microeconomics quiz #4 - Custom Scholars
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microeconomics quiz #4

question
an example of something economists would consider a cost but accountants wouldn't
answer
interest income to the owner because he invested in his own company
question
marginal products in the short run;
answer
initially increase, then eventually decrease
question
implicit costs
answer
costs that do not require a monetary payment
question
what will happen to total revenue as a firm, with a product with the elasticity demand of 2.0, decreases its price
answer
total revenue will increase
question
average variable cost
answer
TOTAL variable cost (divided by) QUANtity
question
what indicates less elastic demand
answer
if there are few substitutes
question
in the short run, what do firms want to alter (and can they)
answer
factors of production; some but not all
question
if a company faces a linear demand curve and the current price for the product is set at a elasticity point of 1.6, what will happen if that company increases the product price
answer
the demand becomes MORE elastic and the total revenue DECREASES
question
Diminishing marginal returns
answer
when at least one factor of production is fixed and firms require more workers to produce each unit of output
question
firms total cost equals (short run)
answer
fixed costs + variable costs
question
price of elasticity of demand is calculated by
answer
% change in QUANtity demand (divided by) % change in PRICE
question
why would a firm experience diminishing marginal returns
answer
at least one factor of production is fixed and becomes constraining to production
question
the primary objective of a firm in a market
answer
maximize profits
question
if the price elasticity of demand is 2 then a ____ increase in PRICE causes a ____ decrease in QUANTITY DEMAND
answer
20%, 40%
question
if someone purchases the same amount of something routinely, regardless of changes in price, their demand for that product is...
answer
perfectly inelastic
question
the middle line going upward through two other lines going side to side is the
answer
marginal cost line
question
if the demand curve is a vertical line, that means ...
answer
regardless of the price, the quantity demanded is a constant amount
question
how is cost determined
answer
according to the law of supply
question
principal-agent relationships
answer
the arrangement when an agent speaks on behalf of the principal
question
when are principal-agent relationships controversal
answer
when the two parties disagree or their interests differ
question
explicit costs
answer
costs that require a firm to spend money
question
economic profit equation
answer
total revenue - costs (implicit & explicit)
question
accounting profit equation
answer
total revenue - EXPLICIT costs only
question
production
answer
the method of turning inputs into outputs
question
monopoly
answer
only one firm, illegal in the US, no competition, unique product
question
oligopoly
answer
few firms, limited entry, similar products, hard to get into but not impossible
question
monopolistic competition
answer
many firms, similar products, easy to get into
question
revenue is...
answer
proportional to quantity sold
question
when marginal revenue is greater than marginal cost
answer
increase in quanitity
question
when marginal cost is greater than marginal revenue
answer
decrease in quantity
question
when marginal cost equals marginal revenue
answer
profit is maximized
1 of 31
question
an example of something economists would consider a cost but accountants wouldn't
answer
interest income to the owner because he invested in his own company
question
marginal products in the short run;
answer
initially increase, then eventually decrease
question
implicit costs
answer
costs that do not require a monetary payment
question
what will happen to total revenue as a firm, with a product with the elasticity demand of 2.0, decreases its price
answer
total revenue will increase
question
average variable cost
answer
TOTAL variable cost (divided by) QUANtity
question
what indicates less elastic demand
answer
if there are few substitutes
question
in the short run, what do firms want to alter (and can they)
answer
factors of production; some but not all
question
if a company faces a linear demand curve and the current price for the product is set at a elasticity point of 1.6, what will happen if that company increases the product price
answer
the demand becomes MORE elastic and the total revenue DECREASES
question
Diminishing marginal returns
answer
when at least one factor of production is fixed and firms require more workers to produce each unit of output
question
firms total cost equals (short run)
answer
fixed costs + variable costs
question
price of elasticity of demand is calculated by
answer
% change in QUANtity demand (divided by) % change in PRICE
question
why would a firm experience diminishing marginal returns
answer
at least one factor of production is fixed and becomes constraining to production
question
the primary objective of a firm in a market
answer
maximize profits
question
if the price elasticity of demand is 2 then a ____ increase in PRICE causes a ____ decrease in QUANTITY DEMAND
answer
20%, 40%
question
if someone purchases the same amount of something routinely, regardless of changes in price, their demand for that product is...
answer
perfectly inelastic
question
the middle line going upward through two other lines going side to side is the
answer
marginal cost line
question
if the demand curve is a vertical line, that means ...
answer
regardless of the price, the quantity demanded is a constant amount
question
how is cost determined
answer
according to the law of supply
question
principal-agent relationships
answer
the arrangement when an agent speaks on behalf of the principal
question
when are principal-agent relationships controversal
answer
when the two parties disagree or their interests differ
question
explicit costs
answer
costs that require a firm to spend money
question
economic profit equation
answer
total revenue - costs (implicit & explicit)
question
accounting profit equation
answer
total revenue - EXPLICIT costs only
question
production
answer
the method of turning inputs into outputs
question
monopoly
answer
only one firm, illegal in the US, no competition, unique product
question
oligopoly
answer
few firms, limited entry, similar products, hard to get into but not impossible
question
monopolistic competition
answer
many firms, similar products, easy to get into
question
revenue is...
answer
proportional to quantity sold
question
when marginal revenue is greater than marginal cost
answer
increase in quanitity
question
when marginal cost is greater than marginal revenue
answer
decrease in quantity
question
when marginal cost equals marginal revenue
answer
profit is maximized
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