microeconomics

Question 1

PPF curve

Answer 1

shows the different combinations of goods that may be produced if all resources are efficiently utilised

Question 2

opportunity cost

Answer 2

the cost of foregoing the next best alternative

Question 3

accounting profit

Answer 3

excess revenue above explicit costs (costs associated wit production)

Question 4

economic loss / sub-normal profit
normal profits

Answer 4

accounting profit that does not cover opportunity costs
accounting profit that covers opportunity costs (economic profit is 0)

Question 5

supply

Answer 5

amount of a good that sellers are prepared to provide at a certain price over a given period of time

Question 6

demand

Answer 6

amount of a good buyers are prepared to pay at a given price over a given period of time

Question 7

PED

Answer 7

% change in qty / % change in price

Question 8

elastic and perfectly elastic

Answer 8

PED >1
% change in qty > % change in demand
luxury goods
PED = infinity
perfect competition

Question 9

unit elastic

Answer 9

PED =1
% change in qty = % change in price

Question 10

inelastic and perfectly inelastic

Answer 10

PED < 1
% change in price > % change in qty
necessities
PED = 0
product that is vital

Question 11

PED and total revenue

Answer 11

PED >1 , TR increase
PED <1 , TR decrease
PED =1 , TR at MAX

Question 12

income elasticity of demand

Answer 12

% change in qty / % change in income

Question 13

cross elasticity of demand

Answer 13

% change in qty / % change in price of substitute or complementary good

Question 14

cross elasticity of substitute and complimentary

Answer 14

positive
negative

Question 15

PES

Answer 15

% CHANGE IN QTY SUPPLIED / % CHANGE IN PRICE

Question 16

elastic and perfectly elastic

Answer 16

PES > 1
durable goods
manufactured goods
PES = infinity

Question 17

inelastic and perfectly inelastic

Answer 17

PES < 1
PES = 0

Question 18

production function

Answer 18

relationship be/een different combos of factor inputs and output

Question 19

short run production function

Answer 19

period of time for which at least one of the factors is fixed

Question 20

law of diminishing returns

Answer 20

further increase in variable input lead to a steadily decreasing marginal product

Question 21

short run costs for a manufacturer

Answer 21

total costs
average costs
marginal costs

Question 22

MC = ATC

Answer 22

at ATC’s lowest value

Question 23

long-run production function

Answer 23

period of time where no factor of production is fixed

Question 24

MES

Answer 24

LOWEST POINT ON THE LONG RUN AVERAGE total COST CURVE
level of output where internal economies of scale fully exploited
> MES low output many firms can exist
> MES large i.e. high ratio of fixed costs to variable costs

Question 25

perfect competition market

Answer 25

MR = AR = Demand = Price > where revenues are maximized MR = MC > long run AR =ATC > short run AR > ATC

Question 26

ATC

Answer 26

explicit + opportunity costs

Question 27

monopolies produce at a level

Answer 27

MR , D downward sloping PRODUCE AT MR = MC D = AR = P MR steeper (2x) than D maintain supernormal profit in long-run AR > ATC

Question 28

monopolistic competition

Answer 28

> many producers and consumers > no firm has total control over market price > non-price differences perceived by consumer > few barriers to entry > producers have a degree of control over price (rarely reach economies of scale)

Question 29

oligopolies price behaviour

Answer 29

> cartel > kinked demand - all members react to each other's price behaviour > price leadership - one firm more dominant than other . predatory pricing illegal > game theory - speculative

Question 30

Porter's five competitive forces

Answer 30

> bargaining powers of suppliers > bargaining power of customers > threat of new entrants > threat of substitutes > rivalry between competitors

Question 31

product life cycles

Answer 31

> intro phase > growth phase > maturity phase > decline phase > obsolescence

Question 32

SWOT analysis

Answer 32

internal > strengths > weaknesses external > opportunities > threats

Question 33

four Ps

Answer 33

place product promotion price

Question 34

effective demand

Answer 34

demand that consumers are not only willing but also able to place on a good or service

Question 35

manufactured gds vs agricultural goods

Answer 35

more elastic ( greater supply elasticity)

Question 36

PES long run

Answer 36

more elastic than in the short run

Question 37

factors of production

Answer 37

land labour capital entrepreneurship