man econ prelim 2

Question 1

utility

Answer 1

The consumer’s level of satisfaction

Question 2

Budget Line:

Answer 2

the various combos of 2 goods the consumer can afford given her income and the relative prices of the goods

Question 3

Completeness

Answer 3

a consumer is able to decide which bundles she may want to consume

Question 4

Rankability

Answer 4

a consumer is able to rank all possible bundles she can consume

Question 5

Transitivity

Answer 5

if A is preferred to B and B is preferred to C then A must be preferred to C

Question 6

marginal utility

Answer 6

the additional utility from consumer an additional unit

Question 7

diminishing marginal utility

Answer 7

the idea that as a consumer consumes additional units of one good, the amount of another good she is willing to give up become less and less

Question 8

Indifference curve

Answer 8

shows the various combos of 2 goods that yield the same satisfaction to a consumer

Question 9

indifference map

Answer 9

shows all of the consumer’s indifference curves between 2 goods

Question 10

Marginal rate of substitution:

Answer 10

the amount of 1 good a consumer is willing to give up to consumer 1 additional unit of another and stay indifferent

Question 11

income effect

Answer 11

shows the change in consumption from a relative price change when the consumer’s purchasing power is allowed to adjust

Question 12

Substitution effect:

Answer 12

shows the change in consumption from a relative price change when the consumer’s utility is held constant

Question 13

giffen good

Answer 13

an inferior good where the income effect is greater than the substitution effect

Question 14

production function

Answer 14

shows the relationship between inputs and two outputs that can be produced given the technology

Question 15

variable input

Answer 15

An input whose use can be altered

Question 16

fixed input

Answer 16

an input whose use cannot be altered in the short-run

Question 17

Total product:

Answer 17

Total product: graphical depiction of the production function

Question 18

Average product:

Answer 18

output divided by the amount of an input used to produce that output

Question 19

marginal product

Answer 19

change in output from using 1 more of an input

Question 20

Value of marginal product:

Answer 20

benefit the firm recipes from hiring an additional input = P * Marginal Product of the Input

Question 21

Marginal revenue product:

Answer 21

benefit the firm recipes from hiring an additional input = MR * Marginal Product of input

Question 22

Leontief production function:

Answer 22

production function which assumes all inputs are required in a specific ratio.

Question 23

Isoquant

Answer 23

shows the various combinations of 2 inputs that can produce the same amount of output

Question 24

Marginal rate of technical substitution:

Answer 24

the amount of 1 input that has to be given up to use 1 additional unit of another, keeping output constant

Question 25

isocost

Answer 25

shows the various combinations of 2 inputs that cost the sake for the firm

Question 26

Optimal input mix:

Answer 26

long run decision about the number of all inputs to hire: when the MPL/ W =MPK/r, marginal product per dollar spent is equated across all inputs

Question 27

Optimal input use:

Answer 27

short run decision about hiring an additional input: when the VMP (or MRP)= cost of input

Question 28

Cobb douglas production function:

Answer 28

prod function which assumes all inputs are required in a specific ratio with a degree of substitutability across inputs

Question 29

Income Elasticity of Demand

Answer 29

% change in qd from a given % change in income.

Question 30

Elasticity of Supply

Answer 30

percent change in q supplied from a given percent change in price

Question 31

Advertising Elasticity of Demand

Answer 31

% change in qd from a given % change in advertising exp.

Question 32

Cross Price Elasticity of Demand

Answer 32

shows the percent change in the demand for good x from a given percent change in the price of good z