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Microeconomics FPC1

Question	Answer
Benefit	The benefit of something is the gain or pleasure that it brings.
Correlation	The tendency for the values of two variables to move together in a predictable and related way.
Economic model	A description of some feature of the economic world that includes only those features assumed necessary to explain the observed facts.
Economics	The social science that studies the choices that individuals, businesses, government, and entire societies make as they cope with scarcity, the incentives that influence those choices, and the arrangements that coordinate them.
Goods and services	The objects (goods) and the actions (services) that people value and produce to satisfy human wants.
Incentive	A reward or a penalty—a “carrot” or a “stick”—that encourages or discourages an action.
Macroeconomics	The study of the aggregate (or total) effects on the national economy and the global economy of the choices that individuals, businesses, and governments make.
Margin	A choice on the margin is a choice that is made by comparing all the relevant alternatives systematically and incrementally.
Marginal benefit	The benefit that arises from a one-unit increase in an activity. The marginal benefit of something is measured by what you are willing to give up to get one additional unit of it.
Marginal cost	The opty cost that arises from a 1unit increase in activityThe marginal cost of something is what you must give up to get one adt'l unit of itThe marginal cost of producing a good is the change in total cost that results from a1unit increase in output.
Microeconomics	The study of the choices that individuals and businesses make and the way these choices interact and are influenced by governments.
Opportunity cost	The opportunity cost of something is the best thing you must give up to get it.
Rational choice	A choice that uses the available resources to best achieve the objective of the person making the choice.
Scarcity	The condition that arises because wants exceed the ability of resources to satisfy them.
Self-interest	The choices that are best for the individual who makes them.
Social interest	The choices that are best for society as a whole.
Tradeoff	An exchange—giving up one thing to get something else.
Capital	Tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services.
Capital goods	Goods that are bought by businesses to increase their productive resources.
Circular flow model	A model of the economy that shows the circular flow of expenditures and incomes that result from decision makers’ choices and the way those choices interact to determine what, how, and for whom goods and services are produced.
Consumption goods and services	Goods and services that are bought by individuals and used to provide personal enjoyment and contribute to a person’s quality of life.
Entrepreneurship	The human resource that organizes labor, land, and capital to produce goods and services.
Export goods and services	Goods and services that are produced in one country and sold in other countries.
Factor markets	Markets in which the services of factors of production are bought and sold.
Factors of production	The productive resources that are used to produce goods and services—land, labor, capital, and entrepreneurship.
Firms	The institutions that organize the production of goods and services.
Goods markets	Markets in which goods and services are bought and sold.
Government goods and services	Goods and services that are bought by governments.
Households	Individuals or groups of people living together.
Human capital	The knowledge and skill that people obtain from education, on-the-job training, and work experience.
Interest	Income paid for the use of capital.
Labor	The work time and work effort that people devote to producing goods and services.
Land	The “gifts of nature,” or natural resources, that we use to produce goods and services.
Market	Any arrangement that brings buyers and sellers together and enables them to get information and do business with each other.
National debt	The total amount that the federal government has borrowed to make expenditures that exceed tax revenue—to run a government budget deficit.
Profit	Income earned by an entrepreneur for running a business.
Rent	Income paid for the use of land
Wages	Income paid for the services of labor.
Absolute advantage	When one person (or nation) is more productive than another—needs fewer inputs or takes less time to produce a good or perform a production task.
Comparative advantage	The ability of a person to perform an activity or produce a good or service at a lower opportunity cost than anyone else.
Economic growth	The sustained expansion of production possibilities.
Production efficiency	A situation in which the economy is getting all that it can from its resources and cannot produce more of one good or service without producing less of something else.
Production possibilities frontier	The boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.
Change in demand	A change in the quantity that people plan to buy when any influence on buying plans other than the price of the good changes.
Change in the quantity demanded	A change in the quantity of a good that people plan to buy that results from a change in the price of the good with all other influences on buying plans remaining the same.
Change in the quantity supplied	A change in the quantity of a good that suppliers plan to sell that results from a change in the price of the good with all other influences on selling plans remaining the same.
Change in supply	A change in the quantity that suppliers plan to sell when any influence on selling plans other than the price of the good changes.
Complement	A good that is consumed with another good.
Complement in production	A good that is produced along with another good.
Demand	The relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same.
Demand curve	A graph of the relationship between the quantity demanded of a good and its price when all the other influences on buying plans remain the same.
Demand schedule	A list of the quantities demanded at each different price when all the other influences on buying plans remain the same.
Equilibrium price	The price at which the quantity demanded equals the quantity supplied.
Equilibrium quantity	The quantity bought and sold at the equilibrium price.
Inferior good	A good for which demand decreases when income increases and demand increases when income decreases.
Law of demand	Other things remaining the same, if the price of a good rises, the quantity demanded of that good decreases; and if the price of a good falls, the quantity demanded of that good increases.
Law of market forces	When there is a surplus, the price falls; when there is a shortage, the price rises.
Law of supply	Other things remaining the same, if the price of a good rises, the quantity supplied of that good increases; and if the price of a good falls, the quantity supplied of that good decreases.
Market demand	The sum of the demands of all the buyers in a market.
Market equilibrium	When the quantity demanded equals the quantity supplied—buyers’ and sellers’ plans are in balance.
Market supply	The sum of the supplies of all the sellers in the market.
Normal good	A good for which demand increases when income increases; demand decreases when income decreases.
Quantity demanded	The amount of any good, service, or resource that people are willing and able to buy during a specified period at a specified price.
Quantity supplied	The amount of any good, service, or resource that people are willing and able to sell during a specified period at a specified price.
Substitute	A good that can be consumed in place of another good.
Supply	The relationship between the quantity supplied and the price of a good when all other influences on selling plans remain the same.
Supply curve	A graph of the relationship between the quantity supplied of a good and its price when all the other influences on selling plans remain the same.
Supply schedule	A list of the quantities supplied at each different price when all the other influences on selling plans remain the same.
Cross elasticity of demand	A measure of the responsiveness of the demand for a good to a change in the price of a substitute or complement when other things remain the same.
Elastic demand	When the percentage change in the quantity demanded exceeds the percentage change in price.
Elastic supply	When the percentage change in the quantity supplied exceeds the percentage change in price.
Income elasticity of demand	A measure of the responsiveness of the demand for a good to a change in income when other things remain the same.
Inelastic demand	When the percentage change in the quantity demanded is less than the percentage change in price.
Inelastic supply	When the percentage change in the quantity supplied is less than the percentage change in price.
Perfectly elastic demand	When the quantity demanded changes by a very large percentage in response to an almost zero percentage change in price.
Perfectly elastic supply	When the quantity supplied changes by a very large percentage in response to an almost zero percentage change in price.
Perfectly inelastic demand	When the percentage change in the quantity demanded is zero for any percentage change in the price.
Perfectly inelastic supply	When the percentage change in the quantity supplied is zero for any percentage change in the price.
Price elasticity of demand	A measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers’ plans remain the same.
Price elasticity of supply	A measure of the responsiveness of the quantity supplied of a good changes to a change in its price when all other influences on sellers’ plans remain the same.
Total revenue	The amount spent on a good and received by its seller and equals the price of the good multiplied by the quantity of the good sold.
Total revenue test	A method of estimating the price elasticity of demand by observing the change in total revenue that results from a price change (with all other influences on the quantity sold remaining unchanged).
Unit elastic demand	When the percentage change in the quantity demanded equals the percentage change in price.
Unit elastic supply	When the percentage change in the quantity supplied equals the percentage change in price.
Allocative efficiency	A situation in which the quantities of goods and services produced are those that people value most highly—it is not possible to produce more of a good or service without giving up some of another good that people value more highly.
Big tradeoff	A tradeoff between efficiency and fairness that recognizes the cost of making income transfers.
Command system	A system that allocates resources by the order of someone in authority.
Consumer surplus	The marginal benefit from a good or service in excess of the price paid for it, summed over the quantity consumed.
Deadweight loss	The decrease in total surplus that results from an inefficient underproduction or overproduction.
Market failure	A situation in which the market delivers an inefficient outcome.
Producer surplus	The price of a good in excess of the marginal cost of producing it, summed over the quantity produced.
Total surplus	The sum of consumer surplus and producer surplus.
Transactions costs	The opportunity costs of making trades in a market or conducting a transaction.
Black market	An illegal market that operates alongside a government- regulated market.
Minimum wage law	A government regulation that makes hiring labor services for less than a specified wage illegal.
Price cap	A government regulation that places an upper limit on the price at which a particular good, service, or factor of production may be traded.
Price ceiling	A government regulation that places an upper limit on the price at which a particular good, service, or factor of production may be traded.
Price floor	A government regulation that places a lower limit on the price at which a particular good, service, or factor of production may be traded.
Price support	A price floor in an agricultural market maintained by a government guarantee to buy any surplus output at that price.
Rent ceiling	A regulation that makes it illegal to charge more than a specified rent for housing.
Search activity	The time spent looking for someone with whom to do business.
Subsidy	A payment by the government to a producer to cover part of the cost of production.
Coase theorem	The proposition that if property rights exist, only a small number of parties are involved, and transactions costs are low, then private transactions are efficient and the outcome is not affected by who is assigned the property right.
Externality	A cost or a benefit that arises from production and that falls on someone other than the producer; or a cost or benefit that arises from consumption and that falls on someone other than the consumer.
Marginal private benefit	The benefit from an additional unit of a good or service that the consumer of that good or service receives.
Marginal external benefit	The benefit from an additional unit of a good or service that people other than the consumer of the good or service enjoy.
Marginal external cost	The cost of producing an additional unit of a good or service that falls on people other than the producer.
Marginal private cost	The cost of producing an additional unit of a good or service that is borne by the producer of that good or service.
Marginal social benefit	The marginal benefit enjoyed by society—by the consumer of a good or service and by everyone else who benefits from it. It is the sum of marginal private benefit and marginal external benefit.
Marginal social cost	The marginal cost incurred by the entire society—by the producer and by everyone else on whom the cost falls. It is the sum of marginal private cost and marginal external cost.
Negative externality	A production or consumption activity that creates an external cost.
Positive externality	A production or consumption activity that creates an external benefit.
Property rights	Legally established titles to the ownership, use, and disposal of factors of production and goods and services that are enforceable in the courts.
Public provision	The production of a good or service by a public authority that receives most of its revenue from the government.
Voucher	A token that the government provides to households, which they can use to buy specified goods or services.
Common resource	A resource that can be used only once, but no one can be prevented from using what is available.
Excludable	A good, service, or resource is excludable if it is possible to prevent someone from enjoying its benefits.
Free rider	A person who enjoys the benefits of a good or service without paying for it.
Individual transferable quota (ITQ)	A production limit that is assigned to an individual, who is free to transfer (sell) the quota to someone else.
Nonexcludable	A good, service, or resource is nonexcludable if it is impossible (or extremely costly) to prevent someone from enjoying its benefits.
Nonrival	A good, service, or resource is nonrival if its use by one person does not decrease the quantity available to someone else.
Principle of minimum differentiation	The tendency for competitors to make themselves identical to appeal to the maximum number of clients or voters.
Private good	A good or service that can be consumed by only one person at a time and only by the person who has bought it or owns it.
Public good	A good or service that can be consumed simultaneously by everyone and from which no one can be excluded.
Rational ignorance	The decision not to acquire information because the marginal cost of doing so exceeds the marginal benefit.
Rival	A good, service, or resource is rival if its use by one person decreases the quantity available to someone else.
Tragedy of the commons	The overuse of a common resource that arises when its users have no incentive to conserve it and use it sustainably.
Budget line	A line that describes the limits to consumption possibilities and that depends on a consumer’s budget and the prices of goods and services.
Diminishing marginal utility	The general tendency for marginal utility to decrease as the quantity of a good consumed increases.
Marginal utility	The change in total utility that results from a one-unit increase in the quantity of a good consumed.
Marginal utility per dollar	The marginal utility from a good relative to the price paid for the good.
Relative price	The price of one good in terms of another good—an opportunity cost. It equals the price of one good divided by the price of another good.
Total utility	The total benefit that a person gets from the consumption of a good or service. Total utility generally increases as the quantity consumed of a good increases.
Utility	The benefit or satisfaction that a person gets from the consumption of a good or service.
Utility-maximizing rule	The rule that leads to the greatest total utility from all the goods and services consumed. The rule is: 1. Allocate the entire available budget. 2. Make the marginal utility per dollar equal for all goods.
Average fixed cost	Total fixed cost per unit of output.
Average product	Total product divided by the quantity of a factor of production. The average product of labor is total product divided by the quantity of labor employed.
Average total cost	Total cost per unit of output, which equals average fixed cost plus average variable cost.
Average variable cost	Total variable cost per unit of output.
Constant returns to scale	Features of a firm’s technology that keep average total cost constant as output increases.
Decreasing marginal returns	When the marginal product of an additional worker is less than the marginal product of the previous worker.
Diseconomies of scale	Features of a firm’s technology that make average total cost rise as output increases.
Economic depreciation	An opportunity cost of a firm using capital that it owns—measured as the change in the market value of capital over a given period.
Economic profit	A firm’s total revenue minus total cost.
Economies of scale	Features of a firm’s technology that make average total cost fall as output increases.
Explicit cost	A cost paid in money.
Implicit cost	An opportunity cost incurred by a firm when it uses a factor of production for which it does not make a direct money payment.
Increasing marginal returns	When the marginal product of an additional worker exceeds the marginal product of the previous worker.
Law of decreasing returns	As a firm uses more of a variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases.
Long run	The time frame in which the quantities of all resources can be varied.
Long-run average cost curve	A curve that shows the lowest average total cost at which it is possible to produce each output when the firm has had sufficient time to change both its plant size and labor employed.
Marginal product	The change in total product that results from a one-unit increase in the quantity of labor employed.
Normal profit	The return to entrepreneurship. Normal profit is part of a firm’s opportunity cost because it is the cost of not running another firm.
Short run	The time frame in which the quantities of some resources are fixed. In the short run, a firm can usually change the quantity of labor it uses but not its technology and quantity of capital.
Total cost	The cost of all the factors of production used by a firm.
Total fixed cost	The cost of the firm’s fixed factors of production—the cost of land, capital, and entrepreneurship.
Total product	The total quantity of a good produced in a given period.
Total variable cost	The cost of the firm’s variable factor of production—the cost of labor.
Marginal revenue	The change in total revenue that results from a one-unit increase in the quantity sold.
Monopolistic competition	A market in which a large number of firms compete by making similar but slightly different products.
Monopoly	A market in which one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms.
Oligopoly	A market in which a small number of interdependent firms compete.
Perfect competition	A market in which there are many firms, each selling an identical product; many buyers; no barriers to the entry of new firms into the industry; no advantage to established firms; and buyers and sellers are well informed about prices.
Price taker	A firm that cannot influence the price of the good or service that it produces.
Shutdown point	The point at which price equals minimum average variable cost and the quantity produced is that at which average variable cost is at its minimum.
Efficient scale	The quantity at which average total cost is a minimum.
Excess capacity	The amount by which the efficient scale exceeds the quantity that the firm produces.
Four-firm concentration ratio	The percentage of the total revenue in an industry accounted for by the four largest firms in the industry.
Herfindahl-Hirschman Index	The square of the percentage market share of each firm summed over the 50 largest firms (or summed over all the firms if there are fewer than 50) in a market.
Markup	The amount by which price exceeds marginal cost.
Product differentiation	Making a product that is slightly different from the products of competing firms.
Signal	An action taken by an informed person (or firm) to send a message to less-informed people.
Average cost pricing rule	A rule that sets price equal to average total cost to enable a regulated firm to avoid economic loss.
Barrier to entry	Any constraint that protects a firm from competitors.
Capture theory	The theory that the regulation serves the self-interest of the producer and results in maximum profit, underproduction, and deadweight loss.
Deregulation	The process of removing the regulation of prices, quantities, entry, and other aspects of economic activity in a firm or industry.
Earnings sharing regulation	A regulation that requires firms to make refunds to customers when profits rise above a target level.
Legal monopoly	A market in which competition and entry are restricted by the granting of a public franchise, government license, patent, or copyright.
Marginal cost pricing rule	A rule that sets price equal to marginal cost to achieve an efficient output.
Natural monopoly	A monopoly that arises because one firm can meet the entire market demand at a lower average total cost than two or more firms could.
Perfect price discrimination	Price discrimination that extracts the entire consumer surplus by charging the highest price that consumers are willing to pay for each unit.
Price cap regulation	A rule that specifies the highest price that a firm is permitted to set—a price ceiling.
Price-discriminating monopoly	A monopoly that sells different units of a good or service for different prices not related to cost differences.
Rate of return regulation	A regulation that sets the price at a level that enables a firm to earn a specified target rate of return on its capital.
Regulation	Rules administered by a government agency to influence prices, quantities, entry, and other aspects of economic activity in a firm or industry.
Rent seeking	Lobbying and other political activity that aims to capture the gains from trade. The act of obtaining special treatment by the government to create economic profit or to divert consumer surplus or producer surplus away from others.
Single-price monopoly	A monopoly that must sell each unit of its output for the same price to all its customers.
Social interest theory	The theory that regulation achieves an efficient allocation of resources.
Antitrust law	A law that regulates oligopolies and prohibits them from becoming monopolies or behaving like monopolies.
Cartel	A group of firms acting together to limit output, raise price, and increase economic profit.
Duopoly	A market with only two firms.
Game theory	The tool that economists use to analyze strategic behavior—behavior that recognizes mutual interdependence and takes account of the expected behavior of others.
Nash equilibrium	An equilibrium in which each player takes the best possible action given the action of the other player.
Payoff matrix	A table that shows the payoffs for each player for every possible combination of actions by the players.
Predatory pricing	Setting a low price to drive competitors out of business with the intention of setting a monopoly price when the competition has gone.
Prisoners’ dilemma	A game between two prisoners that shows why it is hard to cooperate, even when it would be beneficial to both players to do so.
Resale price maintenance	An agreement between a manufacturer and a distributor on the price at which a product will be resold.
Strategies	All the possible actions of each player in a game.
Tying arrangement	An agreement to sell one product only if the buyer agrees to buy another, different product.
Which economic question depends on the incomes that people earn and the prices they pay for goods and services?	For whom?
Computers and insurance coverage produced in the United States and sold to people in other nations are categorized as	U.S. exports of goods and services.
Economists classify energy and water as part of which factor of production?	land
A circular flow model shows the interrelationship between the ________ market and the ________ markets.	goods; factor
Scarcity results from the fact that	people's wants exceed the resources available to satisfy them.
All economic questions and problems arise from	a society's wants exceeding what its scarce resources can produce.
Which of the following is NOT considered one of the factors of production?	technology
If Wendy can produce more of all goods than Tommy in an hour, then	Wendy has an absolute advantage in all goods.
Which of the following are key ideas in the economic way of thinking?	People act rationally when making choices., Choices involve trade-offs.
A change in the demand for apples could result from any of the following EXCEPT	a change in the price of an apple.
If the demand for used cars decreases after the price of a new car falls, used cars and new cars are	substitute goods.
Other things remaining the same, the quantity of a good or service demanded will increase if the price of the good or service	falls.
Which of the following increases the supply of a product?	lower prices for the resources used to produce the product
Which of the following increases the supply of gasoline?	a decrease in the price of a resource used to produce gasoline, such as crude oil
Changes in which of the following factors do NOT shift the demand curve?	the price of the good
Assume a market is in equilibrium. There is an increase in supply, but no change in demand As a result the equilibrium price ________, and the equilibrium quantity ________.	falls; increases
The phrase "a change in demand" most directly implies a	shift of the demand curve.
Assume a competitive market is in equilibrium. There is an increase in demand, but no change in supply. As a result the equilibrium price ________, and the equilibrium quantity ________.	rises; increases
Which of the following would increase the equilibrium price of bananas?	a hurricane wiped out the banana crop in South America., medical research that demonstrates the cancer fighting ability of bananas.
The data in the table above give two points on the demand curve for pizza. Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in price?	10.5 percent
The data in the table above give two points on the demand curve for pizza. Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in the quantity demanded?	22.2 percent
The data in the table above give two points on the demand curve for pizza. Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the price elasticity of demand?	2.1
In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $8 to $7 is equal to	2.50
If a firm supplies 200 units at a price of $50 and 100 units at a price of $40, using the midpoint method, what is the price elasticity of supply?	3.00
Consumer surplus is equal to	marginal benefit minus price summed over the quantity consumed.
In the summer of 2008, the price of gasoline increased greatly. If the demand curve for gasoline did not shift, which of the following occurred?	Consumer surplus decreased.
Mary is willing to pay $50 for a Christmas tree, John is willing to pay $45 and Jeff is willing to pay $40. The price of a tree is $40. The total consumer surplus for Mary, John and Jeff taken together is	$15.
The figure above shows Diane's demand curve for soda. The price of a soda is $1.00. Diane's consumer surplus from her 10th soda is	$0.50.
Producer surplus is the ________ summed over the quantity produced.	price of the good minus the marginal cost of producing it
Producer surplus	increases if market price rises and the supply curve does not shift.
Which of the following influence the price elasticity of demand?	availability of substitutes, proportion of income spent on good
The production possibilities frontier illustrates the	maximum combinations of goods and services that can be produced.
The production possibilities frontier is the	boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.
If a society moves from a period of time with significant unemployment to a time with full employment, its production possibilities frontier will	not shift because the society moves from a point inside the frontier to a point on the frontier
When production efficiency does NOT occur,	an economy is producing at a point within its PPF. there are unemployed resources., & allocative efficiency can not occur.
If there is unemployment in an economy, then the	economy is producing at a point inside the production possibilities frontier.
A country produces only apples and bananas. Moving from point A to point B along its production possibilities frontier, 5 apples are forgone and 4 bananas are gained. What is the opportunity cost of a banana?	5/4 of an apple
When drawing a production possibilities frontier, which of the following is held constant?	the available factors of production and the state of technology
When an economy is producing at a point on its PPF	producing a different output combination will require a trade-off., technology is being used efficiently.
The opportunity cost of producing one more unit of a good is calculated by dividing the	decrease in the quantity of the other good by the increase in the quantity of the good whose opportunity cost we're calculating.
If a price ceiling is set above the equilibrium price, then	there will be neither a shortage nor a surplus of the good.
A price ceiling in the market for gasoline that is below the equilibrium price will lead to	the quantity demanded of gasoline exceeding the quantity supplied.
The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month then there is a	shortage equal to 150,000 town homes.
The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month, what is the maximum rent someone is willing to pay in the black market?	$1,300 per month
Rent controls	create a deadweight loss & benefit people who live in rent controlled apartments.
A price floor is a price	below which a seller cannot legally sell.
The graph shows the labor market for fast-food workers in Sioux City. If the government sets a minimum wage of $7 an hour, then the labor market is ________ and marginal benefit ________ marginal cost.	inefficient; is greater than
When a price support is set below the equilibrium price, producers ________ the quantity supplied and consumers ________ the quantity demanded.	do not change; do not change
An effective price support ________ producers and ________ a deadweight loss.	benefits; creates
Identify the cases where the market output is efficient.	The market produces the quantity where supply and demand are equal., The marginal cost to producers is equal to the marginal benefit of the good to consumers.
Externalities	can be either benefits or costs.
For a product with an external cost, the supply curve	is the same as the marginal private cost curve.
For a firm, its labor costs are	a private cost.
A marginal external cost of a product is equal to	the cost someone other than the producer incurs when another unit is produced.
Which of the following equations is correct?	MSC = MC + marginal external cost
If the marginal social cost of generating a kilowatt of electricity is $0.10 and the marginal private cost is $0.08, what is the marginal external cost?	$0.02
When a person receives a flu vaccination, the ________ is the additional benefit the person receives from getting the shot.	marginal private benefit
If the marginal private benefit of attending college for Shelly is $40,000 and the marginal external benefit is $15,000, she will attend college if the cost of attendance is no more than	$40,000.
If a government action is designed to achieve efficiency, then the action must have the market produce the amount of output so that the	marginal social cost equals the marginal social benefit.
If all education in the United States were provided by private, tuition-charging schools,	too little education would be consumed.
A good or service with a positive externality is one which	the marginal social benefit exceeds the marginal private benefit., there will be underproduction of the good.
To determine the efficient quantity of a public good to supply,	marginal benefit and marginal cost are equated, the same as is done to determine the efficient quantity of a private good.
Suppose the marginal cost of the fourth unit of a public good is $20. If Mark and Judy are the only members of society, and they are willing to pay $10 and $11, respectively, for the fourth unit of the good, then the efficient quantity is	4 or more units.
If tuition at a college is $30,000 and the external benefit of graduating from this college is $10,000, then	in the absence of any govt intervention, the number of students graduating is less than the efficient number. the govt could increase the number of graduates by giving the college a $10,000 subsidy per student, giving the students $10,000 vouchers.
The use of vouchers for education	increases the demand for education and increases the equilibrium quantity.
A marginal external cost of a product is equal to	the cost someone other than the producer incurs when another unit is produced.
The cost of producing an additional unit of a good or service that is borne by the producer of that good or service	is the marginal private cost.
An example of a common resource is	a tuna in the ocean.
Fish in the ocean are an example of ________ because they are ________.	common resource; rival and nonexcludable
Which of the following characteristics are use by economists to describe a public good	its use by one person does not decrease the quantity available for someone else., E) it is not possible to prevent someone from enjoying its benefits.
Samantha has a budget of $40 and buys beef jerky and fried pork rinds. Her budget does not change and the price of both beef jerky and fried pork rinds increases. As a result,	Samantha's consumption possibilities have decreased. Samantha's budget line shifts inward
Nadir and Nina consume the same goods. If Nadir has more income than Nina, then Nina's budget line will	lie to the left of Nadir's budget line.
The fact that diamonds have a much higher price than water	does not violate the rules of utility maximization because water's marginal utility is low.
The solution to the paradox of value is found by looking at which of the following?	the difference between marginal utility and total utility
Billy has a $20 budget to spend on yogurt and cereal.Yogurt cost $2 each and cereal costs $4 each.Suppose that the quantity of yogurt is on the vertical axis and the quantity of cereal is on the horizontal axis. The budget line's vertical intercept equals	10 yogurts
To resolve the paradox of value, you must	distinguish between marginal and total utility.
One reason why the price of diamonds is so high is because the	marginal utility of diamonds is high.
Why does the paradox of value between diamonds and water arise?	because water has a low price and a low marginal utility, while diamonds have a high price and a high marginal utility
Related to the paradox of value, which of the following statements is correct?	The marginal utility of water is small but the total utility is enormous.
The paradox of value with respect to water and diamonds can be explained using consumer surplus because	water is cheap but provides a large consumer surplus, while diamonds are expensive with a small consumer surplus.
The paradox of value refers to the	fact that water is vital but cheap while diamonds are relatively useless but expensive.
________ in consumer surplus occurs when the price of a good _______	An increase; decreases and consumers can buy more of the good at the lower price
A budget line	shifts outward with no change in its slope if the budget increases and prices don't change., has a slope equal to the opportunity cost
The long run average cost curve	shows the lowest average cost facing a firm as it increases output changing both its plant and labor force.
The long-run average cost curve is U-shaped because of which of the following?	economies and diseconomies of scale
Which of the following is an explicit cost of production?	wages paid to workers, the electric bill, purchases of raw material
Which of the following are correct statements about implicit and explicit costs?	Normal profit is an implicit cost. Wages are an explicit cost.
A normal profit is defined as	the return to entrepreneurship.
Jennifer owns a pig farm near Salina, Kansas. Last year she earned $39,000 in total revenue while incurring $38,000 in explicit costs. She could have earned $27,000 as a teacher in Salina. These are all her revenue and costs. Therefore Jennifer earned an	accounting profit of $1,000 but incurred an economic loss of $26,000.
Afirm's total rev is $1,000. Afirm has explicit costs of $750. There is also $50,000 of forgone wages by the owner, $10 of forgone interest by the owner, $3 worth of economic deprec, and $20 worth of normal profit. What is the firm's economic profit?	$167,000
he quit hi $150 job. His revenues for the1styear are $500He paid $90 in rent for the dental office, $60 for his office manager's salary, $24 for the dental hygienist, $150 for ins, and $6 for misc costs. The normal profit from running his business is $20	His explicit costs are $330, His implicit costs are $170, His economic profit is zero.
Economies of scale are a result of ________.	specialization of labor, specialization of capital
For a syrup producer in central Vermont, profit is maximized at the level of output for which total	revenue exceeds total cost by the largest amount.
Marginal revenue is	the change in total revenue from a one-unit increase in the quantity sold.
A firm maximizes its profit by producing the amount of output such that	marginal revenue equals marginal cost.
The long-run average cost curve is U-shaped because of which of the following?	economies and diseconomies of scale
A perfectly competitive firm maximizes its profit by producing at the point where	marginal revenue is equal to marginal cost.
If it does not shut down, a perfectly competitive firm produces where marginal cost is equal to the marginal revenue	always to maximize its profit.
The above figure illustrates a perfectly competitive firm. If the market price is $40 a unit, to maximize its profit (or minimize its loss) the firm should	produce 40 units.
The above figure illustrates a perfectly competitive firm. If the market price is $10 a unit, to maximize its profit (or minimize its loss) the firm should	shut down.
Which of the following statements will NOT be true for the perfectly competitive firm in the long-run?	The firm's average fixed costs are declining., The firm's marginal costs exceed their average costs and the profit maximizing level of output.
For a single-price monopoly, price is	greater than marginal revenue.
Which of the following must a firm be able to do to successfully price discriminate?	divide buyers into different groups according to their willingness to pay, prevent resale of the good or service, identify into which group (high willingness to pay or low willingness to pay) a buyer falls
To maximize its profit, a perfectly competitive firm produces so that ________ and a single-price monopoly produces so that ________.	MR = MC; MR = MC
In contrast to competitive firms, single-price monopolies	can make an economic profit indefinitely.
Once a monopoly has determined how much it produces, it will charge a price that	is determined by its demand curve.
We define a monopoly as a market with	one supplier with barriers to entry.
Which of the following are characteristics of monopoly?	firm produces a unique product, there are barriers to entry in the market
Use the figure above to answer this question. Mary is the only veterinarian in a small town. To maximize her profit, Mary will choose to treat ________ animals per hour and charge ________ per customer in order to ________.	4; $50; maximize profit
If the market was a monopoly, the quantity would be ________ and the price would be ________; if the market tis perfectly competitive, the quantity would be ________ and the price would be ________.	Q1; P2; Q2; P1
The figure above shows that monopoly is ________ because it produces a level of output at which ________.	inefficient; marginal benefit exceeds marginal cost
Which of the following describes a barrier to entry?	anything that protects a firm from the arrival of new competitors
A price-discriminating monopoly is a monopoly that	sells different units of a good or service at different prices.
Which of the following is an example of price discrimination?	Albert pays 25 percent less on prescription drugs because he is a senior citizen.
Monopolistic competition is a market structure in which	a large number of firms compete.
Firms in monopolistic competition determine the profit-maximizing level of output by producing	where marginal revenue equals marginal cost.
Advertising is a ________ cost that is incurred by ________.	fixed; monopolistically competitive firms
How do advertising and other selling costs affect a firm?	They shift the average total cost curve upward.
The players in a game theory situation often DO NOT act in their joint interest because of which of the following?	It is not in each player's self-interest to cooperate.
What is the conclusion in the prisoners' dilemma?	Two prisoners acting in their own best interest harm their joint interest.
The above figure shows a motel engaged in monopolistic competition with other motels. The equilibrium price at this motel is ________ per room.	$50
2firms in a duopoly must decide whetherto ofer consumers a coupon for their good.The payof matrix represents the daily profit avail to the firms under the difnt coupon strategies.What quadrant represents the equil that result if the firm act independently	C
Based on the payoff matrix above, what quadrant represents the outcome if the two firms are able to successfully collude?	B
Which of the following statements are true of Monopolistic Competition?	firms receive zero economic profits in the long-run. market prices are higher and output is lower than under perfect competition.
In monopolistic competition, each firm supplies a small part of the market. This occurs because	there are a large number of firms.
If a monopolistically competitive seller's marginal cost is $3.56, the firm will decrease its output if	its marginal revenue is less than $3.56.
In which of the following ways do advertising and other selling costs affect a firm's cost curves?	Advertising expenditures increase total fixed costs. Selling costs increase total fixed costs. Advertising and other selling costs per unit of output decrease as output increases.
A firm faces a small number of competitors. This firm is competing in	an oligopoly.
If an industry has an HHI of 2,500, the market structure is that of	an oligopoly.
The fact that firms in oligopoly are interdependent means that	one firm's profits are affected by other firms' actions.

Created by: rebej07

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