Economics Quiz 2 Study - Assignment Essays

question

elasticities

answer

percent change in the dependent economic variable due to a percent change in the independent economic variable

question

price elasticity of demand

answer

a measure of the sensitivity of demand to changes in price- percent change in quantity demanded over the percent change in price

question

elastic

answer

describes demand that is very sensitive to a change in price, greater than 1

question

inelastic

answer

describes demand that is not very sensitive to price changes, less than 1

question

revenue

answer

price times quantity

question

factors that affect elasticity

answer

input cost as a percent of final cost, time, availability of substitutes

question

cross-price elasticity

answer

the percent change in demand for product A that occurs in response to a percent change in price of product B
percent change in Qx due to a percent change in Py

question

income elasticity

answer

the percent change in quantity demanded due to a percent change in income

question

price elasticity of supply

answer

percent change in quantity supplied due to percent change in price

question

substitute

answer

use in place

question

complement

answer

use with it

question

utility

answer

the satisfaction from consuming a good or service

question

the paradox of diamonds and water

answer

illustrates the difficulty of using total utility to explain consumer behavior

question

marginal utility

answer

satisfaction of consuming one more unit of the good

question

law of diminishing marginal utility

answer

the more you consume of a good, the less you value the consumption of another unit of the good

question

MUx/Px=MUy/Py

answer

the maximum satisfaction for a consumer occurs when all the marginal utilities are equal as corrected for price

question

the maximum satisfaction for a consumer occurs when all the marginal utilities are equal as corrected for price

answer

MUx/Px=MUy/Py

question

necessary assumptions for measurement and use

answer

utility maximizing
economically rational
nonsatiation of wants

question

economically rational

answer

maximizing utility and making economic sense

question

nonsatiation of wants

answer

"more is better"

question

short-run

answer

some economic factors are considered fixed

question

long-run

answer

all economic factors are considered variable

question

fixed costs

answer

costs that do not vary with the level of production (exist only in the short-run)

question

variable costs

answer

costs that depend on the level of production

question

total costs

answer

fixed costs plus variable costs

question

marginal costs

answer

the cost of producing one more unit of a good

question

perfect competition

answer

a large number of buyers and sellers
a standardized product
easy entry and exit from the market

question

under conditions of perfect competition...

answer

MC=MR (marginal cost=marginal revenue)
P=MC (price=marginal cost)
MR=AR (marginal revenue=average revenue)
AR=ATC (average revenue=average total cost)
MC=ATC (marginal cost=average total cost)
MC=ATC=LRAC (marginal cost=average total cost=long run average cost)

question

marginal cost=marginal revenue

answer

profit maximization

question

price=marginal cost

answer

economic efficiency

question

marginal revenue=average revenue

answer

perfectly competitive market

question

average revenue=average total cost

answer

normal profits

question

marginal cost=average total cost

answer

minimum cost point

question

marginal cost=average total cost=long-run average cost

answer

optimum output and plant size

question

where do perfect competitive firms move toward?

answer

their break-even point

question

economies of scale

answer

economic incentive is to get larger at the expense of smaller firms- eliminates competition

1 of 36

question

elasticities

answer

percent change in the dependent economic variable due to a percent change in the independent economic variable

question

price elasticity of demand

answer

a measure of the sensitivity of demand to changes in price- percent change in quantity demanded over the percent change in price

question

elastic

answer

describes demand that is very sensitive to a change in price, greater than 1

question

inelastic

answer

describes demand that is not very sensitive to price changes, less than 1

question

revenue

answer

price times quantity

question

factors that affect elasticity

answer

input cost as a percent of final cost, time, availability of substitutes

question

cross-price elasticity

answer

the percent change in demand for product A that occurs in response to a percent change in price of product B
percent change in Qx due to a percent change in Py

question

income elasticity

answer

the percent change in quantity demanded due to a percent change in income

question

price elasticity of supply

answer

percent change in quantity supplied due to percent change in price

question

substitute

answer

use in place

question

complement

answer

use with it

question

utility

answer

the satisfaction from consuming a good or service

question

the paradox of diamonds and water

answer

illustrates the difficulty of using total utility to explain consumer behavior

question

marginal utility

answer

satisfaction of consuming one more unit of the good

question

law of diminishing marginal utility

answer

the more you consume of a good, the less you value the consumption of another unit of the good

question

MUx/Px=MUy/Py

answer

the maximum satisfaction for a consumer occurs when all the marginal utilities are equal as corrected for price

question

the maximum satisfaction for a consumer occurs when all the marginal utilities are equal as corrected for price

answer

MUx/Px=MUy/Py

question

necessary assumptions for measurement and use

answer

utility maximizing
economically rational
nonsatiation of wants

question

economically rational

answer

maximizing utility and making economic sense

question

nonsatiation of wants

answer

"more is better"

question

short-run

answer

some economic factors are considered fixed

question

long-run

answer

all economic factors are considered variable

question

fixed costs

answer

costs that do not vary with the level of production (exist only in the short-run)

question

variable costs

answer

costs that depend on the level of production

question

total costs

answer

fixed costs plus variable costs

question

marginal costs

answer

the cost of producing one more unit of a good

question

perfect competition

answer

a large number of buyers and sellers
a standardized product
easy entry and exit from the market

question

under conditions of perfect competition...

answer

question

marginal cost=marginal revenue

answer

profit maximization

question

price=marginal cost

answer

economic efficiency

question

marginal revenue=average revenue

answer

perfectly competitive market

question

average revenue=average total cost

answer

normal profits

question

marginal cost=average total cost

answer

minimum cost point

question

marginal cost=average total cost=long-run average cost

answer

optimum output and plant size

question

where do perfect competitive firms move toward?

answer

their break-even point

question

economies of scale

answer

economic incentive is to get larger at the expense of smaller firms- eliminates competition

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