Test #2 - Assignment Essays

question

The law of demand indicates that as the cost of an activity

answer

rises, less of the activity will occur.

question

According to economists, the satisfaction people get from their consumption activities is called

answer

Utility

question

resources; satisfaction

answer

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

question

The additional utility gained from consuming an additional unit of a good is called

answer

marginal utility.

question

total utility; 1

answer

The term marginal utility denotes the amount by which ______ changes when consumption changes by ______ unit(s).

question

law of diminishing marginal utility

answer

he tendency for marginal utility to decline as consumption increases beyond some point is called

question

optimal

answer

The ______ combination of goods is the combination that yields the highest total utility given a consumer's income.

question

If a consumer buys two different goods, the rational spending rule requires that the

answer

ratio of marginal utility to price be equal for the two goods.

question

maximize utility

answer

The rational spending rule is derived from the consumer's desire to

question

real price.

answer

The dollar price of a good relative to the average dollar price of all other goods is the good's

question

Consumer Surplus

answer

the difference between the most a buyer would be willing to pay for a product and the price actually paid

question

A rational seller will sell another unit of output

answer

if the cost of making another unit is less than the revenue gained from selling another unit.

question

The primary objective of most private firms is to

answer

maximize profit

question

The most important challenge facing a firm in a perfectly competitive market is deciding

answer

how much to produce.

question

profit

answer

Total revenue minus both explicit and implicit costs defines a firm's

question

Which of the following is a defining characteristic of all perfectly competitive markets?

answer

All firms sell the same standardized product.

question

A price-taker faces a demand curve that is

answer

horizontal at the market price

question

An imperfectly competitive firm is one that

answer

has at least some influence over the market price.

question

A profit-maximizing perfectly competitive firm must decide

answer

only how much to produce, taking price as fixed.

question

The short run is best defined as

answer

a period of time sufficiently short that at least one factor of production is fixed.

question

A fixed factor of production

answer

is fixed only in the short run

question

A variable factor of production

answer

is variable in both the short run and the long run.

question

Marginal cost is calculated as

answer

the change in total cost divided by the change in output.

question

Average variable cost is defined as

answer

variable cost divided by total output

question

Average total cost is defined as

answer

total cost divided by total output

question

In general, perfectly competitive firms maximize their profit by producing the level of output at which

answer

marginal cost equals price.

question

The difference between the price a seller actually receives for a good and the seller's reservation price is

answer

producer surplus.

question

Economic theory assumes that a firm's goal is to

answer

maximize its economic profit.

question

Explicit costs

answer

measure the payments made to the firm's factors of production.

question

Accounting profit is equal to

answer

total revenue minus explicit costs.

question

Economic profit is equal to

answer

total revenue minus the sum of explicit and implicit costs.

question

The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the ______ function of price.

answer

rationing

question

The role that prices play in directing resources away from overcrowded markets and towards markets that are underserved is known as the ______ function of price.

answer

allocative

question

Generally, ______ motivates firms to enter an industry, while ______ motivates firms to exit an industry.

answer

economic profit; economic loss

question

Free entry and exit of firms is a characteristic of

answer

perfectly competitive industries.

question

Barriers to entry are forces that

answer

limit new firms from joining an industry.

question

total surplus

answer

the sum of producer surplus and consumer surplus

question

Consumer surplus is the cumulative difference between

answer

the amount consumers are willing to pay and the price they actually pay.

question

A price setter is a firm that

answer

has some degree of control over its price.

question

A pure monopoly exists when:

answer

a single firm produces a good with no close substitutes

question

If a firm operates in an oligopoly, it is

answer

one of a small number of firms that produce goods that are either close or perfect substitutes.

question

A monopolistically competitive firm is one

answer

of many firms that sell products that are close but not perfect substitutes.

question

A good is characterized by network economies if it

answer

becomes more valuable as more people own it.

question

Patents, which confer market power, are intended to

answer

encourage innovation by helping firms recoup the costs of research and development.

question

Economies of scale exist when

answer

the average cost of production falls as output rises.

question

A natural monopoly is a monopoly that arises from

answer

economies of scale

question

The primary objective of an imperfectly competitive firm is to

answer

maximize profit.

question

Both a perfectly competitive firm and a monopolist find that

answer

it is best to expand production until the benefit and the cost of the last unit produced are equal.

question

The monopolist will maximize profits at the output level for which

answer

marginal revenue equals marginal cost.

question

Price discrimination means charging

answer

different prices to different buyers for essentially the same good or service.

1 of 50

question

The law of demand indicates that as the cost of an activity

answer

rises, less of the activity will occur.

question

According to economists, the satisfaction people get from their consumption activities is called

answer

Utility

question

resources; satisfaction

answer

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

question

The additional utility gained from consuming an additional unit of a good is called

answer

marginal utility.

question

total utility; 1

answer

The term marginal utility denotes the amount by which ______ changes when consumption changes by ______ unit(s).

question

law of diminishing marginal utility

answer

he tendency for marginal utility to decline as consumption increases beyond some point is called

question

optimal

answer

The ______ combination of goods is the combination that yields the highest total utility given a consumer's income.

question

If a consumer buys two different goods, the rational spending rule requires that the

answer

ratio of marginal utility to price be equal for the two goods.

question

maximize utility

answer

The rational spending rule is derived from the consumer's desire to

question

real price.

answer

The dollar price of a good relative to the average dollar price of all other goods is the good's

question

Consumer Surplus

answer

the difference between the most a buyer would be willing to pay for a product and the price actually paid

question

A rational seller will sell another unit of output

answer

if the cost of making another unit is less than the revenue gained from selling another unit.

question

The primary objective of most private firms is to

answer

maximize profit

question

The most important challenge facing a firm in a perfectly competitive market is deciding

answer

how much to produce.

question

profit

answer

Total revenue minus both explicit and implicit costs defines a firm's

question

Which of the following is a defining characteristic of all perfectly competitive markets?

answer

All firms sell the same standardized product.

question

A price-taker faces a demand curve that is

answer

horizontal at the market price

question

An imperfectly competitive firm is one that

answer

has at least some influence over the market price.

question

A profit-maximizing perfectly competitive firm must decide

answer

only how much to produce, taking price as fixed.

question

The short run is best defined as

answer

a period of time sufficiently short that at least one factor of production is fixed.

question

A fixed factor of production

answer

is fixed only in the short run

question

A variable factor of production

answer

is variable in both the short run and the long run.

question

Marginal cost is calculated as

answer

the change in total cost divided by the change in output.

question

Average variable cost is defined as

answer

variable cost divided by total output

question

Average total cost is defined as

answer

total cost divided by total output

question

In general, perfectly competitive firms maximize their profit by producing the level of output at which

answer

marginal cost equals price.

question

The difference between the price a seller actually receives for a good and the seller's reservation price is

answer

producer surplus.

question

Economic theory assumes that a firm's goal is to

answer

maximize its economic profit.

question

Explicit costs

answer

measure the payments made to the firm's factors of production.

question

Accounting profit is equal to

answer

total revenue minus explicit costs.

question

Economic profit is equal to

answer

total revenue minus the sum of explicit and implicit costs.

question

The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the ______ function of price.

answer

rationing

question

The role that prices play in directing resources away from overcrowded markets and towards markets that are underserved is known as the ______ function of price.

answer

allocative

question

Generally, ______ motivates firms to enter an industry, while ______ motivates firms to exit an industry.

answer

economic profit; economic loss

question

Free entry and exit of firms is a characteristic of

answer

perfectly competitive industries.

question

Barriers to entry are forces that

answer

limit new firms from joining an industry.

question

total surplus

answer

the sum of producer surplus and consumer surplus

question

Consumer surplus is the cumulative difference between

answer

the amount consumers are willing to pay and the price they actually pay.

question

A price setter is a firm that

answer

has some degree of control over its price.

question

A pure monopoly exists when:

answer

a single firm produces a good with no close substitutes

question

If a firm operates in an oligopoly, it is

answer

one of a small number of firms that produce goods that are either close or perfect substitutes.

question

A monopolistically competitive firm is one

answer

of many firms that sell products that are close but not perfect substitutes.

question

A good is characterized by network economies if it

answer

becomes more valuable as more people own it.

question

Patents, which confer market power, are intended to

answer

encourage innovation by helping firms recoup the costs of research and development.

question

Economies of scale exist when

answer

the average cost of production falls as output rises.

question

A natural monopoly is a monopoly that arises from

answer

economies of scale

question

The primary objective of an imperfectly competitive firm is to

answer

maximize profit.

question

Both a perfectly competitive firm and a monopolist find that

answer

it is best to expand production until the benefit and the cost of the last unit produced are equal.

question

The monopolist will maximize profits at the output level for which

answer

marginal revenue equals marginal cost.

question

Price discrimination means charging

answer

different prices to different buyers for essentially the same good or service.

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