Econ 4001 Exam 1 - Assignment Essays

question

Microeconomics

answer

the study of how individuals and firms make themselves as well off as possible in a world of scarcity and the effects of their actions on markets and the entire economy

question

Market

answer

an exchange mechanism that allows buyers to trade with sellers

question

Model

answer

a description of the relationship between two or more economic variables

question

positive statement

answer

a testable hypothesis about cause and effect

question

normative statement

answer

a conclusion as to whether something is good or bad

question

quanity demanded

answer

the amount of a good that consumers are willing to buy at a given price, holding constant the other factors that influence purchases

question

demand curve

answer

the quantity demanded at each possible price, holding constant the other factors that influence purchases

question

Law of Demand

answer

consumers demand more of a good the lower its price, holding constant tastes, the prices of other goods, and other factors that influence consumption

question

substitutes

answer

a good or service that may be consumed instead of another good or service

question

complement

answer

a good or service that is jointly consumed with another good or service

question

Demand Function

answer

the relationship between the quantity demanded, price, and other factors that influence purchases

question

Quantity Supplied

answer

the amount of a good that firms want to sell at a given price, holding constant other factors that influence firms' supply decisions, such as costs and government actions

question

supply curve

answer

the quantity supplied at each possible price, holding constant the other factors that influence firms' supply decisions

question

supply function

answer

shows the correspondence between the quantity supplied, price, and other factors that influence the number of units offered for sale

question

Quota

answer

the limit that a government sets on the quantity of a foreign-produced good that may be imported

question

Equilibrium

answer

a situation in which no one wants to change his or her behavior

question

excess demand

answer

the amount by which the quantity demanded exceeds the quantity supplied at a specific price

question

excess supply

answer

the amount by which quantity supplied exceeds quantity demanded when the price of a good exceeds the equilibrium price

question

transaction costs

answer

the expenses of finding a trading partner and making a trade for a good or service beyond the price paid for that good or service

question

elasticity

answer

the percentage change in a variable in response to a given percentage change in another variable

question

price elasticity of demand

answer

the percentage change in the quantity demanded in response to a given percentage change in the price

question

income elasticity of demand

answer

the percentage change in the quantity demanded in response to a given percentage change in income

question

cross-price elasticity of demand

answer

the percentage change in the quantity demanded in response to a given percentage change in the price of another good

question

price elasticity of supply

answer

the percentage change in the quantity supplied in response to a given percentage change in the price

question

incidence of a tax on consumers

answer

the share of the tax that consumers pay

question

good

answer

a commodity for which more is preferred to less, at least at some levels of consumption

question

bad

answer

something for which less is preferred to more, such as pollution

question

indifference curve

answer

the set of all bundles of goods that a consumer views as being equally desirable

question

indifference map

answer

a complete set of indifference curves that summarize a consumer's tastes or preferences

question

Marginal Rate of Substitution (MRS)

answer

the maximum amount of one good a consumer will sacrifice to obtain one more unit of another good

question

perfect substitutes

answer

goods that a consumer is completely indifferent as to which to consume

question

perfect complements

answer

goods that a consumer is interested in consuming only in fixed proportions

question

utility

answer

a set of numerical values that reflect the relative rankings of various bundles of goods

question

utility function

answer

the relationship between utility values and every possible bundle of goods

question

marginal utility

answer

the extra utility that a consumer gets from consuming the last unit of a good

question

budget line

answer

the bundles of goods that can be bought if the entire budget is spent on those goods at given prices

question

opportunity set

answer

all the bundles a consumer can buy, including all the bundles inside the budget constraint and on the budget constraint

question

marginal rate of transformation (MRT)

answer

the trade-off the market imposes on the consumer in terms of the amount of one good the consumer must give up to obtain more of the other good

question

behavioral economics

answer

by adding insights from psychology and empirical research on human cognition and emotional biases to the rational economic model, economists try to better predict economic decision making

question

endowment effect

answer

people place a higher value on a good if they own it than they do if they are considering buying it

question

tax salience

answer

awareness of a tax

question

bounded rationality

answer

people have a limited capacity to anticipate, solve complex problems, or enumerate all options

question

Engel Curve

answer

the relationship between the quantity demanded of a single good and income, holding prices constant

question

normal good

answer

a commodity of which as much or more is demanded as income rises

question

inferior good

answer

a commodity of which less is demanded as income rises

question

substiution effect

answer

the change in the quantity of a good that a consumer demands when that good's price rises, holding other prices and the consumer's utility constant

question

income effect

answer

the change in quantity of a good that a consumer demands because of a change in income, holding prices constant

question

Giffen good

answer

a commodity for which a decrease in price causes the quantity demanded to fall

question

compensating variation (CV)

answer

the amount of money one would have to give to a consumer to offset the harm from a price increase or take from a consumer to offset the benefit from a price decrease

question

equivalent variation (EV)

answer

the amount of money one would have to take from a consumer to harm the consumer by as much as the price increase or give to a consumer to benefit the consumer by as much as the price increase

question

firm

answer

an organization that converts inputs such as labor, materials, energy, and capital into outputs, the goods and services that it sells

question

limited liability

answer

the personal assets of the owners of the corporation cannot be taken to pay a corporation's debts even if it does into bankruptcy

question

profit

answer

the difference between revenue and cost

question

efficient production

answer

the current level of output cannot be produced with fewer inputs, given existing knowledge about technology and the organization of production

question

production function

answer

the relationship between the quantities of inputs used and the maximum quantity of output that can be produced, given current knowledge about technology and organization

question

short run

answer

a period so brief that at least one factor of production cannot be varied practically

question

fixed input

answer

a factor of production that the firm cannot practically vary in the short run

question

variable input

answer

a factor of production that the firm can easily vary during the relevant period

question

long run

answer

a lengthy enough period that all factors of production can be varied

question

marginal product of labor

answer

the change in total output, resulting from using an extra unit of labor, holding other factors constant

question

average product of labor

answer

the ratio of output to the number of workers used to produce that output: AP = q / L

question

isoquant

answer

a curve that shows the efficient combinations of labor and capital that can produce the same level of output

question

Marginal Rate of Technical Substitution

answer

the extra units of one input needed to replace one unit of another input that enables a firm to keep the amount of output it produces constant

question

constant returns to scale

answer

property of a production function whereby when all inputs are increased by a certain percentage, output rises by that same percentage

question

increasing returns to scale

answer

property of a production function whereby output rises more than in proportion to an equal percentage increase in all inputs

question

decreasing returns to scale

answer

property of a production function whereby output rises less than in proportion to an equal percentage increase in all inputs

question

technical progress

answer

an advance in knowledge that allows more output to be produced with the same level of inputs

question

economically efficient

answer

minimizing the cost of producing a specified amount of output

question

economic cost or opportunity cost

answer

the value of the best alternative use of a resource

question

durable good

answer

a product that is usable for years

question

sunk cost

answer

a past expenditure that cannot be recovered

question

fixed cost

answer

a production expense that does not vary with output

question

variable cost

answer

a production expense that changes with the quantity of output produced

question

Cost

answer

the sum of a firm's variable cost and fixed cost

question

average fixed cost

answer

the fixed cost divided by units of output produced

question

average variable cost

answer

the variable cost divided by units of output produced

question

average cost

answer

total cost divided by units of output produced

question

isocost line

answer

all the combinations of inputs that require the same total expenditure

question

expansion path

answer

the cost-minimizing combination of labor and capital for each output level

question

economies of scale

answer

property of a cost function whereby the average cost of production falls as output increases

question

diseconomies of scale

answer

property of a cost function whereby the average cost of production rises when output increases

question

learning by doing

answer

the productive skills and knowledge that workers and managers gain from experience

question

learning curve

answer

the relationship between average costs and cumulative output

question

economies of scope

answer

situation in which it is less expensive to produce goods jointly than seperately

question

production possibility frontier

answer

the maximum amount of outputs that can be produced from a fixed amount of input

1 of 85

question

Microeconomics

answer

the study of how individuals and firms make themselves as well off as possible in a world of scarcity and the effects of their actions on markets and the entire economy

question

Market

answer

an exchange mechanism that allows buyers to trade with sellers

question

Model

answer

a description of the relationship between two or more economic variables

question

positive statement

answer

a testable hypothesis about cause and effect

question

normative statement

answer

a conclusion as to whether something is good or bad

question

quanity demanded

answer

the amount of a good that consumers are willing to buy at a given price, holding constant the other factors that influence purchases

question

demand curve

answer

the quantity demanded at each possible price, holding constant the other factors that influence purchases

question

Law of Demand

answer

consumers demand more of a good the lower its price, holding constant tastes, the prices of other goods, and other factors that influence consumption

question

substitutes

answer

a good or service that may be consumed instead of another good or service

question

complement

answer

a good or service that is jointly consumed with another good or service

question

Demand Function

answer

the relationship between the quantity demanded, price, and other factors that influence purchases

question

Quantity Supplied

answer

the amount of a good that firms want to sell at a given price, holding constant other factors that influence firms' supply decisions, such as costs and government actions

question

supply curve

answer

the quantity supplied at each possible price, holding constant the other factors that influence firms' supply decisions

question

supply function

answer

shows the correspondence between the quantity supplied, price, and other factors that influence the number of units offered for sale

question

Quota

answer

the limit that a government sets on the quantity of a foreign-produced good that may be imported

question

Equilibrium

answer

a situation in which no one wants to change his or her behavior

question

excess demand

answer

the amount by which the quantity demanded exceeds the quantity supplied at a specific price

question

excess supply

answer

the amount by which quantity supplied exceeds quantity demanded when the price of a good exceeds the equilibrium price

question

transaction costs

answer

the expenses of finding a trading partner and making a trade for a good or service beyond the price paid for that good or service

question

elasticity

answer

the percentage change in a variable in response to a given percentage change in another variable

question

price elasticity of demand

answer

the percentage change in the quantity demanded in response to a given percentage change in the price

question

income elasticity of demand

answer

the percentage change in the quantity demanded in response to a given percentage change in income

question

cross-price elasticity of demand

answer

the percentage change in the quantity demanded in response to a given percentage change in the price of another good

question

price elasticity of supply

answer

the percentage change in the quantity supplied in response to a given percentage change in the price

question

incidence of a tax on consumers

answer

the share of the tax that consumers pay

question

good

answer

a commodity for which more is preferred to less, at least at some levels of consumption

question

bad

answer

something for which less is preferred to more, such as pollution

question

indifference curve

answer

the set of all bundles of goods that a consumer views as being equally desirable

question

indifference map

answer

a complete set of indifference curves that summarize a consumer's tastes or preferences

question

Marginal Rate of Substitution (MRS)

answer

the maximum amount of one good a consumer will sacrifice to obtain one more unit of another good

question

perfect substitutes

answer

goods that a consumer is completely indifferent as to which to consume

question

perfect complements

answer

goods that a consumer is interested in consuming only in fixed proportions

question

utility

answer

a set of numerical values that reflect the relative rankings of various bundles of goods

question

utility function

answer

the relationship between utility values and every possible bundle of goods

question

marginal utility

answer

the extra utility that a consumer gets from consuming the last unit of a good

question

budget line

answer

the bundles of goods that can be bought if the entire budget is spent on those goods at given prices

question

opportunity set

answer

all the bundles a consumer can buy, including all the bundles inside the budget constraint and on the budget constraint

question

marginal rate of transformation (MRT)

answer

the trade-off the market imposes on the consumer in terms of the amount of one good the consumer must give up to obtain more of the other good

question

behavioral economics

answer

by adding insights from psychology and empirical research on human cognition and emotional biases to the rational economic model, economists try to better predict economic decision making

question

endowment effect

answer

people place a higher value on a good if they own it than they do if they are considering buying it

question

tax salience

answer

awareness of a tax

question

bounded rationality

answer

people have a limited capacity to anticipate, solve complex problems, or enumerate all options

question

Engel Curve

answer

the relationship between the quantity demanded of a single good and income, holding prices constant

question

normal good

answer

a commodity of which as much or more is demanded as income rises

question

inferior good

answer

a commodity of which less is demanded as income rises

question

substiution effect

answer

the change in the quantity of a good that a consumer demands when that good's price rises, holding other prices and the consumer's utility constant

question

income effect

answer

the change in quantity of a good that a consumer demands because of a change in income, holding prices constant

question

Giffen good

answer

a commodity for which a decrease in price causes the quantity demanded to fall

question

compensating variation (CV)

answer

the amount of money one would have to give to a consumer to offset the harm from a price increase or take from a consumer to offset the benefit from a price decrease

question

equivalent variation (EV)

answer

the amount of money one would have to take from a consumer to harm the consumer by as much as the price increase or give to a consumer to benefit the consumer by as much as the price increase

question

firm

answer

an organization that converts inputs such as labor, materials, energy, and capital into outputs, the goods and services that it sells

question

limited liability

answer

the personal assets of the owners of the corporation cannot be taken to pay a corporation's debts even if it does into bankruptcy

question

profit

answer

the difference between revenue and cost

question

efficient production

answer

the current level of output cannot be produced with fewer inputs, given existing knowledge about technology and the organization of production

question

production function

answer

the relationship between the quantities of inputs used and the maximum quantity of output that can be produced, given current knowledge about technology and organization

question

short run

answer

a period so brief that at least one factor of production cannot be varied practically

question

fixed input

answer

a factor of production that the firm cannot practically vary in the short run

question

variable input

answer

a factor of production that the firm can easily vary during the relevant period

question

long run

answer

a lengthy enough period that all factors of production can be varied

question

marginal product of labor

answer

the change in total output, resulting from using an extra unit of labor, holding other factors constant

question

average product of labor

answer

the ratio of output to the number of workers used to produce that output: AP = q / L

question

isoquant

answer

a curve that shows the efficient combinations of labor and capital that can produce the same level of output

question

Marginal Rate of Technical Substitution

answer

the extra units of one input needed to replace one unit of another input that enables a firm to keep the amount of output it produces constant

question

constant returns to scale

answer

property of a production function whereby when all inputs are increased by a certain percentage, output rises by that same percentage

question

increasing returns to scale

answer

property of a production function whereby output rises more than in proportion to an equal percentage increase in all inputs

question

decreasing returns to scale

answer

property of a production function whereby output rises less than in proportion to an equal percentage increase in all inputs

question

technical progress

answer

an advance in knowledge that allows more output to be produced with the same level of inputs

question

economically efficient

answer

minimizing the cost of producing a specified amount of output

question

economic cost or opportunity cost

answer

the value of the best alternative use of a resource

question

durable good

answer

a product that is usable for years

question

sunk cost

answer

a past expenditure that cannot be recovered

question

fixed cost

answer

a production expense that does not vary with output

question

variable cost

answer

a production expense that changes with the quantity of output produced

question

Cost

answer

the sum of a firm's variable cost and fixed cost

question

average fixed cost

answer

the fixed cost divided by units of output produced

question

average variable cost

answer

the variable cost divided by units of output produced

question

average cost

answer

total cost divided by units of output produced

question

isocost line

answer

all the combinations of inputs that require the same total expenditure

question

expansion path

answer

the cost-minimizing combination of labor and capital for each output level

question

economies of scale

answer

property of a cost function whereby the average cost of production falls as output increases

question

diseconomies of scale

answer

property of a cost function whereby the average cost of production rises when output increases

question

learning by doing

answer

the productive skills and knowledge that workers and managers gain from experience

question

learning curve

answer

the relationship between average costs and cumulative output

question

economies of scope

answer

situation in which it is less expensive to produce goods jointly than seperately

question

production possibility frontier

answer

the maximum amount of outputs that can be produced from a fixed amount of input

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