Micro #5

Question 1

The value of the difference between the price consumers are willing to pay for a product on the demand curve and the price actually paid for it.

Answer 1

Consumer suplus

Question 2

The value of the difference between the actual selling price of a product and the price producers are willing to sell it for on the supply curve.

Answer 2

Producer surplus

Question 3

What + What = Total surplus

Answer 3

Total Surplus = Consumer Surplus + Producer Surplus

Question 4

@Deadweight loss is a result of three things: ___, ___, and ___.

Answer 4

Price ceilings, price floors, and taxations.

Question 5

If a demand curve for a product were completely vertical, is considered what?

Answer 5

Perfect inelastic

Question 6

The ratio of the percentage change in the quantity demanded of a product to a percentage change in its price

Answer 6

Price elasticity of demand

Question 7

A condition in which the percentage change in quantity demanded is less than the percentage change in price

Answer 7

Inelastic Demand

Question 8

Price elasticity of demand measures

Answer 8

How responsive or sensitive consumers are to a change in the price

Question 9

Elasticity measures how sensitive consumers are, by measuring their change in ___ as the price of the product changes.

Answer 9

Quantity demanded

Question 10

If a firm knows the price elasticity of demand. It helps them to determine the changes on the firm’s ____?

Answer 10

Revenues

Question 11

A good that is jointly consumed with another good. As a result, there is an inverse relationship between a price range for one good and the demand for its “go together good”.

Answer 11

Complementary good

Question 12

Any good for which there is an inverse relationship between changes in income and its demand curve.

Answer 12

Inferior good

Question 13

The satisfaction, or pleasure, that people receive from consuming a good or service.

Answer 13

Utility

Question 14

Is the unit of measurement for the satisfaction of utilities.

Answer 14

Util

Question 15

Marginal utility is the change in what?

Answer 15

The change in total utility from one additional unit of a good or service

Question 16

The change in total utility due to a 1-unit change in the quantity consumed is?

Answer 16

Marginal utility

Question 17

The statement “as more of a good is consumed, the utility a person derives from each additional unit diminishes” is knows as the?

Answer 17

Law of diminishing marginal utility

Question 18

Consumer equilibrium exists when:

Answer 18

A consumer selects or buys the combination of goods that maximizes utility.

Question 19

The change in quantity demanded of a good or service caused by a change in its price relative to substitutes.

Answer 19

Substitute effect.

Question 20

The change in quantity demanded of a good or service caused by a change in real income (purchasing power).

Answer 20

Income effect

Question 21

Which one is an example of Explicit cost

Answer 21

Payments to non owners of a firm for their resources.

• wages paid to labor
• the rental charges for a plant
• the cost of electricity
• the cost of materials
• the cost of medical insurance

Question 22

Which one is NOT an example of Explicit cost

Answer 22

The opportunity costs of using resources owned by a firm

Question 23

The opportunity cost of using resources owned by a firm

Answer 23

Implicit cost

Question 24

Which one is an example of implicit cost

Answer 24

@opportunity costs of resources

Question 25

The sum of total fixed cost and total variable cost at each level of output

Answer 25

Total cost

Question 26

Total revenue minus explicit and implicit costs

Answer 26

Economic profit

Question 27

What total revenue minus total cost is equal to zero

Answer 27

@Total profit

Question 28

Examples of fixed inputs

Answer 28

@Any resource for which the quantity cannot change during the period of time under consideration - the physical size of a firm’s plant and the production capacity of heavy machines cannot easily change within a short period of time

Question 29

Short run and long run - key differences

Answer 29

Short run: a period of time so short that there is at least one fixed input, firms are only able to influence prices through adjustments made to production levels Long run: a period of time so long that all inputs are variable→ NO fixed costs, firms are able to adjust all costs

Question 30

Short run, what time period is that covering?

Answer 30

In which a firm uses at least one fixed input | During the short run, a firm has enough time to adjust its variable inputs

Question 31

Long run, what time period is that covering?

Answer 31

That is long enough to permit changes in all the firm’s, both fixed and variable In the long run, total fixed cost does NOT exist

Question 32

The change in total output produces by adding 1 unit of a variable input, with all other inputs used being held constant

Answer 32

Marginal product

Question 33

Law of diminishing marginal returns (short run)

Answer 33

Occurs in the short run when one factor is fixed

Question 34

The principle that states that beyond some point, the marginal product decreases as additional units of a variable factor are added to a fixed factor.

Answer 34

Law of diminishing marginal returns

Question 35

Expenses that have to be paid by a company, independent of any business activity.

Answer 35

Fixed cost

Question 36

- rent payment - lease on a building - insurance premiums - loan payments

Answer 36

Examples of fixed costs

Question 37

The change in total cost when one additional unit of output is produced

Answer 37

Marginal Costs

Question 38

Economies of scale are created by greater efficiency of capital and by _______?

Answer 38

Increased specialization of labor

Question 39

A situation in which the long-run average cost curve rises as the firm increases output

Answer 39

Diseconomies of scale

Question 40

Diseconomies of scale exist for all of the following reasons except.

Answer 40

Firms size is too small