Test #1

Question 1

Market Demand Curve

Answer 1

shows the relationship between price and quantity demanded of a particular good or service by all the consumers participating in the market

Question 2

Market Supply Curve

Answer 2

shows the relationship between price and quantity supplied of a particular good or service by all the producers participating in the market

Question 3

Equilibrium

Answer 3

the point at which the market clears

Question 4

Equilibrium Price

Answer 4

the price that satisfies both the consumers and producers

Question 5

Shortage

Answer 5

quantity supplied by producers is less than the quantity demanded by consumers

Question 6

Surplus

Answer 6

quantity supplied by producers is larger than the quantity demanded by consumers

Question 7

Tax

Answer 7

payment to the government on the production or consumption of a good or service

Question 8

Subsidy

Answer 8

payment by the government on the production or consumption of a good or service

Question 9

Incidence

Answer 9

the economic effect on the producer or consumer of a tax or subsidy

Question 10

Price Floor

Answer 10

an established minimum price at which a good may be sold

Question 11

Price Ceiling

Answer 11

an established maximum price at which a good may be sold

Question 12

Willingness to Pay

Answer 12

shows the relationship between price and quantity supplied of a particular good or service by all the producers participation in that market

Question 13

Consumer Surplus

Answer 13

the difference between what a consumer is willing to pay and the price they actually pay

Question 14

Utility

Answer 14

the satisfaction arising from consumption

Question 15

Marginal Utility

Answer 15

the additional satisfaction an individual consumer derives from an additional unit of a good/service. while keeping all other consumption constant.

Question 16

Rational

Answer 16

the assumption that consumers will use their money to acquire the goods/services leading to the highest possible level of satisfaction

Question 17

Total Utility

Answer 17

the total amount of satisfaction derived from consuming a certain quantity

Question 18

Marginal Utilities of Income

Answer 18

different individuals derive different levels of satisfaction for each additional dollar

Question 19

Indifference Curve

Answer 19

the curve delineating the line where different combinations of two goods offer a consumer equal satisfaction

Question 20

Fixed Costs

Answer 20

costs that are the same regardless of output level

Question 21

Variable Costs

Answer 21

costs that change with the output level

Question 22

Sunk Costs

Answer 22

previously incurred costs that are not relevant to current decisions

Question 23

Opportunity Costs

Answer 23

the alternatives you give up in exchange for a good or service

Question 24

Marginal Costs

Answer 24

are the costs to produce one more unit of output.

Question 25

Maximize Profits

Answer 25

marginal costs should equal marginal benefits.

Question 26

Long Run Costs are always variable

Answer 26

true

Question 27

Shut Down

Answer 27

when the marginal revenue (price) is less than or equal to average variable costs.

Question 28

Break Even

Answer 28

where marginal revenue (price) equals average total cost.

Question 29

Changes in labor costs cause movement along the supply curve.

Answer 29

False

Question 30

A shift in the demand curve but not in the supply curve will cause a change in the equilibrium price.

Answer 30

True

Question 31

In the market for a specific good, both the demand and supply curves increase at the same time. Which of the following is true:

Answer 31

Overall market quantity increases.

Question 32

The analysis of interrelationships among markets and cross-price effects is called _______ equilibrium analysis.

Answer 32

general

Question 33

Perfectly competitive markets have the following characteristics:

Answer 33

1. Many consumers and producers.
2. Indistinguishable products.
3. Easy entrance and exit from the market.

Question 34

In a competitive market, individual consumers and producers can greatly influence the market price for goods and services.

Answer 34

False

Question 35

At a price of $15, Joseph would buy 30 pieces of bubble gum and Emma would buy 5 pieces. The aggregate demand between the two of them at $15 is:

Answer 35

35

Question 36

Pick the Jeremy Bentham quote.

Answer 36

The purpose of society is to promote “the greatest happiness of the greatest number.

Question 37

To maximize satisfaction consumers should allocate their monetary expenditures so that the last dollar on each product yields:

Answer 37

the same amount of marginal utility.

Question 38

You run a firm that produces watches. You have 1 employee who receives 100 dollars a day regardless of the amount of watches she produces. For every watch you produce, you must pay 3 dollars for parts. What are the total costs for producing 50 watches in one day?

Answer 38

250

Question 39

You produce 10 doughnuts. Your fixed costs are $5 and your variable costs are $0.50. What are your average total costs per doughnut?

Answer 39

((10x.5)+5)/10= 1

Question 40

if you increase the amount of doughnuts you produce to 20, what are your new average total costs per doughnut?

Answer 40

((20x.5)+5)/20= .75