question

marginal utility diminishes as more of a product is consumed

answer

A consumers demand curve is downsloping for a product because:

question

Behavioral

answer

In the recession people over estimated their gains.. type of economics?

question

the recognition heuristic

answer

According to behavioral economics, advertising works because of:

question

framing effects

answer

"mostly sunny" versus "partly cloudy"

question

A payment that must be made or an income that must be provided to obtain and retain the services of a resource

answer

ECONOMIC COSTS CAN BEST BE DEFINED AS

question

MP is 0

answer

Total output of a firm will be at a maximum where:

question

(Total Product)/(Inputs of Labor or VR)

answer

Average product formula?

question

positive and increasing

answer

When total product is increasing at an increasing rate, marginal product is

question

When AP rising, AVC is falling, when AP is falling, AVC is rising

answer

*relationship between AP and AVC

question

AFC nothing & AVC, ATC, and MC would shift right

answer

If wage rates paid to a firm's labor inputs were to rise what would happen to AFC, AVC, ATC, and MC curves?

question

none

answer

Result in change of AFC on marginal costs

question

AVC up MC up

answer

Result in change of AVC on marginal costs

question

ECONOMIES OF SCALE

answer

If a firm increases its inputs and its outputs increase by more it is encountering...

question

factors other than those being considered do not change/other things equal assumption

answer

ceterius paribus

question

factual statements

answer

Positive Economics

question

"ought/should"

answer

Normative Economics

question

unlimited wants and limited resources

answer

Economizing Problem

question

The study of the individual firm, consumer, or market

answer

Microeconomics

question

Study of economy or major aggregate of economy

answer

Macroeconomics

question

Land, Labor, Capital, Entrepreneurial Ability

answer

Economic Resources

question

-Full Employment, Fixed Resources, Fixed Technology, 2 goods in economy (consumer and capital goods)

answer

Assumptions of PPC Curve

question

misunderstanding cause and effect (rooster crow doesn't cause sunrise)

answer

post hoc fallacy

question

something true for one person might not be true for all

answer

fallacy of composition

question

...

answer

ALL ECONOMIES ARE MIXED

question

CONSUMERS DETERMINE TYPES AND QUANTITIES OF PRODUCTS THAT WILL BE PRODUCED THROUGH DOLLAR VOTES

answer

CONSUMER SOVEREIGNTY

question

-Changes in consumer tastes -Changes in technology -Changes in resource prices

answer

How Will System Change?

question

export a lot but don't import a lot

answer

Mercantilism

question

In command econ not knowing how much to produce

answer

Coordination Problem

question

-Households Sell -Businesses Buy

answer

Resource Market

question

-Business Sells -Household buys

answer

Product Market

question

WRIP, Wages, Rent, Interest, Profit

answer

What goes into households?

question

Land, Labor, Capital, Entrep Ability

answer

What goes out of households and resource market?

question

WIDESPREAD PRIVATE OWNERSHIP OF CAPITAL

answer

DISTINGUISHING FEATURE OF A MARKET SYSTEM

question

greater total output!

answer

Speacialization is important because it results in...

question

The substitution effect.

answer

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement described:

question

complimentary

answer

If the demand curve for product B shifts to the right as the price of product A declines, then they are -- goods

question

Beyond some point the production costs of additional units of output will rise

answer

A firm's supply curve is upsloping because

question

Supply curves must reflect all costs of production, and demand curves must reflect consumer willingness to pay.

answer

What two conditions must hold for a competitive market to produce efficient outcomes?

question

The difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price

answer

Consumer Surplus

question

Is measured as the combined loss of a consumer surplus and producer surplus

answer

An efficiency loss or deadweight loss

question

the moral hazard problem

answer

Because the federal gov't typically provides disaster relief to farmers, many farmers don't buy crop insurance, this represents:

question

asymmetric information

answer

Owners of defective cars have more info about the condition of their cars than potential buyers, this represents:

question

govt has legal right to force people to do things, private firms do not

answer

Key diff between govt' activities and private ones

question

agents, employees

answer

In a representative democracy voters are -- and politicians are--

question

result from political bias towards immediate benefit and deferred cost

answer

Govt's unfunded liabilities:

question

Rules and enforcement in an industry are heavily influenced by the industry being regulated

answer

Regulatory Capture

question

product differentiation.

answer

A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:

question

above marginal cost.

answer

In the long run, a profit-maximizing monopolistically competitive firm sets it price:

question

may be either equal to ATC, less than ATC, or more than ATC.

answer

In the short run, the price charged by a monopolistically competitive firm attempting to maximize profits:

question

P exceeds minimum ATC.

answer

Which of the followiIf a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry:

question

consumers have increased product variety.

answer

The economic inefficiencies of monopolistic competition may be offset by the fact that:

question

greater market power in Y than in X.

answer

Industries X and Y both have four-firm concentration ratios of 65 percent, but the Herfindahl index for X is 1,500 while that for Y is 2,000. These data suggest:

question

may understate the degree of monopoly.

answer

If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry:

question

there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price.

answer

The kinked-demand curve model helps to explain price rigidity because:

question

cost and demand curves of various participants are very similar.

answer

The likelihood of a cartel being successful is greater when:

question

limit pricing.

answer

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called:

question

expands sales such that firms achieve substantial economies of scale.

answer

Advertising can enhance economic efficiency when it:

question

Exit and entry of firms does not affect resource prices

answer

Constant cost industry

question

Firms will only enter if costs increase if price increases too

answer

Increased cost industry

question

Decrease in resource prices increases supply/ decreases price

answer

Decreasing cost industry

question

The firms in the market are part of a decreasing-cost industry.

answer

Under what conditions would an increase in demand lead to a lower long-run equilibrium price?

question

producing less output than allocative efficiency requires.

answer

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is:

question

price is greater than marginal cost.

answer

Assume that society places a higher value on the last unit of X produced than the value of the resources used to produce that unit. With no spillovers, this information means that:

question

innovate to lower operating costs and generate short-run economic profits.

answer

Entrepreneurs in purely competitive industries:

question

benefit surplus

answer

When consumer and producer surplus are maximized

question

-Changes in Consumer Tastes -Resource Prices -Technology

answer

Purely competitive markets will automatically adjust to

question

average revenue, marginal revenue, and total revenue over output

answer

For a purely competitive seller, price equals:

question

-Consumer Tastes and Preferences -# of Buyers -Income -Price of Related Goods --Change in Consumer Expectations

answer

Demand Determinants

question

Up price up QS Down price down QS

answer

Relationship between price and QS?

question

-Change in resource prices -Change in technology - Change in taxes and subsidies - Change in prices of other goods - Change in producer expectations -Change in number of suppliers

answer

Supply Determinants

question

ability of market to find equilibrium

answer

Rationing function of prices

question

long-run average costs decline continuously through the range of demand.

answer

A natural monopoly occurs when:

question

is the industry demand curve.

answer

The nondiscriminating pure monopolist's demand curve:

question

the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.

answer

For an imperfectly competitive firm:

question

its economic profits will be zero.

answer

If a pure monopolist is producing at that output where P = ATC, then:

question

charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic.

answer

If a monopolist engages in price discrimination, it will:

question

produce a larger output than a nondiscriminating monopolist.

answer

Other things equal, a price discriminating monopolist will:

question

inelastic

answer

If MU falls sharply, is demand elastic or inelastic?

question

utility derived is greater than market price

answer

Consumer Surplus

question

Too little is produced

answer

Positive Externality

question

Too much is produced

answer

Negative Externality

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