unit 7

Question 1

differentiated product

Answer 1

a product produced by a single firm that has some unique charachteristsics compaired to a similar product in other firms

Question 2

economies of scale
1. increasing
2. constant
3. decreasing

Answer 2

1. when double all the input to a production process more than doubles the output
2. when doubling all the inputs to a production process doubles the output
3. when doubling all the inputs to a production process less than doubles the output

Question 3

cost function

Answer 3

the total cost at each unit of output

Question 4

Willingness to pay

Answer 4

how much a person values a good, measured by the maximum amount they are willing to pay to have that unit of good

Question 5

1. Consumer surplus
2. Producer surplus

Answer 5

1. The consumer’s willingness to pay for a good - the price at which the consumer bought the good, summed across all units sold.
2. The price at which a firm sells a good minus the minimum price at which it would have been willing to sell the good, summed across all units sold.

Question 6

price -setting

Answer 6

a curve showing the real wage paid when firms choose their profit maximizing point

Question 7

Deadweight loss

Answer 7

a loss of total surplus relative to a Pareto - efficient allocation

Question 8

Market failure

Answer 8

when a market allocates in a Pareto - inefficient ways

Question 9

Elasticity of Demand

Answer 9

the percentage change in demand that would occur in response to a 1% increase in price.

demand is inelastic when greater than 1
demand is elastic when smaller than 1

Question 10

profit margin

Answer 10

the difference between price and the marginal cost

Question 11

demand curve

Answer 11

a curve showing the quantity consumers will buy at each price.