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32 Cards in this Set

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According to the example in the text, when a monetary fine was imposed for picking up a child late at a daycare center, the number of late pickups actually rose. Which of the following correctly explains this?
The monetary fine was less than the moral cost the tardy parent incurred when there was no fine.
A centrally planned economy has a planning authority that decides:
What products to produce.
Who receives the products.
How the products are produced.
Economics is the study of...
Choices made by people faced with scarcity
Considering how a change in one variable affects the value of another is called:
the marginal principle
Normative Economics
"What ought to be"
Diminishing returns occurs because
one of the inputs of production is fixed
When people act in their own self interest, it is described as the:
principle of voluntary exchange
To make things simpler and focus attention on what really matters economists use
A rich nation will trade with a poor nation because
The poor nation has the comparative advantage in a product
To explore the rationale for specialization, economists use:
Principle of oppurtunity cost
One common source of market failure is:
According to the principle of diminishing returns, if all factors of production are held constant and if that one factor is doubled then eventually output will most likelt:
less than double
Economic models are used to
explore decision making by individuals, firms and other organizations
Under which condition might diseconomies of a scale result
Hampered coordination brought about by bureaucracy and increasing cost of inputs
A perfectly competitive firm's marginal cost curve above the minimum of the average variable cost curve is its
short run supply curve
if a firm in a perfectly competitive market is currently producing output where price=marginal cost>avg total cost the firm is earning a positive or negative profit?
earning a positive profit
For a normal good if there is an increase in income there will be a ________ in the number of units purchased
When average variable cost is less than average fixed costs the firm is
suffering an economic loss
when AVC < AFC
When price is less than average variable costs, When marginal revenue=marginal costs
shut down
Diminishing marginal returns implies that firms
require more and more workers to produce each additional unit of output
A firms Marginal Cost curve is above the minimum of the Avg Variable cost curve is its
short-run supply curve
when price=marginal cost>average total cost the firm is?
earning a positive profit
When MC>AVG Total Cost
A profit maximizing firm in a perfectly competitive market is currently producing the output where (price-average variable cost)<average fixed cost, the firm is:
suffering n economic loss
In a perfectly competitive market a firm can maximize its profit by producing the output where:
Price is equal to its marginal cost
Average total costs are minimized when
Marginal cost=Average total cost
Average variable costs are minimized when
Marginal Costs = Average Variable costs
Profit is equal to
(Marginal Cost - Average Total cost)*Quantity
Explain why diseconomies of scales exist:
Diseconomies of scale exist when average costs increase with firm size.
its possible that input prices are increasing.
the average amount spent on inputs increases as
the scale of production increases.
coordination problems associated with an increasing number
of layers of bureaucracy
A ban on imported goods would result in:
Equilibrium quantity increase
Equilibrium prices increases
A price-taking firm should produce the quantity of output at which
marginal Revenue= marginal cost
An unprofitable firm should continue to operate if
its total revenue>total variable cost
The long-run supply curve is flatter than the short run supply curve because
there are diminishing returns in the short run but not in the long run