Q4 Microeconomics

Question 1

Firms transform inputs into:

Answer 1

outputs

Question 2

2 types of inputs:

Answer 2

1) Fixed input: cannot be changed in the short run, fixed for a period of time (eg. land)
2) Variable input: can be changed at any time (eg. labor, intermediary good)

Question 3

Short vs long run inputs

Answer 3

In the long run ALL inputs can be adjusted (no imput is fixed)

Question 4

Describing production: Economies of Scale

Answer 4

1) Firmos costs priklauso nuo its scale of production ir production technology tipo, kurį ji naudoja.
2) Didelės firmos gali būti labiau profitable nei mažos, nes turi technological ir/arba cost advantages.

We say that production exhibits:
INCREASING RETURNS TO SCALE (inputs increase by a given proportion, and production increases by the same proportion)
CONSTANT TURTUNS TO SCALE (inputs increase by a given proportion, and production increases by the same proportion)
DECREASING RETURNS TO SCALE aka DISECONOMIES OF SCALE (inputs increase by a given proportion, and production increases increases less than proportionaliy

Question 5

Economies of scale includes:

Answer 5

1. Cost advantages - large firms can purchase inputs on more favourable terms, because they have greater bargaining power when negotiating with suppliers.
2. Demand advantages - Network effects (value of output rises with number of users eg. software application).
3. Large firms can also suffwer from diseconomies of scale, eg. additional layers of bureaucracy due to too many amployees.

Question 6

Fixed cost (FC) is

Answer 6

Cost of fixed input and does not depend on the quantity of oputput produced int he short run.

Question 6

Cost function shows and is used for:

Answer 6

How total production costs vary with quantity produced.
To make pricing and production decisions.

Question 7

Variable cost (VC) increases with the

Answer 7

quantity of output produced: more output means more units of variable input.

Question 8

Average cost is (and savybės)

Answer 8

average cost per unit of output you produce.
1) If you have a graph calculated as the slope spindulio nuo the origin (0 likely?) to a given point on the cost function (pvz A). Trikampio įžambinė, bet tipo jie tiesiog padalina y axis iš x.

Question 9

Elastic or inelastic or unit

Answer 9

The absolute value is more than 1. (Ignore the minus, nes absolute value)
=1 -> unit lygtais?
o maziau uz absolute value nu karoc is iraso gaut

Question 10

What is demand?

Answer 10

How many people are willing to buy a product for a certain price

Question 11

Reservation price is

Answer 11

the lowest price…. 57:00-58:00

Kazkas apie marginal cost = price

Question 45

Marginal cost

Answer 45

Tai yra papildomi kaštai, kurie atsiranda pagaminus vieną papildomą prekę ar paslaugą. Kitaip tariant, tai kaštai, kuriuos įmonė patiria, norėdama padidinti gamybą vienu vienetu. Ribos kaštai dažnai naudojami sprendimų priėmimui, siekiant nustatyti, ar verta didinti gamybą. * Calculated as the slope of the cost function at a given point.

Question 45

WTP

Answer 45

Willingness to pay

Question 46

Demand curve

Answer 46

shows the quantity that consumers will buy at each price

Question 47

Isoprofit curves show...

Answer 47

price-quantity combinations that give the same profit.

Question 48

Firm maximizes profits how

Answer 48

demand and isoprofit curves are tangent to each other AKA intersect. DEAND CURVE TURI BUT LIESTINE ISOPROFIT CURVUI Pasirinkdama tašką, kuriame ribinė nauda (MC) yra lygi ribinei pajamai (MR). - Jei MC > MR, įmonė patiria nuostolius gamindama daugiau, nes papildomi kaštai viršija papildomas pajamas, todėl gamybą reikėtų sumažinti. - Jei MC < MR, įmonė galėtų padidinti gamybą, nes dar būtų galima uždirbti daugiau nei patiriami kaštai.

Question 49

Atvirkštinė paklausos funkcija rodo

Answer 49

kainą kaip funkciją nuo paklausos kiekio, o ne atvirkščiai – kaip paklausos kiekis priklauso nuo kainos, kaip dažniausiai pateikiama paklausos funkcijoje.

Question 50

Perteklius (angl. surplus) rinkoje reiškia situaciją, kai

Answer 50

pasiūla viršija paklausą, tai yra, kai prekės ar paslaugos kaina yra tokia aukšta, kad vartotojai nesuinteresuoti ją pirkti tiek, kiek yra pasiūlos.

Question 51

Deadweight loss

Answer 51

Aa loss of total surplus relative to a Pareto efficient allocation (unexploited gains from trade).

Question 52

Pareto efficient allocation

Answer 52

Point where all gains from trade are utilized.

Question 53

Total surplus is highest when

Answer 53

Demand = Marginal Cost or, in other words, when the allocation is Pareto efficient

Question 54

The elasticity of demand is the

Answer 54

ercentage change in quantity demanded as a result of a one-percent change in the price of the good.

Question 55

When a one percent change in price leads to a greater than one-percent change in quantity demanded, the demand is

Answer 55

elastic

Question 55

When a one-percent change in price leads to an exactly one-percent change in quantity demanded, the demand is

Answer 55

unit elastic

Question 56

When a one-percent change in price leads to a less than one-percent change in quantity demanded, the demand is

Answer 56

inelastic

Question 57

The flatter the demand curve the....

Answer 57

more elastic is the price

Question 58

More elastic demand when

Answer 58

(a) more substitutes (b) consumer’s expenditure is large (e.g., cars) (c) less necessity Examples: * Elastic demand: cars, flight tickets for leisure * Inelastic demand: cigarettes (when the prices of all individual brands go up overall consumption of cigarettes is not much affected). Train ticket for business.

Question 58

Elasticity determines the effect of a price increase on

Answer 58

total revenue (price * quantity)

Question 58

Profit margin will be higher when you have elastic/inelastic demands?

Answer 58

inelastic demands

Question 59

A firm’s markup (P − MC ) is inversely proportional to price ...

Answer 59

elasticity of demand

Question 60

A firm's markup is a

Answer 60

measure of the distance between price and marginal cost

Question 61

Governments can raise more tax revenue by imposing taxes on inelastic/elastic goods

Answer 61

Inelastic