Microeconomics Flashcards by Chauntia Carroll

D= b +m(a) b is the

B is the intercept

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The intercept is the value of the

Dependent variable at the lowest value of the independent variable

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In a free market economy

Government regulation and commerce is the least significant factor

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Labor. Capital and natural resources are all

Economic resources

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Under any economic system all economic resources are

Scarce

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Increase on the income of market participants causes

The demand curve to shift outward

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A reduction in price will not cause a

Reduction in price commodity

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An increase in demand causes a

Shift of the demand curve

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When the cost of input factors to the production increases. The supply curve shifts

The supply curve will shift inward

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A shift in the supply curve inward will cause

The same quantity to be provided at a higher price

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A factor that would not cause an increase in the supply curve is

Ah increase in the price of the commodity

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If the price for a good if fixed by government fiat below market equilibrium price

Excess demand

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A price ceiling will cause a

Shortage of supply and excess of demand

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Percentage change in supply is greater than price supply

Is elastic

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Elasticity of demand measures the percentage change in quantity of a commodity demanded as result of a

Given percentage change in price of a commodity

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A high price elasticity of demand example

There are many substitutes

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Percentage change less than 1 is

In elastic

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Percentage change is equal to 1 is

Unitary

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Percentage change is greater than 1 is

Elastic

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Price elasticity equation

Percent change in quantity / percent change in price

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When the Total utility is maximized the marginal utility of the last dollar spent on each and every item acquired

Must be the same

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Equation for utility is

Utils/price = Utils/price

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As an individual acquires or consumes more units of a commodity the total utility

Increases and the marginal utility decreases

If output increases lesser than inputs there are

Decreasing returns to scale

Diminishing returns is when

One input is fixed

In the long run analysis assumes that all

Inputs are varied

The extent of competition in the market is central to determining

The nature of market structure

When the market price is less than average variable cost the firm should

Cease to produce and exit the market

In a perfectly competitive market the demand curve is

Horizontal

In perfect competition price equals

Marginal revenue

In a perfect competition firms can

Easily enter or leave the market

In a natural monopoly it is a condition where there are

Increasing returns to scale

A monopolistic firm that maximizes revenue uses it's resources

Inefficiently and at higher price then perfect competition

In a monopolistic competition there are the following characteristics

Product or service is slightly differentiated Large number of sellers Close substitutes for the product or service Ease of entry into or exit from market

Monopolistic competition is maximized when

Marginal revenue = marginal cost

Collusive pricing

Firms conspire to set the price at which a good or service will be provided

Goods or services offered at different prices in different markets or market segments is

Dual pricing

Setting of prices low in an attempt to eliminate the competition

Predatory pricing

A group of firms that conspire to make price and output decisions

A cartel

An oligopoly has

Few sellers

Price leadership is

Tacit collusion

A firm is not assured to make a profit in the short run for

Perfect competition. Monopolistic competition, oligopoly, pure monopoly

Perfect competition is not a market found in the

Increases in a demand curve are results of

Shifts

Increases in demand shifts

Outward

Shifts in the supply curve to the left is

Inward (closer to y axis)

A higher equilibrium is caused by an

Increase in demand

When demand is elastic the percentage change in demand is greater than the percentage change in

Price

According to the law of diminishing returns the marginal product (output) falls as more units of a

Variable input are added to fixed inputs

Characteristics of perfect competition are

A large number of independent buyers and sellers who is too small to affect price Homogenous product or service Resources are completely mobile Perfect info Govt does not set prices

In a perfectly competitive market in the short run MR =

A firm should cease to exist in perfect competition when price is less than

Average variable cost

Price is what in perfect competition

Marginal revenue

Mr is less than atc but greater than avc firm is covering variable cost and contributions to fixed cost but not

Making a profit

If mr is less than vac the firm is not coveting variable cost and there is a

Loss with every unit produced

In a perfect monopoly marginal revenue is belw demand because it has to

Lower the price to sell more units