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A market is defined as
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any arrangement that brings buyers and sellers together.
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The "law of demand" refers to the fact that, other things remaining the same, when the price of a good rises,
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there is a movement up along the demand curve to a smaller quantity demanded.
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What results in a movement upward along the demand curve for movies?
answer
an increase in the price of movie tickets
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The American Dairy Association starts a highly successful advertising campaign that makes most people want to drink more milk. As a result,
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the demand for milk increases.
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If income increases and the demand for bus rides decreases,
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bus rides are an inferior good.
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If the automobile workers' union successfully negotiates a wage increase for its members, how does the wage hike affect the supply of automobiles?
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The supply decreases
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An increase in the number of fast-food restaurants
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increases the supply of fast-food meals
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Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then
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the demand for hot dog buns will increase.
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The above figure shows the market for pizza. The market is in equilibrium when people's incomes decrease. If pizza is a normal good, then which point represents the most likely new price and quantity
answer
E
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The above figure shows the market for pizza. The market is in equilibrium when the cheese used to produce pizza falls in price. What point represents the most likely new price and quantity?
answer
D
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The above figure shows the market for pizza. The market is in equilibrium when the wages paid pizza workers increases. What point represents the most likely new price and quantity?
answer
B
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The above figure shows the market for pizza. The market is in equilibrium when new pizza firms enter the market. What point represents the most likely new price and quantity?
answer
D
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Demand curves slope ________ because as the price increases and other things remain the same, the quantity demanded _______.
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downward; decreases
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The market demand curve
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is the horizontal sum of individual demand curves.
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The phrase "a change in demand" most directly implies
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shift of the demand curve.
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If the demand for used cars decreases after the price of a new car falls, used cars and new cars are
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substitute goods.
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Which of the following increases the demand for a good?
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the expectation that future income will be higher
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"Other things remaining the same, if the price of a good rises, the quantity supplied of that good increases." This sentence describes a
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movement along a supply curve.
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If both the supply and demand curves shift simultaneously, we can always predict what will happen to
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either the price or the quantity, but not both.
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The price elasticity of demand is a measure of
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buyers' responsiveness to changes in the price of a product.
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The price elasticity of demand measures the ________ that results from a ________.
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percentage change in the quantity demanded; percentage change in price
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Suppose the price of a box of cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price?
answer
40 percent
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Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1,000 per month to 900 per month. Using the midpoint formula, the ________ percent change in price lead to a ________ percent change in the quantity demande.
answer
12.5; 10.5
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Suppose the local university charges $85 per credit hour. If tuition increases from $85 to $93 per credit hour, using the midpoint method, what is the percentage change in price?
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8.99 percent
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When the percentage change in the quantity demanded exceeds the percentage change in price, then demand is
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elastic
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If the price of a six-pack of Pepsi falls from $4 to $3 and the quantity purchased increases 80 percent, then demand is
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elastic.
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Perfectly inelastic demand means that consumers
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will buy a certain quantity, regardless of price.
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Suppose the demand for rescue services in our national parks is perfectly inelastic. This fact would mean that a 31 percent increase in rescue fees leads to
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no change in the quantity demanded.
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The demand for a good is more elastic if the
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good is narrowly defined.
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If a good has many close substitutes, then its demand is most likely
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elastic.
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If demand is price inelastic and the price is lowered, which of the following occurs
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The total revenue of the firms selling the product decreases.
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The price elasticity of supply measures
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the extent to which the quantity supplied of a good changes when the price of a good changes, other things remaining the same
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If the percentage change in the price of a good exceeds the percentage change in the quantity supplied, then the supply is
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inelastic
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The fact that there is a very limited amount of land in Hong Kong means the supply of new apartments in Hong Kong is
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inelastic
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If the price of a good decreases from $9 to $6 and the quantity supplied decreases from 1,500
to 1,300, using the midpoint formula the elasticity of supply equals
to 1,300, using the midpoint formula the elasticity of supply equals
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0.36.
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Because the price elasticity of supply for jumbo jets is 0.35, the supply of jumbo jet is
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inelastic.
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The greater the amount of time that passes after a price change, the
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more elastic supply becomes.
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If you know the cross elasticity between two goods is positive, then you know the goods are
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substitutes.
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If the cross elasticity of demand for DVD players and DVDs equals -2, then the products are
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complements.
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The income elasticity of demand is a measure of
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the extent to which the demand for a good changes when income changes.
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The income elasticity of demand is
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positive for a normal good.
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A firm's fundamental goal is
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to maximize profit
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John fishes for a living. Last year, he sold $100,000 of fish. Bait, nets and other fishing supplies cost John $10,000 and he paid $40,000 in salaries to his helpers. Depreciation on his boat and other equipment, as calculated using IRS rules, was $15,000. What was John's profit as would be calculated by an accountant?
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$35,000
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Suppose a firm's total revenue is $1,000,000. The firm has incurred explicit costs of $750,000. There is also $50,000 of forgone wages by the owner, $10,000 of forgone interest by the owner, $3,000 worth of economic depreciation, and $20,000 worth of normal profit. What is the firm's economic profit?
answer
$167,000
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The short run is the time frame
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during which the quantities of some resources are fixed.
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The long run is defined as
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the period of time when all resources are variable.
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The total product curve shows the relationship between total product and
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the quantity of labor.
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The marginal product of labor is
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the change in total product divided by the increase in labor.
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The law of decreasing returns states that as a firm uses more of a
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variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases.
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When the average product is at its maximum
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it is equal to the marginal product.
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Total cost includes
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the cost of both variable and fixed resources.
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The cost that does not change as output changes is
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total fixed cost.
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Marginal cost equals
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the change in total cost that results from a one-unit increase in output.
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Average variable cost equals
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total variable cost divided by output.
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Which of the following always decreases when output increases?
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average fixed cost
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The main source of economies of scale is
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greater specialization of both labor and capital.
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Diseconomies of scale is a result of
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difficulties of coordinating and controlling a large enterprise.
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The long-run average cost curve is U-shaped because of which of the following?
answer
economies and diseconomies of scale
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Based on the figure above, curve
A is the firm's
A is the firm's
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average fixed cost curve
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Based on the figure above, curve B is the firm's
answer
average variable cost curve.
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