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Micro final

See above

QuestionAnswer
decrease in both the price and the quantity of a product Decrease in demand
We can predict that price will ... Rise if demand increases or supply decreases (depends on context)
inferior good, an increase in money income Decreases demand for the inferior good
market system automatically corrects Disequilibrium through price adjustments
A market ... Is a mechanism that brings buyers and sellers together
increase in the quantity supplied Caused by an increase in price
A fall in the price of milk Increases quantity demanded of milk
to produce efficient outcomes Competitive markets tend to produce efficient outcomes
Consumer surplus Difference between what consumers are willing to pay and what they actually pay
Market failures Occur when markets fail to allocate resources efficiently
elasticity of demand Measures responsiveness of quantity demanded to a price change
a commodity that is elastic Demand is highly responsive to price changes
coefficient of price elasticity Greater than 1 indicates elastic demand
will be more elastic Demand when many substitutes are available
If the price of pizza increases Demand for substitutes (e.g., hamburgers) increases
diminishing marginal utility Each additional unit provides less additional satisfaction
the substitution effect Consumers buy relatively cheaper goods when price changes
is downsloping because Diminishing marginal utility and substitution effects
an implicit cost Opportunity cost of self-owned resources
What do ... have in common They are opportunity costs (common exam question)
total cost Fixed cost + variable cost
Marginal cost Change in total cost from producing one more unit
increases a firm's labor productivity More capital, training, or technology
average total cost curve Typically U-shaped
Economies of scale Long-run average cost falls as output rises
characteristic of a purely competitive Many buyers and sellers; price taker
A perfectly elastic demand Horizontal demand curve
a purely competitive seller will shut down If price falls below AVC in the short run
following is true concerning purely competitive Firms are price takers and earn normal profit in the long run
MR = MC Profit-maximizing rule
long-run equilibrium P = MR = MC and firms earn normal profit
A purely monopolistic firm Faces a downward-sloping demand curve
economic profits Attract entry in competitive markets
To maximize profit Produce where MR = MC
Which of the following statements ... Need full question
Price discrimination is Charging different prices to different buyers for the same product
will become more elastic As more time passes or substitutes become available
firm's marginal revenue curve Lies below its demand curve under monopoly
Monopolistically competitive firms Sell differentiated products and face many competitors
by producing at the point where MR = MC
firms leave a monopolistically competitive industry When firms incur economic losses
In long-run equilibrium Monopolistic competitors earn zero economic profit
The economic inefficiencies Price exceeds marginal cost
The mutual interdependence Characteristic of oligopoly
significant economies of scale Often lead to natural monopoly
how people (or firms) behave Economics studies choices under scarcity
derived demand Demand for a resource depends on demand for the final product
Marginal revenue product Additional revenue from hiring one more unit of a resource
should hire additional labor as long as MRP ≥ wage rate (MRC)
employs resources to the point MRP = MRC
Created by: user-2044476
 

 



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