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Questions and Answers
What does "marginal cost" describe?
What does "marginal cost" describe?
- Total cost divided by the quantity produced
- The cost that remains constant regardless of the production level
- The cost of producing one more unit (correct)
- The difference between fixed and variable costs
What is a characteristic of perfect competition?
What is a characteristic of perfect competition?
- There are high barriers to entry
- Products are homogeneous (correct)
- Firms can freely set their own prices
- Firms have monopolistic control
If the demand for a product is very elastic, what happens when the price increases?
If the demand for a product is very elastic, what happens when the price increases?
- Quantity demanded increases
- Quantity demanded decreases slightly
- Quantity demanded remains unchanged
- Quantity demanded decreases significantly (correct)
What is the main reason for "economies of scale"?
What is the main reason for "economies of scale"?
What does "market failure" mean?
What does "market failure" mean?
A price floor (price minimum) usually leads to:
A price floor (price minimum) usually leads to:
What is a negative externality?
What is a negative externality?
What happens in a market with a monopoly?
What happens in a market with a monopoly?
When a nation has a comparative advantage in the production of a good:
When a nation has a comparative advantage in the production of a good:
What does the Lorenz curve show?
What does the Lorenz curve show?
What does "opportunity cost" describe?
What does "opportunity cost" describe?
A price increase for a complementary good will likely lead to:
A price increase for a complementary good will likely lead to:
What is a characteristic of monopolistic competition?
What is a characteristic of monopolistic competition?
What happens to total revenue when the price increases in a market with inelastic demand?
What happens to total revenue when the price increases in a market with inelastic demand?
What does a production possibilities curve (PPC) show?
What does a production possibilities curve (PPC) show?
When will a firm operate at a short-run loss?
When will a firm operate at a short-run loss?
What does "price discrimination" mean?
What does "price discrimination" mean?
What is a "positive externality"?
What is a "positive externality"?
What happens in a market economy when the prices of goods rise?
What happens in a market economy when the prices of goods rise?
If marginal cost is lower than marginal revenue, what should a firm do?
If marginal cost is lower than marginal revenue, what should a firm do?
What is the main difference between accounting profit and economic profit?
What is the main difference between accounting profit and economic profit?
How does a tax on producers affect the supply curve?
How does a tax on producers affect the supply curve?
What does "derived demand" mean?
What does "derived demand" mean?
What characteristics define a public good?
What characteristics define a public good?
What happens when a nation specializes in its comparative advantage?
What happens when a nation specializes in its comparative advantage?
What is an example of a "variable cost"?
What is an example of a "variable cost"?
What is the purpose of a carbon tax?
What is the purpose of a carbon tax?
Which of these actions can increase productivity in an economy?
Which of these actions can increase productivity in an economy?
What does the "law of diminishing marginal returns" describe?
What does the "law of diminishing marginal returns" describe?
What is a Lorenz curve designed to measure?
What is a Lorenz curve designed to measure?
Under conditions of pure monopoly, entry into the market is:
Under conditions of pure monopoly, entry into the market is:
What is likely to be the result of an oligopolistic market?
What is likely to be the result of an oligopolistic market?
If the price of a firm's output increases, how will it affect the firm's demand for labor in the short run?
If the price of a firm's output increases, how will it affect the firm's demand for labor in the short run?
A country that has a comparative advantage in the production of rubber bands means that:
A country that has a comparative advantage in the production of rubber bands means that:
What concept underlies the statement that "Incomes are subject to diminishing marginal utility"?
What concept underlies the statement that "Incomes are subject to diminishing marginal utility"?
In a perfectly competitive market, what is the relationship between marginal revenue and demand?
In a perfectly competitive market, what is the relationship between marginal revenue and demand?
Climate change can be viewed as an example of:
Climate change can be viewed as an example of:
What is a good example of a public good?
What is a good example of a public good?
What does the "law of diminishing marginal returns" state?
What does the "law of diminishing marginal returns" state?
What is the best definition of "derived demand"?
What is the best definition of "derived demand"?
The short-run effect of an increase in the price of a firm's output will always increase the firm's demand for labor.
The short-run effect of an increase in the price of a firm's output will always increase the firm's demand for labor.
When a firm's product faces a market price of $50, but it produces only when its variable cost is below $50, the competitive firm is likely to?
When a firm's product faces a market price of $50, but it produces only when its variable cost is below $50, the competitive firm is likely to?
If a firm's price just covers its average total cost, what kind of economic profit is the firm earning?
If a firm's price just covers its average total cost, what kind of economic profit is the firm earning?
When a firm increases its output, what generally happens to its total revenue and profits?
When a firm increases its output, what generally happens to its total revenue and profits?
In the short run, a firm should always continue to operate at a loss if it can:
In the short run, a firm should always continue to operate at a loss if it can:
What is the amount of money that a firm can save by continuing to operate in the short run rather than shutting down immediately?
What is the amount of money that a firm can save by continuing to operate in the short run rather than shutting down immediately?
The point where the demand curve and supply curve intersect is referred to as:
The point where the demand curve and supply curve intersect is referred to as:
In the long run, the market will tend to supply more of a good or service if there is a sustainable economic profit.
In the long run, the market will tend to supply more of a good or service if there is a sustainable economic profit.
When a purely competitive market has reached long-run equilibrium, price equals:
When a purely competitive market has reached long-run equilibrium, price equals:
The demand curve for a non-discriminating monopolist is the same as:
The demand curve for a non-discriminating monopolist is the same as:
What is the relationship between the demand curve and marginal revenue for an imperfectly competitive firm?
What is the relationship between the demand curve and marginal revenue for an imperfectly competitive firm?
A law that restricts or prohibits price gouging is often referred to as:
A law that restricts or prohibits price gouging is often referred to as:
Flashcards
Marginal cost
Marginal cost
The cost of producing one additional unit of a good or service.
Perfect competition
Perfect competition
A market structure where many firms sell identical products, and no single firm can influence the market price.
Elastic demand
Elastic demand
When a change in price leads to a proportionally larger change in quantity demanded.
Economies of scale
Economies of scale
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Market failure
Market failure
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Price floor
Price floor
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Negative externality
Negative externality
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Monopoly
Monopoly
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Comparative advantage
Comparative advantage
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Lorenz curve
Lorenz curve
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Opportunity cost
Opportunity cost
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Complementary goods
Complementary goods
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Substitues goods
Substitues goods
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Monopolistic competition
Monopolistic competition
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Equilibrium price
Equilibrium price
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Fixed costs
Fixed costs
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Variable costs
Variable costs
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Price Elasticity of Demand
Price Elasticity of Demand
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Cross Elasticity of Demand
Cross Elasticity of Demand
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Income Elasticity of Demand
Income Elasticity of Demand
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Total Revenue
Total Revenue
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Marginal Revenue
Marginal Revenue
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Profit
Profit
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Average Fixed Cost
Average Fixed Cost
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Average Variable Cost
Average Variable Cost
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Average Total Cost
Average Total Cost
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Shutdown Point
Shutdown Point
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Consumer Surplus
Consumer Surplus
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Producer Surplus
Producer Surplus
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Study Notes
Marginal Cost
- Represents the cost of producing one additional unit.
Perfect Competition
- Firms can't freely set prices.
- Products are homogeneous.
- Low barriers to entry.
Price Elasticity
- When price increases, sales significantly decrease (elastic).
- When price increases, sales slightly decrease (inelastic).
Economies of Scale
- Costs per unit decrease as production increases.
- Due to fixed costs being spread over more units.
Market Failure
- Occurs when markets do not efficiently allocate resources.
- Usually involves externalities or public goods.
Price Floor
- Sets a minimum price for a product.
- Often leads to surpluses.
Externality
- A cost or benefit imposed on a third party not involved in the transaction.
- Negative externalities (e.g., pollution) have an adverse effect.
- Positive externalities (e.g., education) are beneficial.
Monopoly
- A single seller controls the entire market.
- Sets prices above marginal cost.
Market Equilibrium
- Occurs where demand and supply meet.
- Prices are stable, and quantity demanded equals quantity supplied.
Supply and Demand
- Describes how consumers and producers interact to determine market prices.
- Relationship between price and quantity demanded/supplied.
Fiscal Policy
- Government actions to influence the economy.
- Fiscal policy instruments like taxes and government spending affects the economy.
Monetary Policy
- Actions taken by a central bank to influence money supply and credit conditions.
- Tools include interest rates, reserve requirements, and open market operations.
Fiscal & Monetary Policy Interaction
- Fiscal policy and monetary policy can interact to stimulate or restrain economic activity.
- A combined strategy is beneficial but requires careful coordination.
Macroeconomics
- Studies the economy as a whole.
- Focuses on broad measures like inflation, unemployment, and economic growth.
Microeconomics
- Focuses on choices made by individuals, firms, and industries.
- Looks at individual markets (supply, demand curves).
Comparative Advantage
- Producing a good or service at a lower opportunity cost than other countries (in trade).
Economic Systems
- The structure of how a nation uses its resources to produce and distribute products and services.
- Different systems include capitalism, socialism, communism, and mixed economies.
Market Structures
- Types of markets, differing in number of competitors.
- Perfect competition (large number of sellers).
- Monopoly (single seller).
- Monopolistic competition (large number of sellers).
- Oligopoly (a few powerful sellers)
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Description
Test your understanding of key economics concepts such as marginal cost, price elasticity, and market structures. This quiz covers fundamental topics that are essential for any economics student. Dive in and see how well you grasp these important principles!
