micro test 2

question

MU>0

answer

TU is rising

question

MU=0

answer

TU is at its peak

question

answer

change in TU/ change Q

question

answer

sum of the MUS

question

Diminishing MU and law of demand

answer

p decrease when buying more and MU decreases as you get more

question

MUa/Pa > MUb/Pb

answer

buy more of good A

question

MUa/Pa = MUb/Pb

answer

maximizing utility

question

rational choice theory

answer

people behave like human calculators and compare the many MU per dollar calculations for all major purchases

question

Bounded Rationality

answer

we make so many decisions each day that we rely on rules of thumb, habits and emotions in making many economic decisions

question

bounded rationality includes following rules of thumb and habits:

answer

you get what you pay for, follow the leader, and focal point equilibria

question

status-quo bias

answer

people like the current situation so if you have a new car and then your income decreases then it would be hard for you to adjust to the new income

question

conspicuous consumption

answer

showing off like trump with his plane

question

ultimatum game

answer

people like whats fair , if someone offered you 50$ when they get $50 , you would accept but if they only offered you 10$ and kept the rest you would reject.

question

profit

answer

TR-TC

question

explicit cost

answer

obvious costs that are needed for the business. like blender

question

implicit cost

answer

the OC of using resources owned by the entrepreneur that could be used for another purpose . ex: if you own the store then forgone rent, entrepreneur forgone salary.

question

in the short run,at least one input is

answer

fixed

question

in the long run, all inputs are

answer

variable

question

law of diminishing returns

answer

law of diminishing marginal productivity; as more variable inputs are added to a fixed input, at some point the productivity of the variable input will decrease

question

law of diminishing marginal utility

answer

as you are engaged in an activity each additional increment gives less pleasure than the previous increment

question

accounting profit

answer

revenue- explicit cost

question

economic profit

answer

R-C

question

answer

change in TC/ change in Q

question

answer

average product= TP/ units of labor

question

answer

marginal product= change in TP

question

on long run cost curves

answer

all costs are variable

question

four market structures

answer

perfect( or pure) competition, pure monopoly, monopolistic competition, oligopoly

question

pure competition- market traits

answer

1. very large # of firms 9 no one firm has market power)
2. standardized product or homogenous product ( milk, grains)
3. sellers are prices taker( market determines the price)
4. no barriers to entry ( no patents, no major licensing)

question

in pure competition a firm maximizes profit

answer

TR exceeds TC by a maximum amount

question

in pure competition a firm maximizes profit ( or minimizes loss)

answer

producing at a quantity where MR=MC

question

in pure competition a firm will shut down

answer

if the price is below AVC

question

positive economic profit

answer

new firms will enter the market, supply increase, price falls

question

economic loss

answer

firms will exit the market, supply decreases, price rises

question

long run equilibrium

answer

firms are making 0 ( or normal) economic profits

question

equilibrium

answer

MR=MC=P=Minimum ATC and the market achieves elective efficiency, productive efficiency, and the combined areas of consumer & producer surplus are maximized

question

new innovations

answer

change the cost structure in pure competition through the process of creative destruction

question

MU is the

answer

change in TU obtained by consuming one more unit of a good

question

TU of a product is calculated by

answer

summing the MU for each successive unit of the product thats consumed

question

which is a dimension of assumption of the MU theory of consumer behavior?

answer

goods&services carry a price tag

question

a consumer w/ a fixed income will maximize utility when each good is purchased in mouton such that the

answer

MU per dollar spent is the same for all goods

question

downward sloping demand curve can be derived for a normal product by decreasing its price in the consumer- behavior model and noting:

answer

increase in utility maximizing quantity of that product demanded

question

consumers demand curve for a product is down sloping because

answer

MU diminishes as more of a product is consumed

question

product has utility if it

answer

satisfies consumer wants

question

price ratio of the two products is the

answer

slope of the budget line

question

costs to an economist

answer

may or may not involve monetary outlays

question

implicit costs are

answer

"payments" for self-employed resources

question

cash expenditures a firm makes to pay for resources are called

answer

explicit costs

question

in the short run, output

answer

can vary as the result of using a fixed amount of plant and equipment more or less intesively

question

main difference between short run and the long run is that

answer

in short run, one or more inputs is fixed

question

which of the following is most likely to be a fixed cost?

answer

property insurance premiums

question

if you know that when a firm produces 10 units of output, TC are $1030 and AFC are $10, then TFC are?

answer

$100

question

economies & diseconomies of scale explain:

answer

why the firms long run ATC cure is U-shaped

question

when diseconomies of scale occur?

answer

long run ATC curve rises

question

when a firm doubles its inputs and finds that its output has more than doubled, this is known as ?

answer

economies of scale

question

for a purely competitive seller, price equals

answer

AR, MR, TR/Q

question

for a pruely competitive firm , TR ?

answer

1. is price times quantity sold
2.increases by constant absolute amt. as output expands
3.graphs as a striaght upsloping line from the origin

question

in the standard model of pure competition, a profit maximizing entrepreneur will shut down in the short run if?

answer

TR is less than TVC

question

in a typical graph for a purely competitive firm, the intersection of the TC & TR curves would be?

answer

break even pt

question

wage rates increase in a purely competitive industry.this change will result in an?

answer

increase in the marginal cost curve for a firm in the industry

question

in the short run a purely competitive firm that seeks to maximize profit will produce?

answer

where TR exceeds TC by the maximum amount

question

a firm reaches a break even pt ( normal profit position) where?

answer

TR and TC are equal

question

in the short run the individual competitive firms supply curve is that segment of the?

answer

MC curve lying above the AVC curve

question

a purely competitive firms short run supply curve is?

answer

up sloping & equal to the portion of the MC curve that lies above the AVC curve

question

resource costs increase in a purely competitive industry. this change will result in a

answer

decrease in the short run supply curve for a firm in the industry

question

when a purely competitive industry is in LR equilibrium, which stmt is true?

answer

price and AVC are equal

question

productive efficiency refers to ?

answer

cost minimization , where p= minimum ATC

question

an economy is producing at the least-cost rate of production when?

answer

price and the minimum ATC are equal

question

if a purely competitive firm is producing at the MR=MC output level and earrings an economic profit, then?

answer

new firms will enter this market

question

LR equilibrium of a purely competitive industry ensures?

answer

consumer and producer surplus is maximized

question

in the short run purely competitive firms earn ______ in equilibrium while in the LR firms earn _________ in equilibrium

answer

profits or losses, normal profit

question

creative destruction

answer

1. stimulates growth
2.contributes to the production of new goods
3.forces firms to be innovative

1 of 71

question

MU>0

answer

TU is rising

question

MU=0

answer

TU is at its peak

question

answer

change in TU/ change Q

question

answer

sum of the MUS

question

Diminishing MU and law of demand

answer

p decrease when buying more and MU decreases as you get more

question

MUa/Pa > MUb/Pb

answer

buy more of good A

question

MUa/Pa = MUb/Pb

answer

maximizing utility

question

rational choice theory

answer

people behave like human calculators and compare the many MU per dollar calculations for all major purchases

question

Bounded Rationality

answer

we make so many decisions each day that we rely on rules of thumb, habits and emotions in making many economic decisions

question

bounded rationality includes following rules of thumb and habits:

answer

you get what you pay for, follow the leader, and focal point equilibria

question

status-quo bias

answer

people like the current situation so if you have a new car and then your income decreases then it would be hard for you to adjust to the new income

question

conspicuous consumption

answer

showing off like trump with his plane

question

ultimatum game

answer

people like whats fair , if someone offered you 50$ when they get $50 , you would accept but if they only offered you 10$ and kept the rest you would reject.

question

profit

answer

TR-TC

question

explicit cost

answer

obvious costs that are needed for the business. like blender

question

implicit cost

answer

the OC of using resources owned by the entrepreneur that could be used for another purpose . ex: if you own the store then forgone rent, entrepreneur forgone salary.

question

in the short run,at least one input is

answer

fixed

question

in the long run, all inputs are

answer

variable

question

law of diminishing returns

answer

law of diminishing marginal productivity; as more variable inputs are added to a fixed input, at some point the productivity of the variable input will decrease

question

law of diminishing marginal utility

answer

as you are engaged in an activity each additional increment gives less pleasure than the previous increment

question

accounting profit

answer

revenue- explicit cost

question

economic profit

answer

R-C

question

answer

change in TC/ change in Q

question

answer

average product= TP/ units of labor

question

answer

marginal product= change in TP

question

on long run cost curves

answer

all costs are variable

question

four market structures

answer

perfect( or pure) competition, pure monopoly, monopolistic competition, oligopoly

question

pure competition- market traits

answer

question

in pure competition a firm maximizes profit

answer

TR exceeds TC by a maximum amount

question

in pure competition a firm maximizes profit ( or minimizes loss)

answer

producing at a quantity where MR=MC

question

in pure competition a firm will shut down

answer

if the price is below AVC

question

positive economic profit

answer

new firms will enter the market, supply increase, price falls

question

economic loss

answer

firms will exit the market, supply decreases, price rises

question

long run equilibrium

answer

firms are making 0 ( or normal) economic profits

question

equilibrium

answer

MR=MC=P=Minimum ATC and the market achieves elective efficiency, productive efficiency, and the combined areas of consumer & producer surplus are maximized

question

new innovations

answer

change the cost structure in pure competition through the process of creative destruction

question

MU is the

answer

change in TU obtained by consuming one more unit of a good

question

TU of a product is calculated by

answer

summing the MU for each successive unit of the product thats consumed

question

which is a dimension of assumption of the MU theory of consumer behavior?

answer

goods&services carry a price tag

question

a consumer w/ a fixed income will maximize utility when each good is purchased in mouton such that the

answer

MU per dollar spent is the same for all goods

question

downward sloping demand curve can be derived for a normal product by decreasing its price in the consumer- behavior model and noting:

answer

increase in utility maximizing quantity of that product demanded

question

consumers demand curve for a product is down sloping because

answer

MU diminishes as more of a product is consumed

question

product has utility if it

answer

satisfies consumer wants

question

price ratio of the two products is the

answer

slope of the budget line

question

costs to an economist

answer

may or may not involve monetary outlays

question

implicit costs are

answer

"payments" for self-employed resources

question

cash expenditures a firm makes to pay for resources are called

answer

explicit costs

question

in the short run, output

answer

can vary as the result of using a fixed amount of plant and equipment more or less intesively

question

main difference between short run and the long run is that

answer

in short run, one or more inputs is fixed

question

which of the following is most likely to be a fixed cost?

answer

property insurance premiums

question

if you know that when a firm produces 10 units of output, TC are $1030 and AFC are $10, then TFC are?

answer

$100

question

economies & diseconomies of scale explain:

answer

why the firms long run ATC cure is U-shaped

question

when diseconomies of scale occur?

answer

long run ATC curve rises

question

when a firm doubles its inputs and finds that its output has more than doubled, this is known as ?

answer

economies of scale

question

for a purely competitive seller, price equals

answer

AR, MR, TR/Q

question

for a pruely competitive firm , TR ?

answer

1. is price times quantity sold
2.increases by constant absolute amt. as output expands
3.graphs as a striaght upsloping line from the origin

question

in the standard model of pure competition, a profit maximizing entrepreneur will shut down in the short run if?

answer

TR is less than TVC

question

in a typical graph for a purely competitive firm, the intersection of the TC & TR curves would be?

answer

break even pt

question

wage rates increase in a purely competitive industry.this change will result in an?

answer

increase in the marginal cost curve for a firm in the industry

question

in the short run a purely competitive firm that seeks to maximize profit will produce?

answer

where TR exceeds TC by the maximum amount

question

a firm reaches a break even pt ( normal profit position) where?

answer

TR and TC are equal

question

in the short run the individual competitive firms supply curve is that segment of the?

answer

MC curve lying above the AVC curve

question

a purely competitive firms short run supply curve is?

answer

up sloping & equal to the portion of the MC curve that lies above the AVC curve

question

resource costs increase in a purely competitive industry. this change will result in a

answer

decrease in the short run supply curve for a firm in the industry

question

when a purely competitive industry is in LR equilibrium, which stmt is true?

answer

price and AVC are equal

question

productive efficiency refers to ?

answer

cost minimization , where p= minimum ATC

question

an economy is producing at the least-cost rate of production when?

answer

price and the minimum ATC are equal

question

if a purely competitive firm is producing at the MR=MC output level and earrings an economic profit, then?

answer

new firms will enter this market

question

LR equilibrium of a purely competitive industry ensures?

answer

consumer and producer surplus is maximized

question

in the short run purely competitive firms earn ______ in equilibrium while in the LR firms earn _________ in equilibrium

answer

profits or losses, normal profit

question

creative destruction

answer

1. stimulates growth
2.contributes to the production of new goods
3.forces firms to be innovative

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