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98 Cards in this Set

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Scarcity exists because of:

Unlimited wants and limited resources

If a government imposes a price floor on a particular good and the price floor is greater than the equilibrium market price, then

The quantity supplied will exceed the quantity demanded

If the cross-price elasticity is equal to zero - products x and y are

Unrelated products

Efficiency is defined as:

Absence of misallocation of resources

Along a given supply curve:

Quantity supplied changes as price changes

If the price of a rental car increases, the price of airline tickets will _________ and the equilibrium quantity of rental cars will _________

Decrease/Decrease

The slope of a demand curve is negative because:

Inverse relationship between price and quantity demanded

Economic Growth may result from:

The elimination of unemployment, the introduction of new technology, an increase in the proportion of society's spending going toward capital goods rather than consumption

Assuming a specific good is an inferior good, a decrease in consumer income will shift:

The demand curve outward

In consumption and utility theory, it is assumed at some point the marginal utility of consuming a product:

Decreases as the consumption of the product increases

A change in income leads to a:

Parallel shift in the budget line

If a person's income increases from $2,000 to $3,000 and their quantity demanded of a good increases from 100 units to 150 units, what is the income elasticity for this good?

(150-100)(5)/(3-2)(250) = 250/250 = 1


(Q2-Q1)(P2+P1)/(P2-P1)(Q2+Q1)

The opportunity cost of an action is:

The foregone value of the next best alternative that is not chosen

The slope of the indifference curve measures:

The marginal rate of substitution between the two goods

Along any indifference curve:

Total utility is constant

Which is a supply shifter?

An increase in the price of an input required to produce the good, The discovery of a new more efficient technology for producing the good

Total utility is defined as:

Maximum amount a consumer if willing to pay for a quantity of a good

If the price of Good A increases from $1.00 to $1.50 and the quantity demanded of Good B increases form 5 units to 10 units what is the cross price elasticity?

(10-5)(1.50+1.00)/(1.50-1.00)(10+5)


= 5(2.5)/(1.5)(15)


= 12.5/7.5 = 1.66

In a well functioning market, goods with high prices will have:

High opportunity costs

Positive economies is concerned with:

What action is taken to address an economic issue

Two goods with a positive cross elasticity would be characterized as:

Substitute goods

If your income increases and, as a result, your consumption of a certain good increases, then that good is

Normal good

The two effects of a change in price are:

The substitution effect and the income effect

When MPP is increasing, APP is:

Increasing

Average fixed cost will:

Fall as output rises

In a long run, firms break-even price should be:

Equal to the long run average total cost

What curve best represents all of the combinations of two products that a society can produce with its limited resources?

Production possibilities curve

Along a given isoquant, output is:

Constant

If a firm is operating in stage III, the firm's:

MPP is negative

If a firm is currently producing zero output, total cost equals:

Total fixed cost

In the long run:

All inputs can be varied

A profit maximizing firm will equate marginal revenue and:

Marginal cost

The mechanism used to allocate resources efficiently in a market system is:

Price

The addition to total revenue associated with selling the last unit of output is:

Marginal revenue

Perfect competition is efficient in the long run because,

P=MC


P=MU


P=minimum ATC

The immediate run is:

Fixed

Short run

Can change all but one factor

Long Run

Can change anything or all factors of production

Under perfect competition price equals:

AR (average revenue), MR (marginal revenue), and Demand facing the individual firm

A firms short run supply curve is:

The upward sloping portion of MC above AVC

Production functions indicate the technical relationship between:

Factor inputs and quantity of output

Which of the following is not one of the characteristics underlying a perfectly competitive market:

High barriers to entry/exit

A laissez faire market system is one where:

There is no government intervention

If a firm is operating on the downward sloping portion of the long run average cost curve, the firm is experiencing:

Increasing returns to scale

The law of Diminishing Returns states that:

As more inputs are added, marginal physical product of the inputs used in the production process decline

In a monopoly situation, the barriers to entry:

May be significant

Stage II of a production function begins at:

The point where Marginal Physical Product is equal to Average Physical Product

What term is used to measure to slope of an isoquant

Marginal rate of technical substitution (MRTS)

A monopolist's supply curve is:

A monopolist does not have a supply curve

The two market structures that are polar opposites on the competitive spectrum are:

Perfect competition and monopoly

An industry in which advantages of large-scale production make it possible for a single firm to produce the entire output of the market at a lower average total cost than a larger number of firms each producing a smaller quantity is:

A natural monopoly

In the long run, a monopolistically competitive firm will produce an output level:

Lower than that which minimizes its unit costs

If the government imposes a $1.00 per unit tax on a firm in order to curb pollution emissions, which way will the firm's MC curve shift?

It will shift to the left

Economists make a distinction between investment and capital.Capital is considered to be

A stock

The effect of a minimum wage, a price floor, if set above the equilibrium wage rate will result in:

A surplus of labor

The method used to find the present day value of money that will be received in future time periods is called:

Discounting

Characteristic of an oligopolist

Some control over price, Homogeneous or heterogeneous product, and Imperfect information among buyers and sellers




NOT Large number of firms

Mutual interdependence between firms is most significant under which market structure?

Oligopoly

A monopolist market model is inefficient compared to a perfectly competitive market model because:

It charges too high a price for its output, It produces too little output

Like a perfectly competitive firm, a monopolist:

Chooses an output level at which MR=MC

A four firm concentration ratio is best defined by:

Sales of the largest four firms

The kinked demand curve in an oligopolistic market is a way of explaining:

Why there is price stickiness in the market

Which of the following does the market system do well?

Allocate resources among competing industries

Which of the following is an example of a cartel?

OPEC

A sales maximizer:

Sacrifices short-run profit for long-run market share, Produces where MR=0

The derived demand curve for an input is:

The downward-sloping portion of the MRP curve

The price of capital can best be defined as:

Interest

The income effect of an increase in the wage rate results in:

Since higher wages increase a worker's income, his/her demand for all goods and services increases. Thus, the demand for leisure increases.

A bilateral monopoly is where:

Both a monopsony (buyer) and monopoly (seller) exist

If a firm chooses to maximize sales revenue rather than maximize profit it will:

Produce more output and charge a lower price

It is not possible to charge for a pure public good because:

People cannot be excluded from enjoying its benefits

The market level of rent is entirely determined by:

Demand side of the market

Cause a firm to become a monopolist:

Patents, Control of a scarce resource, Technical superiority in production

PV


Exam 3

FV/(1+r)^n

FV


Exam 3

A(1+r)^n

MPP


Exam 2

Change y/Change x

TVC

PX*X

TC

TFC+TVC

AFC

TFC/Y

AVC

TVC/Y

ATC

AFC+AVC

MC

Change TC/Change Y

MR

Change TR/Change Y

TR

Price*Y

Profit/Loss

TR-TC

Milton Friedman

Conservative Economist - belief in the ability of free markets


Limit gov involvement


Legalize drugs


Negative income taxes for the poor.


Volunteer military

John Kenneth Galbraith

Believes the modern corporation controls or even supplants (displaces) the market.


Planned economy with price and wage controls.


Society dictated by technology.



Progressive Taxes

The tax rate rises as income rises

Proportional Taxes

The tax rate is constant over all levels of income

Regressive taxes

The tax rate falls as income rises

Direct Taxes

Taxes that directly target income

Indirect Taxes

Taxes that indirectly target income

Value added taxes

Tax the total value added by each firm in the production chain. (not used in US)

Average tax rate

Refers to the fraction of income paid

Marginal tax rate

Refers to the fraction of tax that must be paid on each additional dollar of income earned

Horizontal Equity

Refers to equally situated individuals being taxed equally. This is concept is ambiguous as it is difficult to classify individuals as equal.

Supply curve in immediate run

Perfectly inelastic

Slope of Production Curve

MP