Units 6 for economic test

Question 1

when is a market in equilibrium

Answer 1

when total demanded by consumers equals quantity supplied by suppliers

Question 2

when demand at price’ is less than supply at price’ . is there an excess of supply or demand ?

Answer 2

excess of demand

Question 3

when demand at price’ is greater than supply at price’ . is there an excess of supply or demand

Answer 3

excess of supply

Question 4

what is a quantity tax

Answer 4

it is a tax that is a fixed amount for each unit of a good or service sold

Question 5

define an excise tax
define a sales tax

Answer 5

a tax that is levied on sellers
a tax that is levied on buyers

Question 6

what is the effect of a quantity tax on the market equilibrium

Answer 6

The effect of the tax on the supply-demand equilibrium is to shift the quantity toward a point where the before-tax demand minus the before-tax supply is the amount of the tax. A tax increases the price a buyer pays by less than the tax. Similarly, the price the seller obtains falls, but by less than the tax.

Question 7

a tax rate of t makes the price paid by buyers Pb, higher by t from the price received by the sellers.

how can this be represented as an equation

Answer 7

Pb -Ps = t
or
Pb = Ps + t

Question 8

true or false?
deadweight loss due to a quantity tax rises as either market demand or market supply becomes more own price elastic

if either elastic demand = 0 or elasticity of supply = 0, the deadweight loss is zero

Answer 8

true

true

Question 9

what is technology

Answer 9

Technology is a process by which inputs are converted into outputs for example, a lecture requires a computer, internet connection, electricity etc. to be produced

Question 10

what does xi and y represent in a production function

Answer 10

xi - denotes the amount of input
y - output levels

Question 11

what is a production plan

when is a production plan feasible

Answer 11

a production plan is an output level and an input bundle (x1,,, xn) y

when the output level is greater or equal to the production plan

Question 12

what is a technology set

Answer 12

the collection of all feasible production plans

Question 13

on a technology set, anythingg under the curve is feasible but not maximum efficient

Answer 13

.

Question 14

to find maximal optimal output level from an input bundle in a technology set e.g. (1,8). you put it through the function normally and multiply to provide a number

Question 15

different types of production functions:

what is the form of a fixed proportions production function?

what is the form of a perfect substitute production function?

Answer 15

y= min(a1x1,a2x2)
for example, y = min ( x1, 2x2)

y = a1x1 + a2x2
for example y = x1 + 3x2

Question 15

different types of production functions:

what is the form of a fixed proportions production function?

what is the form of a perfect substitute production function?

Answer 15

y= min(a1x1,a2x2)
for example, y = min ( x1, 2x2)

y = a1x1 + a2x2
for example y = x1 + 3x2

Question 16

what is the marginal product of i

Answer 16

the marginal product of I is the rate of change of output level as the level of input I changes, holding all other input levels fixed.

Mpi = derivative of y with respect to xi

basically your probably going to differentiate if asked for marginal product

Question 17

the marginal product of input I is diminishing if it becomes smaller as the level of input I increases

Answer 17

fact

Question 18

the perfect substitutes function exhibits constant returns to scale

Answer 18

fact

Question 19

there’s practice questions, but the returns to scale are:

constant if a + b = 1
increasing if a + b > 1
decreasing if a + b < 1

Question 20

how do you calculate technical rate of substitution

Answer 20

derive to find dx1 then to find dx2 then - over each other to find and simplify

Question 21

what is an isoquant slope

what is an isocost slope

Answer 21

an isoquant slope:
shape: curved
it is the rate at which you can substitute one input, such as labor, for another input, such as capital, without changing the resulting output level.

An isocost line is a curve which shows various combinations of inputs that cost the same total amount . For the two production inputs labour and capital, with fixed unit costs of the inputs, the isocost curve is a straight line

Question 22

what shape is a Leontief curve

what two features does a well behaved curve have (monotonic)

Answer 22

perfect compliments

• well behaved technologies are both:
  monotonic and convex

monotonicity means more of any input generates more output

Question 23

examples of restrictions that place a firm into a short run:

Answer 23

• temporarily being unable to install or remove machinery
• being required by law to meet affirmative action quotas
• having to meet domestic content regulations

Question 24

identify what each of the follow symbols represent in profit maximisation -

p1
y1
w1
x1

Answer 24

product prices (p1)
output levels (y1)
input prices (w1)
input levels (x1)

Question 25

the economic profit generated by a production plan can be represented as profit = p1y1 + …..pnyn - w1x1 - …….. wmxm

Answer 25

.

Question 26

look at how we value a firm with present value equation

Answer 26

.

Question 27

look at profit maximisation equations and practice writing them out no excuse do now, and read profit maximisation notes as tricky

Answer 27

.

Question 28

​​Law of diminishing marginal returns requires to show a double derivative < 0

Answer 28

.

Question 29

I know it aint this unit, but draw every fixed, marginal, variable cost curve etc rn

Answer 29

.

Question 30

maximal output from an input bundle, sub numbers into the normal equation

Answer 30

.

Question 31

how do you find marginal product

Answer 31

derive with respect to mp1 then mp2

Question 32

𝑓 𝑘𝑥!,𝑘𝑥”,…,𝑘𝑥# < 𝑘𝑓(𝑥!,𝑥”,…,𝑥#) then the technology exhibits diminishing returns to scale. For example, k=2 coupling all input levels less than doubles the output level

memorise this from notes

Answer 32

.

Question 33

If it’s greater than, then output will more than double meaning increasing returns to scale

Answer 33

.

Question 34

Solving an equation of an is-profit line gives w/p1 for the slope and other part gives intercept of the is-profit line

Answer 34

.

Question 35

Marginal revenue product of input 1 is equal to the slope on an is-profit line 2

Answer 35

.

Question 36

what do isoquants show

Answer 36

level of output

Question 37

what is an isoquant

Answer 37

Isoquant is a curve that goes through the points with a fixed level of output (f) but different combinations of inputs

Question 38

Short run resort to price equals to mc is a rule