Mirco Test 1 (real test) Flashcards
Consumer surplus is the:
amount consumers are willing to pay for a good minus the amount the consumer actually pay for it
Producer surplus is the:
amount consumers actually pay for a good minus the amount the sellers are willing to sell the good
Total surplus equal
consumer surplus + producer surplus
Deadweight loss is the result of
- disequilibrium
- underproduction
- overproduction
all of these are correct
If a demand curve for a good were completely vertical, it would be considered:
perfectly inelastic
Price elasticity of demand refers to the ratio of the:
percentage change in the quantity demanded of a good to a percentage change in its price
If the percentage change in the quantity demanded of a good us less than the percentage change in price, price elasticity of demand is
inelastic
Demand price elasticity measures
how consumers change their purchases in response to a change in the price of a product
Elasticity measures how “sensitive” consumers are by measuring their change in ____ as the price of the product changes
quantity demanded
Firms would like to know the price elasticity of demand for their products because it helps determine the effect of price changes on the firms’
revenues
Two goods are complementary if:
they are used together
An inferior good is:
one that consumers buy less of as their income rises
The ability of a good to satisfy a want refers to its:
utility
A util represents a unit of measurement for the:
happiness a person obtains from consuming a good
Marginal utility is the change in:
total utility when an extra unit of output is consumed
The change in total utility due to a 1-unit change in the quantity consumed is:
marginal utility
The statement “as more of a good is consumed, the utility a person derives from each additional unit diminishes” is known as the:
law of diminishing marginal utility
Consumer equilibrium exists when:
ratio of marginal utility to price for all goods and services is equal
When Pepsi becomes more expensive relative to other beverages, people will purchase less pepsi. This observation is known as the:
substitution effect
When a reduction in the price of a good allows a consumer to purchase more of all goods, this effect is called the:
income effect
Which of the following is an explicit cost
the wages paid to workers
Which of the following is NOT an explicit cost
the firm owner’s time
The opportunity costs associated with the use of resources owned by a firm are
implicit costs
Which of the following would be considered an implicit cost
foregone rent on assets owned by the firm
The sum of the explicit and implicit costs incurred in the production process is called
total cost
Economic profit is
total revenues minus total costs
When total revenue minus total cost is equal to zero, the firm is
earning a normal profit
Which of the following is an example of a fixed input
- the acreage of a farmer’s land
- machinery
- the size of a firm’s plant
all of these
Which of the following represents the key difference between the short run and the long run
in the short run, the firm makes commitments to a certain type of production technology, which are represented as fixed costs in the short run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the long run.
The short run is a time period such that
the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory
The long run is a period of
sufficient length to allow a firm to alter its plant size and capacity and all other factors of production
The increase in total output that results form a unit increase in one unit of a variable input is equal to the input’s
marginal product
The law of diminishing marginal returns implies that, in the short run
the marginal product of the variable input must eventually decrease
The ___ is the situation in which the marginal product of labour is greater than zero and declining as more labour is hired.
law of diminishing returns
Fixed costs are BEST defined as
cost that do not vary with output
Which of the following is MOST likely to be a fixed cost for a business
property taxes on the firm’s building
Marginal cost is BEST defined as
the amounted added to total cost when one more unit of output is produced
Economies of scale are created by greater efficiency of capital and by
increased specialization of labor
If a firm’s long-run average cost curve is rising, it is experiencing
diseconomies of scale
Diseconomies of scale exist for all of the following reasons EXCEPT
firm size is too small
