question
Complete the following sentence. Economic models
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describe some aspect of the economic world, but include only those features needed for the purpose at hand
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If the price of a good is not affected by a tax, then
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demand is perfectly elastic
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A price ceiling set below the equilibrium price will result in
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excess demand
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A Price elasticity of demand of 2 means that a 10 percent increase in price will result in a
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20 percent decrease in quantity demanded
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A turnip is an inferior good if
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an increase in income decreases the demand for turnips
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Economies of scale are present when
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the LRAC curve slopes downward
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Which one of the following events shifts the demand curve for grape jelly to the right?
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an increase in income if grape jelly is a normal good
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The average variable cost curve will shift upward if
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the price of the variable input increases
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If we produce one more bottle of water
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we incur a marginal cost
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The law of diminishing marginal returns states:
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as a firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes
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Statements about "what ought to be" are called
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normative statements
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Which one of the following illustrates an inelastic demand?
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a 10 percent rise in price leads to a 5 percent decrease in quantity demanded
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An increase in income
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increase the demand for turnips if turnip is a normal good
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At the best affordable point, what is the relationship between the indifference curve and the budget line?
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the slope of the indifference curve equals the slope of the budget line
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Suppose Honda can triple its production of Civics by tripling its production facility for those cars. This indicates the presence of
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constant returns to scale
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If the government imposes a maximum rent for housing that is above the equilibrium price, then you predict that
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the law will have no effect in the market for housing
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If ATC is falling, then MC must be
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below ATC
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An increase in the price of ground beef
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increase the demand for chicken, a substitute for ground beef & decreases the quantity demanded of ground beef
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Marginal cost
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is the minimum price a producer must receive to induce him to offer one more unit of a good or service for sale
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An indifference curve is
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a line that shows combinations of goods among which a consumer is indifferent
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Producer surplus is
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the price received for a good minus its marginal cost, summed over the quantity sold
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Marginal cost is equal to
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the increase in total cost divided by the increase in output
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Which of the following are correct? According to the law of demising product,
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marginal product eventually falls & marginal cost eventually rises
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The magnitude of the slope of an indifference curve is
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the marginal rate of substitution
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