Microecon test 2 - Assignment Essays

question

Total Utility

answer

the total satisfaction you derive from consumption; this could refer to either your total utility of consuming a particular good or your total utility from all consumption

question

Marginal Utility

answer

the change in your total utility from a one-unit change in your consumption of good, i.e. like eating a bag of chips and suddenly you don't have as much of an appetite for it then it turns into the law of diminishing marginal utility

question

Law of Diminishing Marginal Utility

answer

the more of a good a person consumes per period, the smaller the increase in total utility from consuming one more unit

question

Consumer Equilibrium

answer

the condition in which an individual's consumer's budget is exhausted and the last dollar spent on each good yields the same marginal utility; therefore, utility is maximized, i.e. Spending on what you want for utility that i clears your budget

question

Marginal Valuation

answer

the dollar value of marginal utility derived from consuming each additional unit of a good

question

Consumer Surplus

answer

the difference between the most a consumer would pay for a given quantity of a good and what the consumer actually pays

question

Indifference Curve

answer

shows all combinations of goods that provide the consumer the same level of satisfaction or utility

question

Marginal Rate of Substitution

answer

indicates the number of 'x' that you are willing to give up to get one more unit of ''y' - neither gaining or losing utility in the process

question

Law of Diminishing marginal rate of substitution

answer

as your consumption of 'x' increases, the number of 'y' you are willing to give up to get one more unit of 'x' decreases

question

Indifference Map

answer

a graphical representation of a consumer's trade, curves/levels shows income

question

Budget Line

answer

depicts all possible combinations of x and y, given their prices and your budget, slope = Px - Py

question

Explicit Cost

answer

opportunity cost of resources employed by a firm that takes the form of cash payments

question

Implicit Cost

answer

a firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment

question

accounting profit

answer

a firm's total revenue minus its explicit costs

question

economic profit

answer

a firm's total revenue minus its explicit and implicit costs

question

normal profit

answer

the accounting profit earned when all resources earn their opportunity costs

question

variable resources

answer

any resource that can be varied (can be changed up) in the short run to increase or decrease production ; i.e. labor

question

fixed resource

answer

any resource that cannot be varied (cannot be change) in the short run ; i.e. capital equipment, contracts, buildings, etc.

question

short run

answer

a period during which at least one of a firm's resources is fixed

question

long run

answer

a period during which all resources under the firm's control are variable

question

total product

answer

the total output produced by a firm

question

production function

answer

the relationship between the amount of resources employed and a firm's total product

question

marginal product

answer

the change in total product that occurs when the use of a particular resource increases by one unit, all other resources constant

question

increasing marginal returns

answer

the marginal product of a variable resource increases as each additional unit of that resource is employed

question

law of diminishing marginal returns

answer

as more of a variable resource is added to a given amount of fixed resource, marginal product eventually declines and could become negative

question

fixed cost

answer

any production cost that is independent of the firm's rate of output (must be paid, i.e. insurance, utilities, etc.)

question

graph of fixed cost

answer

constant

question

variable cost

answer

any production cost that changes as the rate of output changes

question

total cost

answer

the sum of fixed cost and variable cost

question

total cost equation

answer

TC = FC + VC

question

average variable cost

answer

variable cost divided by output

question

average variable cost equation

answer

AVC = VC/q

question

average total cost

answer

total cost divided by output, or ATC = TC/q; the sum of average fixed cost and average variable cost, or ATC = AFC + AVC

question

Long-run Average Cost Curve:

answer

a curve that indicates the lowest average cost of production at each rate of output whent eh size, or scale, of the firm varies; also called the planning curve

question

economies of scale

answer

forces that reduces a firm's average cost as the scale of operation increases in the long run

question

diseconomies of scale

answer

force that may eventually increase a firm's average cost as the scale of operation increase in the long run

question

Constant Long-Run Average Cost:

answer

a cost that occurs when, over some range of output, long run average cost neither increases nor decreases with changes in firm size

question

production function

answer

identifies the maximum quantities of a particular good or service that can be produced per time period with various combinations of resources, for a given level of technology.

question

isoquant curve

answer

a curve that shows all the technologically efficient combinations of two resources, such as labor and capital, that produce a certain rate of output

question

what do isoquant curves look like

answer

negative, nonintersecting, convex to origin

question

slope of isoquant curve

answer

slope = wage/rent

question

Marginal Rate of Technical Substitution (MRTS)

answer

the rate at which labor substitutes for capital without affecting output

question

market structure

answer

important features of a market, such as the number of firms, product uniformity across firms, firms' ease of entry and exit, and forms of competition

question

perfect competition

answer

a market structure with many fully informed buyers and sellers of a standardized product and no obstacles to entry or exit of firms in the long run

question

commodity

answer

a standardized product, a product that does not differ across producers, such as bushels of wheat or an ounce of gold

question

price taker

answer

a firm that faces a given market price and whose quantity supplied has no effect on that price; a perfectly competitive firm

question

marginal revenue

answer

the change in total revenue from selling an additional unit; in perfect competition, marginal revenue is also the market price

question

gold rule of profit maximization

answer

to maximize profit or minimize loss, a firm should produce the quantity at which marginal revenue equals marginal cost; this rule holds for all market structures

question

average revenue

answer

total revenue divided by output, or AR=TR/q; in all market structures, average revenue equals the market price

question

short-run firm supply curve

answer

a curve that shows the quantity a firm supply at each price in the short run; in perfect competition, that portion of a firm's marginal cost curve that intersects and rises above the low point on it s average variable cost curve

question

short-run industry supply curve

answer

a curve that indicates the quantity supplied by the industry at each price in the short run; in perfect competition, the horizontal sum of each firm's short-run supply curve

question

long-run industry supply curve

answer

a curve that shows the relationship between price and quantity supplied by the industry once firms adjust fully to any change in market demand

question

constant-cost industry

answer

an industry that can expand or contract without affecting the long run per-unit cost of production; the long-run industry supply curve in horizontal

question

increasing cost industry

answer

an industry that faces higher per-unit production costs as industry output expands in the long run; the long run industry supply curve slopes upward

question

producer efficiency

answer

the condition that exists when market output is produced using the least-cost combination of inputs; minimum average cost in the long - profit thru least amount of materials

question

allocative efficiency

answer

the condition that exists when firms produce the output most preferred by consumers; marginal benefit equals marginal cost

question

producer surplus

answer

a bonus for producers in the short run; the amount by which total revenue from production exceeds variable - make money thru surplus

question

social welfare

answer

the overall well-being of people in the economy; maximized when the marginal cost of production equals the marginal benefit to consumers

question

monopoly

answer

a sole supplier of a product with no close substitutes

question

barrier to entry

answer

any impediment that prevents new firms from entering an industry and competing on an equal basis with existing firms

question

examples of barriers to entry

answer

Legal restrictions
Economies of Scale
Control of essential resources

question

legal restrictions

answer

controls who can get involved, not monopoly but monopolistic to control

question

patent

answer

legal barrier to entry that grants its holder the exclusive right to sell a product for 20 years from the date the patent application is filled

question

natural monopoly

answer

one firm can supply market demand at a lower average cost per unit that could two or more

question

innovation

answer

process of turning an invention into a marketing product

question

monopoly occurences

answer

sometimes a monopoly occurs when a firm experiences economies of scale, as reflected by a downward slope, long run average cost curve

question

price maker

answer

a firm that must find the profit maximizing price when the demand curve for its output slopes downward

question

deadweight loss of monopoly

answer

net loss to society when a firm uses its market power to restrict output and increase price

question

PNG popularities

answer

tide, crest, dawn

question

rent seeking

answer

activities undertaken by individuals or firms to influence public policy in a way that will increase their incomes

question

price discrimination

answer

Increasing profit by charging different groups of consumers different prices when the price differences are not justified by differences in costs

question

perfectly discriminating monopolist

answer

a monopolist who charges a different price for each unit sold; also called the monopolist's dream

question

monopolistic competition

answer

a market structure in which many companies sell products that are similar but not identical but enough to make demand curves slope downward

question

what does monopolistic competition consist of

answer

price makers

question

barrier to entry monopolistic competition

answer

low

question

product differentiation

answer

products differentiate themselves in 4 basic ways: physical differences, location, services, product image

question

physical differences of products

answer

packaging, colors, weight

question

location

answer

spatial differentiation or price/convenience store

question

services

answer

free delivery, guarantees, toll free numbers

question

product image

answer

endorsements, all natural, Starbucks, image/brand loyalty, environmentally friendly

question

excess capacity

answer

the differences between a firm's profit-maximizing quantity and the quantity that minimizes average cost. [In monopolistic competition, firms fall short of producing the quantity that would achieve the lowest average cost... as opposed to perfect competition]

question

oligopoly

answer

a market structure characterized by a few firms whose behavior is interdependent

question

examples of oligopoly

answer

cereal, cell phone, film industries, airlines

question

undifferentiated oligopoly

answer

an oligopoly that sells a commodity or a product that does not differ across suppliers, such as an ingot of steel or a barrel of oil

question

differentiated oligopoly

answer

an oligopoly that sells products that differ across suppliers, such as automobiles or breakfast cereal

question

collusion

answer

an agreement among firms to increase economic profit by dividing the market or fixing the prices

question

cartel

answer

a group of firms that agree to coordinate the production and pricing decisions to act like a monopolist

question

price leader

answer

a firm whose price is adopted by other firms in the industry

question

what did wendys do promote its burgers

answer

commercials w a bulky woman

1 of 89

question

Total Utility

answer

the total satisfaction you derive from consumption; this could refer to either your total utility of consuming a particular good or your total utility from all consumption

question

Marginal Utility

answer

question

Law of Diminishing Marginal Utility

answer

the more of a good a person consumes per period, the smaller the increase in total utility from consuming one more unit

question

Consumer Equilibrium

answer

question

Marginal Valuation

answer

the dollar value of marginal utility derived from consuming each additional unit of a good

question

Consumer Surplus

answer

the difference between the most a consumer would pay for a given quantity of a good and what the consumer actually pays

question

Indifference Curve

answer

shows all combinations of goods that provide the consumer the same level of satisfaction or utility

question

Marginal Rate of Substitution

answer

indicates the number of 'x' that you are willing to give up to get one more unit of ''y' - neither gaining or losing utility in the process

question

Law of Diminishing marginal rate of substitution

answer

as your consumption of 'x' increases, the number of 'y' you are willing to give up to get one more unit of 'x' decreases

question

Indifference Map

answer

a graphical representation of a consumer's trade, curves/levels shows income

question

Budget Line

answer

depicts all possible combinations of x and y, given their prices and your budget, slope = Px - Py

question

Explicit Cost

answer

opportunity cost of resources employed by a firm that takes the form of cash payments

question

Implicit Cost

answer

a firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment

question

accounting profit

answer

a firm's total revenue minus its explicit costs

question

economic profit

answer

a firm's total revenue minus its explicit and implicit costs

question

normal profit

answer

the accounting profit earned when all resources earn their opportunity costs

question

variable resources

answer

any resource that can be varied (can be changed up) in the short run to increase or decrease production ; i.e. labor

question

fixed resource

answer

any resource that cannot be varied (cannot be change) in the short run ; i.e. capital equipment, contracts, buildings, etc.

question

short run

answer

a period during which at least one of a firm's resources is fixed

question

long run

answer

a period during which all resources under the firm's control are variable

question

total product

answer

the total output produced by a firm

question

production function

answer

the relationship between the amount of resources employed and a firm's total product

question

marginal product

answer

the change in total product that occurs when the use of a particular resource increases by one unit, all other resources constant

question

increasing marginal returns

answer

the marginal product of a variable resource increases as each additional unit of that resource is employed

question

law of diminishing marginal returns

answer

as more of a variable resource is added to a given amount of fixed resource, marginal product eventually declines and could become negative

question

fixed cost

answer

any production cost that is independent of the firm's rate of output (must be paid, i.e. insurance, utilities, etc.)

question

graph of fixed cost

answer

constant

question

variable cost

answer

any production cost that changes as the rate of output changes

question

total cost

answer

the sum of fixed cost and variable cost

question

total cost equation

answer

TC = FC + VC

question

average variable cost

answer

variable cost divided by output

question

average variable cost equation

answer

AVC = VC/q

question

average total cost

answer

total cost divided by output, or ATC = TC/q; the sum of average fixed cost and average variable cost, or ATC = AFC + AVC

question

Long-run Average Cost Curve:

answer

a curve that indicates the lowest average cost of production at each rate of output whent eh size, or scale, of the firm varies; also called the planning curve

question

economies of scale

answer

forces that reduces a firm's average cost as the scale of operation increases in the long run

question

diseconomies of scale

answer

force that may eventually increase a firm's average cost as the scale of operation increase in the long run

question

Constant Long-Run Average Cost:

answer

a cost that occurs when, over some range of output, long run average cost neither increases nor decreases with changes in firm size

question

production function

answer

identifies the maximum quantities of a particular good or service that can be produced per time period with various combinations of resources, for a given level of technology.

question

isoquant curve

answer

a curve that shows all the technologically efficient combinations of two resources, such as labor and capital, that produce a certain rate of output

question

what do isoquant curves look like

answer

negative, nonintersecting, convex to origin

question

slope of isoquant curve

answer

slope = wage/rent

question

Marginal Rate of Technical Substitution (MRTS)

answer

the rate at which labor substitutes for capital without affecting output

question

market structure

answer

important features of a market, such as the number of firms, product uniformity across firms, firms' ease of entry and exit, and forms of competition

question

perfect competition

answer

a market structure with many fully informed buyers and sellers of a standardized product and no obstacles to entry or exit of firms in the long run

question

commodity

answer

a standardized product, a product that does not differ across producers, such as bushels of wheat or an ounce of gold

question

price taker

answer

a firm that faces a given market price and whose quantity supplied has no effect on that price; a perfectly competitive firm

question

marginal revenue

answer

the change in total revenue from selling an additional unit; in perfect competition, marginal revenue is also the market price

question

gold rule of profit maximization

answer

to maximize profit or minimize loss, a firm should produce the quantity at which marginal revenue equals marginal cost; this rule holds for all market structures

question

average revenue

answer

total revenue divided by output, or AR=TR/q; in all market structures, average revenue equals the market price

question

short-run firm supply curve

answer

question

short-run industry supply curve

answer

a curve that indicates the quantity supplied by the industry at each price in the short run; in perfect competition, the horizontal sum of each firm's short-run supply curve

question

long-run industry supply curve

answer

a curve that shows the relationship between price and quantity supplied by the industry once firms adjust fully to any change in market demand

question

constant-cost industry

answer

an industry that can expand or contract without affecting the long run per-unit cost of production; the long-run industry supply curve in horizontal

question

increasing cost industry

answer

an industry that faces higher per-unit production costs as industry output expands in the long run; the long run industry supply curve slopes upward

question

producer efficiency

answer

the condition that exists when market output is produced using the least-cost combination of inputs; minimum average cost in the long - profit thru least amount of materials

question

allocative efficiency

answer

the condition that exists when firms produce the output most preferred by consumers; marginal benefit equals marginal cost

question

producer surplus

answer

a bonus for producers in the short run; the amount by which total revenue from production exceeds variable - make money thru surplus

question

social welfare

answer

the overall well-being of people in the economy; maximized when the marginal cost of production equals the marginal benefit to consumers

question

monopoly

answer

a sole supplier of a product with no close substitutes

question

barrier to entry

answer

any impediment that prevents new firms from entering an industry and competing on an equal basis with existing firms

question

examples of barriers to entry

answer

Legal restrictions
Economies of Scale
Control of essential resources

question

legal restrictions

answer

controls who can get involved, not monopoly but monopolistic to control

question

patent

answer

legal barrier to entry that grants its holder the exclusive right to sell a product for 20 years from the date the patent application is filled

question

natural monopoly

answer

one firm can supply market demand at a lower average cost per unit that could two or more

question

innovation

answer

process of turning an invention into a marketing product

question

monopoly occurences

answer

sometimes a monopoly occurs when a firm experiences economies of scale, as reflected by a downward slope, long run average cost curve

question

price maker

answer

a firm that must find the profit maximizing price when the demand curve for its output slopes downward

question

deadweight loss of monopoly

answer

net loss to society when a firm uses its market power to restrict output and increase price

question

PNG popularities

answer

tide, crest, dawn

question

rent seeking

answer

activities undertaken by individuals or firms to influence public policy in a way that will increase their incomes

question

price discrimination

answer

Increasing profit by charging different groups of consumers different prices when the price differences are not justified by differences in costs

question

perfectly discriminating monopolist

answer

a monopolist who charges a different price for each unit sold; also called the monopolist's dream

question

monopolistic competition

answer

a market structure in which many companies sell products that are similar but not identical but enough to make demand curves slope downward

question

what does monopolistic competition consist of

answer

price makers

question

barrier to entry monopolistic competition

answer

low

question

product differentiation

answer

products differentiate themselves in 4 basic ways: physical differences, location, services, product image

question

physical differences of products

answer

packaging, colors, weight

question

location

answer

spatial differentiation or price/convenience store

question

services

answer

free delivery, guarantees, toll free numbers

question

product image

answer

endorsements, all natural, Starbucks, image/brand loyalty, environmentally friendly

question

excess capacity

answer

question

oligopoly

answer

a market structure characterized by a few firms whose behavior is interdependent

question

examples of oligopoly

answer

cereal, cell phone, film industries, airlines

question

undifferentiated oligopoly

answer

an oligopoly that sells a commodity or a product that does not differ across suppliers, such as an ingot of steel or a barrel of oil

question

differentiated oligopoly

answer

an oligopoly that sells products that differ across suppliers, such as automobiles or breakfast cereal

question

collusion

answer

an agreement among firms to increase economic profit by dividing the market or fixing the prices

question

cartel

answer

a group of firms that agree to coordinate the production and pricing decisions to act like a monopolist

question

price leader

answer

a firm whose price is adopted by other firms in the industry

question

what did wendys do promote its burgers

answer

commercials w a bulky woman

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