RECITATION_MATRIX_MIDTERM Flashcards
What is the relationship between average product and marginal product?
Average product rises when marginal product is above it
How do you calculate average product (AP)?
AP = Total Product / Input
What is the significance of the law of diminishing marginal returns?
It helps firms determine optimal input levels
What determines consumer tastes and preferences?
Age, income, education, culture
How does an increase in variable inputs affect output in the short run?
It increases total output until diminishing returns set in
What is the relationship between consumer surplus and market price?
Consumer surplus decreases as market price increases
What is an economic good?
A good that is both useful and scarce
Describe the concept of opportunity cost.
The cost of the next best alternative foregone
What happens to total cost if fixed costs are constant and variable costs increase?
Total cost increases
What does an increase in demand typically do to prices?
It raises prices
What are fixed inputs?
Inputs that cannot be changed in the short run
How does a firm determine the optimal combination of factors of production?
By analyzing isoquants and isocosts
What are the primary needs identified by Maslow?
Physiological, safety, social, esteem, self-actualization
What role do consumers play in a market economy?
They determine what is produced through their demands
What is the formula for marginal product?
MP = Change in Total Product / Change in Input
What is the total product when 6 units of input yield 30 units of output?
30 units
What factors affect the productivity of a firm?
Technology, labor efficiency, input quality
How do luxury goods differ from essential goods?
Luxury goods are not necessary for survival
What are the implications of the Law of Diminishing Returns for production?
It suggests increasing input will yield lower per unit output after a point
In which phase of production do marginal returns start to diminish?
After the optimal input level is reached
What type of goods are considered consumer goods?
Goods that provide satisfaction directly
How does the government restrict consumer sovereignty?
By regulating harmful products
How is total revenue calculated?
Total Revenue = Price x Quantity
What is the importance of studying consumer behavior in economics?
To understand market demand and pricing strategies
What factors contribute to a firm’s total cost?
Fixed and variable costs
What does the marginal rate of substitution indicate?
The rate at which one factor can be substituted for another
How does the elasticity of demand affect pricing strategies?
Higher elasticity means consumers are more responsive to price changes
What is the significance of the production function?
It shows the relationship between input and output
How does competition impact prices in the market?
Competition generally leads to lower prices
What is the economic definition of a shortage?
When demand exceeds supply
What are the main characteristics of an oligopoly?
Few sellers, interdependent pricing, barriers to entry
What is price elasticity of demand?
The responsiveness of quantity demanded to a price change
What factors can lead to an increase in supply?
Technology improvements, lower production costs
How does a price ceiling affect the market?
It can create shortages by keeping prices below equilibrium
What is a subsidy and how does it affect production?
A payment to producers to encourage production, which increases supply
How do consumers respond to changes in their income?
They may adjust their spending on normal and inferior goods
What is the concept of consumer surplus?
The difference between what consumers are willing to pay and what they actually pay
How can advertising influence demand?
It can increase demand by changing consumer preferences
What are economies of scale?
Cost advantages gained by producing on a larger scale
What is the purpose of a demand curve?
To show the relationship between price and quantity demanded
What is the impact of increased competition on prices?
Prices tend to decrease
What is a price floor, and how does it affect the market?
A minimum price set by the government that can create surpluses
What is a public good?
A good that is non-rivalrous and non-excludable
How do externalities affect market efficiency?
They can lead to market failures and inefficient allocation of resources
What is the concept of marginal utility?
The additional satisfaction gained from consuming one more unit
How does consumer confidence affect economic activity?
Higher confidence typically leads to increased spending
What is the purpose of antitrust laws?
To promote competition and prevent monopolies
How can price discrimination increase a firm’s profits?
By charging different prices to different consumers based on willingness to pay
What is the relationship between interest rates and investment?
Higher interest rates typically reduce investment
How do imports affect domestic prices?
They can lower prices by increasing supply
