A decrease in the price of substitutes for brand X in the future could cause?

answer

A decrease in consumer demand for brand X

question

When does total revenue decline?

answer

Prices rise and demand is elastic

question

In an industry with low barriers for entry with an increase in economic profits, we can expect?

answer

New firms enter the industry

question

When the demand for an input is downsloping on a graph, which law is being demonstrated?

answer

Diminishing returns

question

Why is a firm's average revenue curve horizontal?

answer

Price remains constant

question

The govt imposes an excise tax on production of a product. This tax will be paid by

answer

More for sellers than buyer

question

Concave production possibilities curves imply?

answer

Opportunity costs of goods increase

question

Why are monopolies inefficient?

answer

Price is greater than MC

question

Business X is selling hot chocolate for .25 when a cold front comes through. It raises the price to .40 and the demand for hot chocolate goes up.

answer

demand for hot chocolate is increased

question

Cross elasticity coefficient of demand is negative. This means?

answer

The goods are complements

question

answer

nothing

question

answer

Fewer hair dressers and more shampooers

question

In a rightward shift of a supply curve with ceteris paribus, what will happen?

answer

Greater quantity supplied at a lower price

question

When will price elasticity of demand for a good increase?

answer

Consumers spend more of the budget on the good

question

Monopolistic competitive firms may make profits in the short and long runs because?

answer

Can make economic profits, but fails to make economic profits in the long-run b/c new firms enter

question

What happens in the short-run, in an oligopoly, when firms agree to collude and one violates the agreement and sells at a lower price?

answer

The firm that cheats will earn higher profits, industry profits will be lower

question

A decrease in capital goods would cause a production possibilities curve to?

answer

shift outward

question

Downward slopes of demand curves demonstrate?

answer

As price falls, people are willing to purchase the good

question

As household incomes decrease, what could be predicted?

answer

Demand curves shift to the right for inferior goods

question

When consumers expect Company A to offer a rebate, what will happen to demand and quantity?

answer

Decrease demand for the good now

question

Define price taker

answer

A firm has no control over price

question

In a competitive market, if the marginal revenue product (MRP) of labor is less than the wage rate, then?

answer

Employ less labor

question

Give 3 examples that would cause a rightward shift in the demand schedule for a normal good.

answer

Increase for consumers' preference for a good, decrease in the price for a complementary good, increase Consumer income

question

Why is an average cost curve flat when output changes?

answer

MC = AC

question

Kinked demand curves demonstrate what with opposing oligopolies?

answer

A price decrease but not an increase

question

Since resources in the US are scarce, they can be?

answer

Resources can't meet all our wants

question

Give 3 determinants for demand of a good.

answer

Consumer income, price of substitutes, tastes & preferences

question

An increase in the price of beef shifts the demand for potatoes which direction?

answer

To the left because they are complements

question

If the price of beef increases, what will happen to pork?

answer

Demand will increase

question

Suppose marginal product of capital is 30 and capital costs $10 per unit, marginal product of labor is 15 and labor costs are $5 per unit. Under these conditions, how would a firm minimize costs?

answer

Hire more labor and use less capital

question

If ATC is falling and AVC is rising, MC lies where?

answer

Between AVC and ATC

question

A university doesn't have enough seats for the crowds. How can they minimize crowds and maximize revenue?

answer

Raise ticket prices b/c demand for them are elastic

question

Competitive firms are incurring losses, what should be expected as the move into long-run equilibrium?

answer

Higher prices and fewer firms

question

A hurricane reduces the shrimp population, what will happen to the price and quantity of shrimp?

answer

Increase price, decrease quantity

question

Cory has a game card for $30. He's going to download 10 songs and 6 games. Songs are $1.50 and games are $2.50. MU for the 10th song is 20. MU for the 6th game is 50. How can he increase utility?

answer

Buy more games and fewer songs

question

Price ceilings cause?

answer

Shortages

question

When goods are inferior, income elasticity is?

answer

Less than 0

question

In perfect competition, if firms can cover variable costs they will continue to produce during which phase?

answer

The Short run

question

With a competitive labor market, increases in productivity result in?

answer

More labor being employed

question

Airlines arguments against deregulation of airfares saying decline in prices would lower total revenue; however, it rose instead. What can be concluded?

answer

Quantity increased greater than fall in price

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micro economics final

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