chapters 7, 10-12
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
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Buying at a low price in one market and selling at a high price in another Drives prices towards each other | Arbitrage
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a way to measure opportunity for arbitrage in markets | Purchasing Power Parody
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when marginal cost does NOT equal marginal benefit is there a chance for arbitrage | Yes
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When world price is higher who is in favor of free trade? | Producers
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When world price is lower who is in favor of free trade? | Consumers
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What is a tax on imports? | A Tariff
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What is consumer surplus? | The area below the demand curve but above the going price, aggregated over all trades made
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What is producer surplus? | The area above the supply curve but below the going price, aggregated over all trades made
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Foreign sellers selling to the U.S are... | Importers
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What is forgone interest? | Funds used to buy capital that could have been used for some other purpose, and in their next best use, they would have earned interest
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Quantity Produced (Q) / Labor (L) = | Average Product
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change in Q / change in L = | Marginal Product (MP) [decreasing function of L]
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Marginal product of an additional worker is less than the marginal product of the previous worker | Diminishing Marginal Returns
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MP X price sold for = | Marginal Revenue Product (MRP) or Value of MP (VMP)
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Total Variable Cost (TVC) + Total Fixed Cost (TFC) = | Total Cost (TC)
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change in TC / change in Output (Q) = | Marginal Cost (MC)
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TC / Q = | Average Total Cost (ATC)
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Fixed Cost (FC) / Q = | Average Fixed Cost (AFC)
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What is the benchmark used to measure other markets? | Perfect Competition
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The time frame in which the quantity of at least one factor of production is fixed | Short Run
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The time frame in which the quantities of ALL factors of production can be varied | Long Run
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A past expenditure on a plant that has NO resale value ex) car will not be worth as much if you try to resell it (depreciation) | Sunk Cost
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cost of land, capital, and entrepreneurship cost that you will incur without producing a single product (when output is zero) | Fixed Cost
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Double all inputs and output more than doubles cost per unit gets smaller | Increasing Returns to Scale
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double all inputs and output also doubles | Constant Returns to Scale
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double all inputs and output less than doubles cost per unit gets larger | Decreasing Returns to Scale
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Diminishing marginal returns is a long run or short run concept | Short Run Concept
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Decreasing returns to scale is a long or short run concept | Long Run Concept
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Smallest output at which long run average cost reaches its lowest level | Minimum Efficient Scale
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Price X Quantity = | Total Revenue (TR)
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Cost X Quantity = | Total Cost (TC)
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TR - TC = | Total Profit (TP)
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The break even point is the... | Lowest Possible ATC
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The shut down point is the... | Minimum AVC
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When MC increases the MP... | Decreases
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Marginal Benefit (MB) is... | The Market Price
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Profit maximizing output is when... | MC = MB
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Characteristics of perfect competition are... | many buyers and sellers
no restrictions to entry and exit from the market
identical products
no firm has an advantage over another
well informed buyers and sellers
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