Week 13 Econ

Question 1

What is price elasticity of demand?

Answer 1

A measure of the sensitivity of demand to changes in price

Question 2

Why is price elasticity in demand important?

Answer 2

It affects total revenue therefore it is important in business

Question 3

What are the two ways to measure elasticity?

Answer 3

Point elasticity (need calculator) (we don’t use)
Arc elasticity (we use this one)

Question 4

If ED >1 then it is considered?

Answer 4

Elastic

Question 5

If ED=1 then it is considered?

Answer 5

Unit Elastic

Question 6

If ED<1 then it is considered?

Answer 6

Inelastic

Question 7

What is the most important factor affecting elasticity of demand?

Answer 7

Number of substitutes

Question 8

Do luxury taxes work?

Answer 8

No

Question 9

What is the the rule for time?

Answer 9

Time gives the market time to react (more elasticity)

Question 10

What is a linear demand curve?

Answer 10

A special case when the graph is straight, but elasticities change

Question 11

What is income elasticity?

Answer 11

Normal and inferior goods. How much consumption change with a given change in income

Question 12

What is an excise tax?

Answer 12

Tax per unit sold, usually collected from producers

Question 13

What is a sunk cost?

Answer 13

A cost that has already been made and cannot be recovered

Question 14

All factors of production are variable in the?

Answer 14

Long run

Question 15

What is the short run?

Answer 15

A length of time short enough so that only one variable can be changed.

Question 16

What is the total product?

Answer 16

The maximum output that a given quantity of labor can produce.

Question 17

The marginal product of labor is equal to the?

Answer 17

Increase in the total product that results from hiring one more worker with all other inputs remaining the same.

Question 18

The average product of labor is equal to the?

Answer 18

The total product divided by the total number of workers hired.

Question 19

The average total cost curve eventually slopes upwards because of the?

Answer 19

Law of diminishing returns

Question 20

When marginal cost is greater than average total cost, the?

Answer 20

Average total cost increases as output increases

Question 21

Which short-run curve is NOT U-shaped?

Answer 21

Average fixed cost

Question 22

If a company triples its plant size and its average cost decreases, then the firm is experiencing?

Answer 22

Economies of scale

Question 23

When the marginal and average products of labor are equal to each other, the

Answer 23

average product must be at its maximum value.

Question 24

Economists using marginal utility theory assume that consumers’ objectives are to?

Answer 24

maximize their total utility.