question
utility
answer
The satisfaction a product yields.
question
law of diminishing marginal utility
answer
The more of any one good consumed in a given period, the less satisfaction (utility) generated by consuming each additional (marginal) unit of the same good.
question
marginal utility (MU)
answer
The additional satisfaction gained by the consumption of one more unit of a good or service.
question
• total utility
answer
The total satisfaction a product yields.
question
Marginal utility
answer
is the additional utility gained by consuming one additional unit of a commodity—in this case, trips to the club.
question
zero
answer
• When marginal utility is _______, total utility stops rising.
question
last unit
answer
MUx/Px = MUy/Py
MUX: the marginal utility derived from the ________ of X consumed
MUY : the marginal utility derived from the last unit of Y consumed
PX : the price per unit of X
PY : the price per unit of Y.
MUX: the marginal utility derived from the ________ of X consumed
MUY : the marginal utility derived from the last unit of Y consumed
PX : the price per unit of X
PY : the price per unit of Y.
question
utility-maximizing rule
answer
Equating the ratio of the marginal utility of a good to its price for all goods.
question
income
answer
Another explanation for downward-sloping demand curves centers on ___________ and substitution effects.
question
income
answer
The Income Effect
• Assuming nothing else changes, a price decline in a product makes you better off because you have more _________ left over.
• The consumer will usually buy more of the good whose price has fallen.
• The change in consumption of X due to this improvement in well-being is called the income effect of a price change.
• The reverse is true for a price increase.
• Assuming nothing else changes, a price decline in a product makes you better off because you have more _________ left over.
• The consumer will usually buy more of the good whose price has fallen.
• The change in consumption of X due to this improvement in well-being is called the income effect of a price change.
• The reverse is true for a price increase.
question
substitution
answer
The ___________ Effect
• When the price of a product falls, that product also becomes relatively cheaper.
• The relatively lower-priced product becomes more attractive than other substitutes.
• A fall in the price of product X might cause a household to shift its purchasing pattern away from substitutes toward X.
• This shift is called the substitution effect of a price change. • Again, the reverse is true for a price increase.
• When the price of a product falls, that product also becomes relatively cheaper.
• The relatively lower-priced product becomes more attractive than other substitutes.
• A fall in the price of product X might cause a household to shift its purchasing pattern away from substitutes toward X.
• This shift is called the substitution effect of a price change. • Again, the reverse is true for a price increase.
question
jobs
answer
The Labor Supply Decision
• As in output markets, households face constrained choices in input markets.
They must decide:
1. Whether to work
2. How much to work
3. What kind of a job to take
• The choices they make are affected by:
- Availability of _______, market wage rates, skills they possess, the limit of 168 hours in a week, etc.
• As in output markets, households face constrained choices in input markets.
They must decide:
1. Whether to work
2. How much to work
3. What kind of a job to take
• The choices they make are affected by:
- Availability of _______, market wage rates, skills they possess, the limit of 168 hours in a week, etc.
question
price of leisure
answer
Buying more leisure means spending less time working and more time on nonwork activities.
• For every hour of leisure consumed, the individual gives up one hour's wages.
• Thus, the wage rate is the ___________
• For every hour of leisure consumed, the individual gives up one hour's wages.
• Thus, the wage rate is the ___________
question
labor supply curve
answer
_______________
A curve that shows the quantity of labor supplied at different wage rates. Its shape depends on how households react to changes in the wage rate.
- The amount of labor that households want to supply
A curve that shows the quantity of labor supplied at different wage rates. Its shape depends on how households react to changes in the wage rate.
- The amount of labor that households want to supply
question
opposite directions
answer
in the labor market the income and substitution effects work in _____________.
question
indifference curve
answer
A set of points, each point representing a combination of goods X and Y, all of which yield the same total utility. • An ______________ is derived by plotting a consumer's preferences.
question
positive
answer
marginal utility is always _______
question
marginal rate of substitution
answer
The _______________, defined as the ratio at which a household is willing to substitute X for Y, MUx/MUy, is diminishing
question
transitivity
answer
If A, B, and C are bundles of goods, and a consumer prefers A to B, and B to C, then the consumer prefers A to C (rationality). Formally this is called ______________.
question
Higher
answer
Each consumer has a unique family of indifference curves called a preference map. ________ indifference curves represent higher levels of total utility.
question
Convex
answer
_________ to the origin means that the slope decreases as we move down the curve from left to right. Because the slope is MUx /MUy , the slope must therefore be decreasing.
question
intersect
answer
No two indifference curves can _________.
question
the same
answer
The tangency point between the indifference curve and the budget constraint has implications:
- They have ___________ slope: -MUx/MUy = -Px/Py
slope of indifference curve = slope of budget constraint
- They have ___________ slope: -MUx/MUy = -Px/Py
slope of indifference curve = slope of budget constraint
question
firms
answer
All ______ demand inputs, engage in production, and produce output.
question
minimize
answer
Firms also have an incentive to maximize profits and _________ costs.
question
production
answer
The process by which inputs are combined, transformed, and turned into outputs.
question
firm
answer
An organization that comes into being when a person or a group of people decides to produce a good or service to meet a perceived demand.
question
production
answer
Firms engage in ____________ because they believe they can sell their products at higher prices than it costs to produce them.
question
maximum profits
answer
All firms must make several basic decisions to achieve what we assume to be their primary objective—_______________.
question
profit
answer
The difference between total revenue and total cost.
question
profit =
answer
total revenue − total cost
question
total revenue
answer
The total amount that a firm takes in from the sale of its product: the price per unit times the quantity of output the firm decides to produce.
question
total cost
answer
Total fixed costs plus total variable costs.
question
economic
answer
The term profit will from here on refer to ___________ profit.
question
economic profit
answer
Profit that accounts for both explicit and opportunity costs.
question
normal rate of return
answer
The way we treat the opportunity cost of capital is to add a _______________ to capital as part of economic cost.
question
short run
answer
The period of time for which two conditions hold: The firm is operating under a fixed scale (fixed factor) of production, and firms can neither enter nor exit an industry.
question
long run
answer
That period of time for which there are no fixed factors of production: Firms can increase or decrease the scale of operation, and new firms can enter and existing firms can exit the industry.
question
longer term
answer
The difference between the short and long run is the difference between day-to-day operations and _____________ strategic planning
question
optimal method of production
answer
The production method that minimizes cost for a given level of output.
question
production technology
answer
The quantitative relationship between inputs and outputs.
question
labor-intensive technology
answer
Technology that relies heavily on human labor instead of capital.
question
capital-intensive technology
answer
Technology that relies heavily on capital instead of human labor
question
production function or total product function
answer
A numerical or mathematical expression of a relationship between inputs and outputs. It shows units of total product as a function of units of inputs.
question
marginal product
answer
The additional output that can be produced by adding one more unit of a specific input, ceteris paribus.
question
law of diminishing returns
answer
When additional units of a variable input are added to fixed inputs, after a certain point, the marginal product of the variable input declines.
question
short
answer
Every firm faces diminishing returns, which always apply in the _______ run.
question
average product
answer
The average amount produced by each unit of a variable factor of production.
question
falls
answer
If marginal product is above average product, the average rises; if marginal product is below average product, the average _______.
question
production function
answer
A _________ is a numerical representation of the relationship between inputs and outputs.
question
marginal product
answer
The ____________ of labor is the additional output that one additional unit of labor produces.
question
total product
answer
Marginal and average product curves can be derived from ________ curves.
question
Average product
answer
is at its maximum at the point of intersection with marginal product.
question
total
answer
Marginal and average product curves can be derived from _______ product curves.
question
maximum
answer
Average product is at its _________ at the point of intersection with marginal product.
question
productivity
answer
Additional capital increases the ___________ of labor—that is, the amount of output produced per worker per hour
question
technologies
answer
Two things determine the cost of production: _______________ that are available and input prices. Profit-maximizing firms choose the technology that minimizes the cost of production, given current market input prices.
question
isoquant
answer
A graph that shows all the combinations of capital and labor that can be used to produce a given amount of output.
question
substitution
answer
The slope of the isoquant is the marginal rate of technical ____________ (MRTS)
question
labor
answer
For output to remain constant, the loss of output from using less capital must be matched by the added output produced by using more _______. ΔK = -ΔL x MPL
question
constant
answer
Slope of isoquant: ΔK/ΔL = -MPL/MPk
• marginal rate of technical substitution The rate at which a firm can substitute capital for labor and hold output ___________.
• marginal rate of technical substitution The rate at which a firm can substitute capital for labor and hold output ___________.
question
K
answer
capital
question
labor
answer
For output to remain constant, the loss of output from using less capital must be matched by the added output produced by using more _______.
question
marginal rate of technical substitution
answer
The rate at which a firm can substitute capital for labor and hold output constant.
question
isocost line
answer
A graph that shows all the combinations of capital and labor available for a given total cost.
question
tangent
answer
Profit-maximizing firms will minimize costs by producing their chosen level of output with the technology represented by the point at which the isoquant is _________ to an isocost line.
question
slope
answer
At the point where a line is just tangent to a curve, the two have the same _______. At each point of tangency, the following must be true:
slope of isoquant = slope of isocost
slope of isoquant = slope of isocost
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
