Econ unit 2 – Flashcards
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A desire to buy a product is the only requirement needed for demand to exist
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False
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Marginal utility describes the decreasing satisfaction a consumer receives with the purchase of each additional unite
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False
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A demand curve illustrates the quantity demanded at all possible prices at a given time
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True
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The Law of Demand states that more of a product will be purchased at low prices than at hight ones.
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True
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A supply curve is a graph that show the carious quantities supplied at a single market price
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False
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Productivity will decrease if workers are unmotivated
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True
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If producers expect lower prices in the future, they may withhold some of the supply
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False
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When more suppliers enter the market, the market supply will typically decline
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False
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The theory of production deals with the relationship between the factors of production and the output of goods and services
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True
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The Law of Variable Proportions states that in the short run, output will NOT change as one production input is varied while the others remain constant
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False
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The production function describes the relationship of changes in output to different amounts of a single input while other inputs are held constant
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True
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An increase in output as each new input is added, as in the addition of a worker, describes Stage 1 of the stages of production
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True
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Fixed cost is the cost that a business incurs even if there are no employees and no production takes place
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True
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The number of items sold multiplied by the average price of each item yields the total revenue of a business
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True
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The Law of Supply states that suppliers will normally offer less for sale at higher prices and more for sale at lower prices
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False
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The market supply curve shows the quantities offered at various prices by all firms that offer the product for sale in a given market
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True
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An increase in the const of inputs an cause the supply curve to shift to the left
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True
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The supply curve is likely to be elastic for products that can be made quickly without huge amounts of capital and skilled labor
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True
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The introduction of technology usually has no effect on supply
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False
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The mix of variable costs and fixed costs that a business faces affects the way the business operates
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True
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Marginal cost is the change in total revenue when one more unit of output is sold
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False
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The four important measures of cost are: total cost, fixed cost, variable cost, and marginal cost.
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True
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The profit-maximizing quantity of output occurs when marginal cost is exactly equal to total revenue
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False or True
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Marginal analysis compare the additional benefits of an action to its additional costs
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True
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Economists often use an academic model to help analyze behavior and predict outcomes
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False
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Market equilibrium is the situation in which the quantity of output supplied is equal to the quantity demanded
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True
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The amount of a price change is affected by the elasticity of both the supply and demand curves
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True
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If the price of an item is too high in a competitive market, a short appears until the price goes down
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False
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Perfect competition is not necessary for the theory of competitive pricing to be practical
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True
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Market situations lacking one or more of the characteristics of perfect competition are called imperfect competition
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True
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Perfect competition requires a market structure with freedom for firms to enter or leave the market
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True
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Oligopoly is a market structure with one very large firm
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False
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A government monopoly is a monopoly based on ownership or control of a manufacturing method or process
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False
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The monopolist does not use an equilibrium price to determine prices
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True
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The U.S. government intervenes in the economy to reduce the costs of imperfect competition
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True
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aThe government can "internalize an externality" by using the tax system
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True
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A condition of perfect competition is characterized by product differentiation
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False
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The monopolistic competitor operates in a market with many well-informed buyers and sellers
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True
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Non-Price competition is the use of advertising, giveaways, and other promotional campaigns to win customers
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True
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Smaller firms have the advantage of economies of scale over larger firms
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False
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Market failure can occur when resources do not move freely from one industry to another
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True
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Economists describe an unintended side effect of a business activity as an externality
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True
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The United States government uses taxes to reduce the effects of negative externalities
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True
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Corporations selling stock to the public met disclose there financial and operating information to both the public and the Securities and Exchange Commission
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True
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For most products and services, increased price results in
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Demand for fewer products
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An increase in the price of milk causes a decrease in the demand for cereal, The two products are
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Complements
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Advertising, fashion trends, and new product introductions serve to
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Create consumer demand
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Because a modest price increase has little or no effect, the demand for the product is
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Inelastic
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A business doubled the price of a product in order to increase profits. What scenario might occur?
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A dramatic decline in revenues demonstrated the elasticity of the product
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A demand schedule shows
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A listing of the various quantities demanded of a particular product at all prices that might prevail in the market
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Consumers' willingness to replace a costly item with a less costly item is an example of
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The substitution effect
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An increase in the price of cameras results in a decrease in the demand for film. The two products are
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Complements
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When a customer's need for a product is not urgent, demand tends to be
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Elastic
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When a manufacturer of pain medication reduced the price of the medication by 30%, profits declined by almost exactly 30%. Demand for the product is
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unit elastic or inelastic
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Changes in market supply
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-cost of labor -expectation that prices are about to increase -the numbers of sellers offering the product
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The supply of a product normally decreases if
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takes on the product increase
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When employees are getting in each other's way, the firm is operating
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in State 2 of production
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The theory of production deals with the relationship between the factors of production and
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The output of goods and services
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Rent payments and property taxes would be counted as
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fixed costs
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Many business are engaging in e-commerce because
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fixed costs are minimal
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Reasons why prices effectively perform the a location function
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-Competitive markets find their own prices without interference -Prices favor neither the producer nor the consumer -Prices are easily understood
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In a market economy, a high price is a signal for
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Producers to supply more and consumers to buy less
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At a given price, a surplus occurs when
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the quantity supplied is greater than the quantity demanded
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The federal minimum wage law demonstrates
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a societal choice for economic equity over efficiency
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When economic or political conditions are unstable
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The demand for gold increases
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Prices enable a market economy to adjust to unexpected events by
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Adjusting consumptions and production
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All of the following are characteristics of allocation by rationing
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-Lack of fairness -High administrative cost -Diminished incentive for workers
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If a competitive market is at equilibrium, and if there is a sudden increase in demand, then a temporary
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Shortage will occur and the price will increase
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The theory of competitive pricing
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is a set of ideal conditions and outcomes
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Deficiency payments are part of a federal program to assist
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Farmers
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Perfect competition is characterized by
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-A large number of buyers and sellers -Identical products -Well-informed buyers and sellers
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A monopoly that is based on the ownership or control of a manufacturing method, process, or other scientific advance is a
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Technological monopoly
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The government is involved in the U.S. economy for all of the folling
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-Promote and encourage competition -Prevent monopolies that deny the public the benefits of competition -Regulate industries in which a monopoly is in the public interest
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Under perfect competition
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No seller sells a product above the prevailing market price
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When a major car company lowers its prices, other car makers will probably
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lower their prices
