Behavioral Economics Quiz

Explicit costs = Out-of-pocket costs for a firm Implicit costs = Opportunity cost of resources owned by a firm Total cost = Sum of fixed and variable costs Marginal cost = Additional cost of producing one more unit

Short run = Period during which at least one input is fixed Long run = Period during which all inputs are variable Production function = Equation showing output based on input amounts Production technologies = Methods of combining inputs to produce output

LRAC curve = Lowest possible average cost of production SRAC curve = Average total cost curve in the short term Marginal product = Change in output from employing more labor Average cost = Total cost divided by total output

<p>Private enterprise = Ownership of businesses by private individuals Revenue = Income from selling a firm's product Scale economies = Long-run average cost decreases with output Production = Combining inputs to produce outputs</p> Signup and view all the answers

<p>Opportunity cost = Next best alternative given up Economies of scale = Cost advantages due to increased output Fixed costs = Costs that do not change with production level Variable costs = Costs that vary with production level</p> Signup and view all the answers

<p>Input = Resources used in production Output = Products resulting from production Cost = Value of resources used for production Profit = Financial gain from production after costs</p> Signup and view all the answers

<p>Marginal analysis = Decision-making process for additional units Diminishing returns = Decreasing output from adding more inputs Competitive market = Market with many buyers and sellers Monopoly = Market with a single seller</p> Signup and view all the answers

<p>Average fixed cost = Fixed costs divided by quantity produced Average variable cost = Variable costs divided by quantity produced Total revenue = Price multiplied by quantity sold Short-run supply curve = Relationship between price and quantity supplied in the short run</p> Signup and view all the answers

<p>Behavioral economics = Integrates psychology to understand decision-making Budget constraint = Shows combinations of two goods affordable within income Diminishing marginal utility = Consumption of additional units provides less additional utility Fungible = Units of a good can be mutually substituted with equal value</p> Signup and view all the answers

<p>Marginal utility = Additional utility from one more unit of consumption Total utility = Overall satisfaction derived from all consumption choices Marginal utility per dollar = Satisfaction gained per unit price of a good Income effect = Change in buying power due to price changes</p> Signup and view all the answers

<p>Average total cost = Total cost divided by quantity of output Constant returns to scale = Proportionate expansion of inputs does not change average cost Diseconomies of scale = Increasing long-run average cost with higher output Diminishing marginal productivity = Declining additional output from employing more labor</p> Signup and view all the answers

<p>Substitution effect = Consumers switch to cheaper alternatives when prices change Income effect = Reduced buying power due to higher prices Consumer equilibrium = Maximized satisfaction at given budget constraints Diminishing marginal utility = Less satisfaction from additional units over time</p> Signup and view all the answers

<p>Accounting profit = Total revenues minus explicit costs Economic profit = Total revenues minus total costs, explicit plus implicit Average profit = Profit divided by output quantity Average variable cost = Variable cost divided by quantity of output</p> Signup and view all the answers

<p>Explicit costs = Direct monetary expenses like wages and rent Implicit costs = Opportunity costs of alternative uses of resources Total utility = Satisfaction from consuming a combination of products Average total cost = Cost per unit produced in an output level</p> Signup and view all the answers

<p>Marginal utility theory = Focuses on the additional satisfaction from consumption Budget line = Graphical representation of affordable combinations of goods Utility maximization = Consumers strive for highest satisfaction within budget Price elasticity = Sensitivity of quantity demanded to price changes</p> Signup and view all the answers

<p>Increased price leads to less quantity demanded = Substitution effect Higher income reduces sensitivity to price increases = Income effect Additional workers yield lower output per worker = Diminishing marginal productivity Consumers satisfied at the optimum combination of goods = Consumer equilibrium</p> Signup and view all the answers

<p>Break Even Point = Level of output where marginal cost equals average cost Shutdown Point = Level of output where price falls below average variable cost Marginal Revenue = Additional revenue from selling one more unit Variable Cost = Cost of production that increases with quantity produced</p> Signup and view all the answers

<p>Perfect Competition = Many competitors selling identical products Barriers to Entry = Obstacles that prevent new competitors from entering a market Price Taker = Firm that must accept the prevailing market price Deregulation = Removal of government controls over prices and quantities</p> Signup and view all the answers

<p>Long-Run Equilibrium = Where all firms earn zero economic profits Variable Inputs = Factors of production easily adjusted in the short run Entry = Process of firms entering an industry due to profits Exit = Process of firms reducing production in response to losses</p> Signup and view all the answers

<p>Allocative Efficiency = Optimal quantity where marginal benefit equals marginal cost Copyright = Legal protection against unauthorized reproduction Intellectual Property = Rights related to creations of the mind Total Product = Synonym for a firm's output level</p> Signup and view all the answers

<p>Market Structure = Conditions affecting competition and product types Marginal Cost = Cost of producing one additional unit Economic Profits = Returns exceeding the normal profit level Production Costs = Expenses associated with manufacturing goods</p> Signup and view all the answers

<p>Exit = Shutting down production in response to losses Entry = New firms starting operations in a profitable industry Deregulation = Lifting restrictions on market competition Break Even = Achieving zero economic profit at a specific output level</p> Signup and view all the answers

<p>Barriers to Entry = Deterrents for potential market entrants Perfect Competition = Market with many firms selling identical goods Shutdown Point = Price below which firms must cease production Long-Run Equilibrium = Persisting market state with no economic profits</p> Signup and view all the answers

<p>Variable Inputs = Adjustable resources in the production process Fixed Inputs = Resources that remain constant in the short term Opportunity Costs = Cost of forgoing the next best alternative Sunk Costs = Costs that cannot be recovered once incurred</p> Signup and view all the answers

<p>Monopoly = Single firm produces all output in a market Oligopoly = Few large firms dominate the market Duopoly = Market structure with only two dominant firms Monopolistic competition = Many firms compete with differentiated products</p> Signup and view all the answers

<p>Predatory pricing = Temporary sharp price cuts to deter competition Cost-plus pricing = Setting price based on production cost plus markup Dynamic pricing = Adjusting prices based on market demand Price discrimination = Charging different prices to different consumers</p> Signup and view all the answers

<p>Cartel = Group of firms colluding to control market output Collusion = Firms acting together to raise prices Marginal profit = Profit from the sale of one additional unit Kinked demand curve = Demand curve reflecting price matching behavior</p> Signup and view all the answers

<p>Natural monopoly = Limited competition due to economies of scale Legal monopoly = Government-sanctioned prohibition against competition Artificial monopoly = Monopoly created through business practices Technological monopoly = Control over technology that creates barriers</p> Signup and view all the answers

<p>Perfect competition = Many firms with no market power Imperfect competition = Firms that exist between monopoly and perfect competition Differentiated products = Products perceived as distinct by consumers Homogeneous products = Products that are identical and interchangeable</p> Signup and view all the answers

<p>Game theory = Analyzing strategic decision-making among competitors Behavioral economics = Studying psychological influences on economic decisions Network effects = Value of a product increases as more people use it Information asymmetry = One party has more or better information than the other</p> Signup and view all the answers