Economics Concepts Quiz
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Questions and Answers

What effect does an increase in the number of suppliers in the microcomputer industry have?

  • The supply curve will shift leftward.
  • The number of microcomputers sold will fall.
  • The price of microcomputers will rise.
  • The supply curve will shift rightward. (correct)

What result does an increase in the price of milk have on the demand for cheese?

  • It causes a leftward shift in the supply curve for cheese.
  • It results in a rightward shift in the supply curve for milk.
  • It causes a leftward shift in the demand curve for cheese.
  • It results in a rightward shift in the demand curve for cheese. (correct)

What defines a dominant strategy in game theory?

  • The strategy that is beneficial regardless of competitors' actions. (correct)
  • The strategy that ensures successful outcomes for all players.
  • The strategy that provides the highest potential profit.
  • The strategy chosen based on the historical behavior of competitors.

If the demand for cheese increases due to higher milk prices, what happens to milk purchases?

<p>Milk purchases may decrease as consumers switch to cheese. (C)</p> Signup and view all the answers

In terms of market influence, what is the effect of more suppliers entering the market?

<p>It increases the total quantity supplied at every price level. (A)</p> Signup and view all the answers

What is a likely outcome when the supply curve shifts to the right?

<p>Prices will fall and more goods will be sold. (C)</p> Signup and view all the answers

What does it indicate if a player's strategy is independent of others' actions in game theory?

<p>The strategy is a dominant one. (D)</p> Signup and view all the answers

What might happen to the demand curve for complementary goods when the price of one good falls?

<p>The demand for complementary goods may rise, shifting their demand curves rightward. (B)</p> Signup and view all the answers

What characterizes a dominant strategy in game theory?

<p>It provides the best outcome irrespective of competitors' actions. (D)</p> Signup and view all the answers

How are isoquants represented when capital and labor are perfect substitutes?

<p>Straight lines that slope downwards. (A)</p> Signup and view all the answers

What is indicated by a production function that shows increasing returns to scale?

<p>Output increases by a greater percentage than the increase in input. (D)</p> Signup and view all the answers

At what point does a profit-maximizing monopolist determine the quantity produced?

<p>Where marginal revenue equals marginal cost. (C)</p> Signup and view all the answers

What can be said about the income elasticity of demand for inferior goods?

<p>It is negative. (C)</p> Signup and view all the answers

What happens to elasticity on a linear demand curve as price decreases?

<p>It becomes less elastic. (A)</p> Signup and view all the answers

Which statement accurately describes a monopoly's pricing power?

<p>They can set prices anywhere on the demand curve. (B)</p> Signup and view all the answers

What feature distinguishes decreasing returns to scale in production functions?

<p>Output increases by a smaller proportion than the increase in inputs. (C)</p> Signup and view all the answers

Which condition leads to a perfectly elastic demand curve?

<p>Any rise in price causes demand to drop to zero. (D)</p> Signup and view all the answers

What key concept does the term 'marginal cost' refer to?

<p>The increase in total cost from producing one additional unit. (C)</p> Signup and view all the answers

Flashcards

Supply Curve Shift Right

Increased supply of microcomputers due to more suppliers entering the market.

Supply and Demand

Foundational economic concepts explaining market behavior.

Milk Price Increase

Increased milk prices may cause more cheese to be bought.

Game Theory

Analyzing strategic interactions between players (firms, individuals).

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Dominant Strategy

A best strategy regardless of what others do.

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Microcomputers Industry

The market where microcomputers are produced and sold.

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Related Goods

Goods whose prices affect each other's demand.

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Market Equilibrium

The intersection of supply and demand curves, determining price and quantity.

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Perfect Substitutes (Production)

Inputs that can be replaced with one another at a constant rate in a production process.

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Isoquants

Curves showing combinations of inputs (like capital and labor) that produce the same level of output.

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Increasing Returns to Scale

When increasing all inputs leads to a more-than-proportional increase in output.

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Profit-maximizing Monopolist

A monopolist maximizes profit by producing the quantity where marginal revenue equals marginal cost.

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Inferior Good

A good whose demand decreases as income increases.

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Income Elasticity of Demand (Inferior Good)

Negative for inferior goods; as income rises, demand falls.

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Linear Demand Curve Elasticity

The elasticity of a linear demand curve changes as the price changes. It becomes less elastic as price falls.

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Marginal Revenue

The additional revenue a firm receives from selling one more unit of a product.

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Marginal Cost

The additional cost incurred by producing one more unit of a product.

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Study Notes

Supply and Demand

  • Increase in suppliers: A rise in the number of suppliers in an industry causes the supply curve to shift rightward.
  • Price increase effect: An increase in the price of one good (e.g., milk) generally results in a rightward shift of the demand curve for a related good (e.g., cheese) as consumers substitute.

Game Theory

  • Dominant strategy: A dominant strategy is a strategy that yields the best outcome for a player, regardless of the actions of other players.

Production Functions and Costs

  • Perfect substitutes: If capital and labor are perfect substitutes in a production function, the isoquants (curves showing combinations of inputs that produce the same output) are downward-sloping straight lines.
  • Increasing returns to scale: A production function exhibits increasing returns to scale when proportional increases in all inputs lead to a more-than-proportional increase in output.

Monopoly

  • Profit maximization in monopoly: A profit-maximizing monopolist sets the quantity where marginal revenue equals marginal cost. The price will be based on the demand curve at the chosen quantity.

Elasticity and Consumer Choice

  • Inferior good elasticity: The income elasticity of demand for an inferior good is negative.
  • Linear demand curve elasticity: A linear demand curve becomes less elastic as the price falls.

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Description

Test your knowledge on essential economics concepts including supply and demand, game theory, production functions, and monopolies. This quiz covers critical aspects such as the effects of supplier increases, dominant strategies, and production efficiencies. Challenge yourself to see how well you understand these key ideas!

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