630. Microeconomics Leveling Course Flashcards
Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in
Price.
If the percentage change in quantity demanded is greater than the percentage change in price, demand is
Elastic.
If quantity demanded is completely unresponsive to changes in price, demand is
Inelastic.
Which of the following would result in higher price elasticity?
more substitutes for a good
The shorter the period of time consumers have to adjust to price changes, the _____ the ________ elasticity of demand.
lower; price
Cross elasticity of demand measures the responsiveness of changes in the quantity _____ of one good to changes in ______.
demanded; the price of another good
If two goods are substitute goods,
an increase in the price of one will cause an increase in the demand for the other.
Income elasticity of demand for a normal good is always
greater than zero.
An inferior good is
a good for which demand rises as income falls.
Price elasticity of supply is the percentage change in the quantity _____ of a good divided by the percentage change in ______.
supplied; price of the good.
Price elasticity of supply is the percentage change in the quantity _____ of a good divided by the percentage change in ______.
time.
Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good. Who will pay the greater share of such a tax?
The buyers will pay the entire share.
Total revenue is defined as
price multiplied by quantity sold.
When an economist talks about utility, she is talking about
the satisfaction that results from the consumption of a good.
Total utility is defined as the
sum of the amounts of satisfaction a person receives from consuming a good.
Marginal utility is defined as the
change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed.
The law of diminishing marginal utility says that
the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases.
We take one dollar from a millionaire and give it to a pauper. Assuming a diminishing marginal utility of money,
we cannot say whether or not total utility changes.
we cannot say whether or not total utility changes.
we cannot say whether or not total utility changes.
we cannot say whether or not total utility changes.
we cannot say whether or not total utility changes.
To resolve the diamond-water paradox, it is important to note that under most circumstances,
the marginal utility of water is lower than the marginal utility of diamonds.
The theory of consumer choice assumes that consumers attempt to maximize
total utility.
The theory of consumer choice assumes that consumers attempt to maximize
states that we value an item more highly if we own it than if we do not own it.
Economist David Friedman pointed out that
is not limited to humans.
No matter what the price of food, a person will eat the same amount of food. This is ______ with the idea of ________.
not consistent; consumer equilibrium.
A cost that is incurred when an actual monetary payment is made is a(n) _____ cost.
explicit.
implicit cost
an implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made.
Which of the following statements is true?
Accounting profit is the difference between total revenue and explicit costs.
Which of the following statements is true?
Saying that a firm earned zero economic profit is the same as saying it earned normal profit.
An unrecoverable cost that should be disregarded in any current or future decision is also called a(n) ________ cost.
sunk
A fixed input is an input whose quantity
cannot be changed as output changes in the short run.
the law of diminishing marginal returns.
“As additional units of a variable input are added to a fixed input, eventually the marginal physical product of the variable input will decline.”
The marginal physical product (MPP) of a variable input is
The marginal physical product (MPP) of a variable input is
Economies of scale are said to exist when inputs are increased by some percentage and output increases by a(n) ______ percentage, causing unit costs to ______.
greater; fall
Average variable costs equal
total variable cost divided by output
Minimum efficient scale refers to the
lowest output level at which average total costs are minimized.
Total costs are
fixed costs plus variable costs
As a firm produces more units of a good, its
fixed costs remain constant in the short run and its variable costs rise.
There is a link between production and cost. We know this because
what happens to MPP directs what happens to MC.
