Exam 1

Question 1

What is Law and Demand?

Answer 1

Law and Demand states that the demand of a good falls when the price rises

Question 2

How is a change in supply represented graphically?

Answer 2

A change in supply would shift the supply curve. Left shift would mean less supply and to the right would mean more supply

Question 3

What causes movement along the supply or demand curve?

Answer 3

A change in price

Question 4

What is the definition of Equilibrium?

Answer 4

A situation in which the market price has reached the level at which quantity supplied equals quantity demanded

Question 5

What is the definition of quantity supplied?

Answer 5

The amount of a good that sellers are willing and able to sell

Question 6

What is the definition of quantity demanded?

Answer 6

The amount of a good that buyers are willing and able to purchase.

Question 7

What is the definition of productivity?

Answer 7

The quantity of goods and services produced from each unit of labor input

Question 8

What should policymakers strive to enhance in order to promote good economic outcomes?

Answer 8

1. Increase productivity
2. Enhance individuals market power
3. increase a rapid growth of money

Question 9

How do you calculate marginal physical product?

Answer 9

Dividing the change in total physical product by the change in variable input

Question 10

What is the definition of marginal physical product?

Answer 10

An extra output generated by an extra input

Question 11

What is the definition of total revenue?

Answer 11

The amount a firm receives for the sale of its output

Question 12

What is the formula for total revenue?

Answer 12

The price of a product x the amount sold

Question 13

What are some things that can not be adjusted in the short-run for a factory?

Answer 13

1. The rent

2. The space or room

Question 14

What is the definition of explicit costs?

Answer 14

Input costs that require an outlay of money by the firm

Question 15

What is the definition of inflation?

Answer 15

An increase of the overall level of prices in the economy

Question 16

What are the benefits of trade?

Answer 16

1. One country can specialize in one thing

2. less resources are being used

Question 17

What are some things considered “scarce resources?”

Answer 17

1. food
2. fuel
3. medecine
4. land

Question 18

What is the definition of economics?

Answer 18

The study of how people use limited resources

Question 19

What causes the phenomenon of scarcity?

Answer 19

Limited supply with unlimited demand

Question 20

What is the need for economics?

Answer 20

To improve the life of people in society

Question 21

What does “there is no such thing as free lunch” mean?

Answer 21

There is an opportunity cost for everything?

Question 22

What factors make a good Elastic?

Answer 22

If there are substitutes and the demand does change when the price changes

Question 23

What factors make a good Inelastic?

Answer 23

If there are no substitutes and the demand does not change when the prices change

Question 24

How do you interpret the value of elasticity?

Answer 24

When a demand is less than 1 (inelastic) Price and total revenue move in the same direction, price and total revenue increases
When a demand is greater than 1 (elastic) price and total revenue move in opposite directions, price increases and total revenue decreases and vice versa
When a demand is equal to 1 (unit Elastic) total revenue remains constant when prices change

Question 25

What information does the value of elasticity provides?

Answer 25

It measure the responsiveness of quantity demanded or the supplied of the good to a change of price

Question 26

What does the price of elasticity of demand measures?

Answer 26

How much the consumers buy when the price changes

Question 27

What is a perfectly competitive market?

Answer 27

A market that has many buyers and sellers

Question 28

Why don't we see any permanent shortages in a market economy?

Answer 28

The price would go up encouraging suppliers to produce more

Question 29

What would a supplier do to increase total revenue from an inelastic good?

Answer 29

Raise the price

Question 30

What is the definition of Market?

Answer 30

A group of buyers and sellers of a particular good or service

Question 31

What is the definition of diseconomies of scales?

Answer 31

The property whereby long-run average total cost rises as the quantity of output increases

Question 32

What would happen if the price is higher than the equilibrium price?

Answer 32

There would be a surplus of supply

Question 33

What happens to inputs in the long run that were fixed in the short run?

Answer 33

They become Variable costs

Question 34

What do economists in the field of industrial organizational study?

Answer 34

They study the behaviors of firms and businesses

Question 35

Two factors of a production function show a relationship between?

Answer 35

Shows an input of capital and labor

Question 36

What is the definition of Variable costs?

Answer 36

Costs that vary with the output of a good

Question 37

What is the definition of Marginal costs?

Answer 37

The increase of total cost that arises from an extra unit of a production

Question 38

What is the definition of Fixed Costs?

Answer 38

Costs that do not vary with the amount of output produced

Question 39

What is the goal of a firm is?

Answer 39

To maximize profit

Question 40

What does the cross-price of elasticity of demand measure?

Answer 40

The responsiveness in the quantity demanded of one good when the price for another good changes