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Econ 1021 > Final Exam Flashcards > Flashcards

Final Exam Flashcards

1
Q

True or False.
Trade Patterns are determined by comparative advantage not by absolute advantage.

A

True

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2
Q

Optimal choices must satisfy…

A

Marginal cost = Marginal Benefit

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3
Q

PPF means…

A

Production Point Frontier

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4
Q

Factors that can shift the demand curve are:

A
  • price of consumption
  • complements or substitutes
  • income, populations and taxes
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5
Q

Factors that can shift the supply curve:

A
  • price of production
  • substitutes and complements
  • the price of factors of production
  • the number of firms and technology
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6
Q

A competitive equilibrium is..

A

the price and quantity where supply and demand intersect

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7
Q

When prices are above equilibrium level…

A

There is excess production

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8
Q

When prices are below the competitive level…

A

there are shortages

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9
Q

When demand increases, what happens to the equilibrium price and quantity?

A

They both increase

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10
Q

When supply increase what happens to the equilibrium price and quantity?

A

The quantity goes up and price goes down

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11
Q

The cross-price elasticity helps describe the relationship between…

A

Complements and substitutes

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12
Q

If the cross price elasticty is positive it means it is a…

A

Substitute

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13
Q

if the cross price elasticity is negative it means it is a…

A

Complement

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14
Q

Income elasticity of demand helps us determine if a good is

A

Inferior or normal

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15
Q

If the income elasticity is less than 1…

A

it is an inferior good

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16
Q

If the income elasticity is greater than 1

A

it is a normal good

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17
Q

Indifference curves are usually…

A

Decreasing at a decreasing rate

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18
Q

Indifference curves usually tell us if..

A

the 2 goods are perfect subs or perfect complements are something in between

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19
Q

If the indifference curves are lines…

A

it is a perfect substitute

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20
Q

If the indifference curves are L-shaped…

A

It is a perfect complement

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21
Q

If the indifference curves are curves…

A

It is something in between

22
Q

The slope of an indfference curve is…

A

MRS

23
Q

The slope of the budget equation is…

A

The relative price

24
Q

True or False
Relative price = MRS

A

True

25
Q

True or False.
The FC curve is always decreasing

A

True

26
Q

True or False
The TC curve is always increasing.

A

True

27
Q

The law of diminishing returns state that…

A

The MC, AVC and ATC curves eventually becoming increasing at an increasing rate

28
Q

In perfect competition we assume that…

A

each firm has a perfectly elastic demand. that is, and they have to act as price takers

29
Q

True or False.
In a perfectly competitive market marginal revenue = demand.

A

True

30
Q

True or false.
Competition makes the residual demand of each firm be more elastic. This lowers profit and prices

A

True.

31
Q

In perfect competition the optimal choice of firms is…

A

Marginal cost = price

32
Q

The best welfare criterion is the…

A

Pareto Criterion: policies that help some without hurting others unambiguously good.

33
Q

What happens in a perfectly competitive market without externalities?

A

Total surplus is maximized by the competitive equilibrium

34
Q

What happens in a monopolistic market with perfect price discrimination?

A

Total surplus is maximized by the monopolistic equilibrium

35
Q

What is a price control?

A

A price control restricts the prices at which legal trade can occur. Examples are rent controls and minimum wages

36
Q

What happens in a competitive market without externalities and with price control?

A

It will decrease trade and total surplus

37
Q

What will happen in a market that is not perfectly competitive with a price control?

A

It will increase trade and total surplus

38
Q

What are sales tax?

A

Sales tax are a way of raising revenue for the govy

39
Q

What are subsidies?

A

Negative taxes. Buyers and sellers are compensated for each unit traded

40
Q

Tax will reduce…

A

Trade

41
Q

Subsidies will increase…

A

Trade

42
Q

Externalities are…

A

the effects that our choices have on the wellbeing of other people

43
Q

True or False
MSC=MSB

A

True

44
Q

An unregulated market with negative externalities…

A

Will result in overproduction and dead-weight loss

45
Q

An unregulated market with positive externalities…

A

with result in underproduction and dead-weight loss

46
Q

What is one way to deal with negative externalities?

A

Pigouvian Taxes

47
Q

What is a monopsony?

A

A market operated by a single buyer

48
Q

True or False.
For a monopsony, the MCL is above the supply curve

A

True

49
Q

True or False.
In concentrated labour markets, minimum wages can increase employment and total market surplus

A

True

50
Q

What is a production quota?

A

A Limit to the quantity of a good that maybe produced in a specified period in time

Econ 1021 (4 decks)

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