For Midterm (stuff You Have Trouble With) Flashcards
Price elasticity if substitute is what positive or negative
Positive
When calculating, make sure the initial quantity and price are correlating
Price elasticity of complement is what positive or negative
Negative
When calculating, make sure the initial quantity and price are correlating
The world faces a scarcity of ideas
Is it a proper way that economists think of scarcity?
Nah boy
What is the difference between a straight line PPF and one that is concave
Straight line: shows constant opportunity cost
Concave: does not show constant opportunity cost
Models used how and for what?
Shows exonomic relationships
Can be graphs
Can be equations
Its an abstraction of exonomy
The income elasticity of an inferior good is positive or negative
Negative
Make sure to put the initial and final quantity and prices properly
Income elasticity of normal good is positive or negative
Positive
What is the inefficiency of a price floor?
Extra cost of the last unit produced is greater than the extra benefit of last unit consumed
Of there is an external cost associated with a good, then how is the allocation of resources in production of the good
There is proper allocation of resources
How is the marginal rate of pollution reduction if more and more of the environment is cleaned up
It declines
Is the MR curve half of the Demand curve usually?
Yeee boyyy
What is the difference between having MR = MC and MR = 0 in a monopoly
MC = MR is the optimal output for max profits
MR = 0 is to max revenue
When MR = 0 is when TR hits max
Is the MR curve half of the Demand curve usually?
Yeee boyyy
What is the difference between having MR = MC and MR = 0 in a monopoly
MC = MR is the optimal output for max profits
MR = 0 is to max revenue
When MR = 0 is when TR hits max
what makes collusion harder
if there are many firms in the industry
if the product is not standardized
if demand and cost conditions are changing rapidly
The demand curve slopes downward due to diminishing marginal utility
True or false?
True fam
In the short run, can a perfectly competitive firm vary their amount of workers and their size of firm?
Only the mount of workers can be varied
Not size of firm
Are fixed costs incurred even if nothing has been produced?
Yeee boyyy
When MP exceeds average product
Marginal cost must be decreasing
They be using economies of scale
When marginal costs increase while output also increases, what does this mean to the marginal product
The marginal product is decreasing
Less is produced per worker, hence the cost per unit increases
Why does risk pooling decrease overall risk
Cause every risk is independent from the others
How does techno improvement affect production produces
Extends increasing returns to scale portion in the long run of the average cost curve
A perfectly competitive firm’s supply is:
Zero for all prices below the shutdown price
For all prices above shutdown price, its the curve above minimum average variable cost
If MR exceed MC, gotta increase or decrease output
Increase output
MR is half the demand curve going downwards
MC goes up
The greater the elasticity of demand, how is the consumer surplus?
The smaller will be the consumer surplus
When does a market failure occur
When The price established in the market does not equate the marginal social benefit of a good and the marginal social cost of production
MP = AP, what does it mean for AP
AP is at max
Does MC = ATC when ATC is at minumum?
Yeee
What are characteristics oligopolists
Produce more and sell at lower price than monopolist when do not collude
Marginal revenue = marginal cost
When colliding, they act as monopoly in output and price
What is included in non tariff barriers
Quotas
Safety standards
Voluntary export restraints
In the PERFECT COMPETITION
since the demand is elastic
That means that there is horizontal demand,
So the demand curve is equal to what?
D = P
D = MR
D = AR
MR = P
In the perfect competition
Where should all firms produce?
(Short run)
Where MR = MC
Why does a perfectly competitive firm want to produce where MR = MC?
(Short run)
Because if MC (which increases) exceed the MR (which is horizontal), the cost of each additional unit will be greater than the revenue of each additional unit
If MC is lower than MR, then they can still make more profits by producing more output till it gets to MR = MC
In a graph, what is the total profit for a perfectly competitive firm?
(Short run)
Vertical distance between the point where MC = MR and the point at the same output where is equal to ATC
X
Horizontal distance of optimal output
Area should be a rectangle
What happens to the total market supply curve when more firms enter a perfectly competitive industtry
The supply increases
It shifts to the right
Total market output increases and price decreases
What happens to the demand of a singular firm in the long run
To their profits?
To their output?
Their P?
Their MR?
Their demand will decrease
It will shift down (it remains horizontal)
Since D = P, their price of sale will decrease
Their MR will also decrease
No more profits
Their output will decrease
MR curve will equal the minimum if the ATC curve (no more profits)
True or false
Monopoly have unique goods with no subs??
True
True or false
Monopoly are price takers??
False
They be price makers
Can a monopoly price discriminate?
Nah boy
If they lower the price, they lower for everyone
Profit maximizing Q in monopoly
MR = MC
Profit max price in monopoly
MR = ATC
Socially optimal output Q in monopoly
Where MC = D
Dead wieght loss in monopoly
POINT where MC = MR
Price where MC = MR
Point where MC = D
No economic profit in monopoly
ATC = D
