Economics Final Exam Study Guide Fall 2024

Scarcity means that there are limited resources to satisfy unlimited wants and needs.

The PPF shows the maximum combinations of two goods that can be produced with the given resources and technology. It illustrates the trade-off between producing different goods and the opportunity cost involved in shifting production.

<p>A Normal good is a good whose demand increases as income increases. An Inferior good is a good whose demand decreases as income increases.</p> Signup and view all the answers

<p>Movement: change in the price of the product. Shift: change in input prices.</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>Total revenue increases.</p> Signup and view all the answers

<p>The Consumer's willingness to pay is the maximum amount a consumer is willing to pay for a good or service. It reflects the perceived value of the product to the consumer.</p> Signup and view all the answers

<p>The Consumer surplus represents the difference between the consumer's willingness to pay and the actual price paid for a good or service. It measures the benefit consumers receive from consuming a product at a price lower than their perceived value.</p> Signup and view all the answers

<p>Explicit costs are the direct, out-of-pocket expenses incurred by a firm for its production activities, such as wages, rent, and material costs. Implicit costs are the opportunity costs of using the firm's own resources, such as the owner's time or capital invested in the business, for which no direct payment is made.</p> Signup and view all the answers

<p>Product differentiation refers to the strategies firms use to make their products or services appear different from their competitors in the eyes of consumers. This can involve varying features, quality, design, branding, or other aspects to distinguish one product or service from another.</p> Signup and view all the answers

<p>Change in Quantity Demanded refers to a movement along the demand curve caused by a change in price. Change in Demand represents a shift in the demand curve caused by factors other than price, such as changes in income, tastes, or prices of related products.</p> Signup and view all the answers

<p>Absolute advantage occurs when a producer can produce a good or service using fewer resources or at a lower cost than another producer. This means they are more efficient in producing that particular good or service.</p> Signup and view all the answers

<p>Comparative advantage exists when a producer can produce a good or service at a lower opportunity cost than another producer.</p> <p>It is determined by comparing the opportunity cost of producing each good or service for each producer. The producer with the lower opportunity cost has the comparative advantage.</p> Signup and view all the answers

<p>The Price Elasticity of Supply measures the responsiveness of the quantity supplied of a good or service to changes in its price.</p> Signup and view all the answers

<p>The Price Elasticity of Supply is positive because a higher price typically leads to a greater quantity supplied. This indicates a direct relationship between price and quantity supplied.</p> Signup and view all the answers

<p>A monopoly market is characterized by a single seller or producer of a good or service with no close substitutes. This single firm has significant market power and can influence the price of the product or service. Barriers to entry prevent other firms from competing in the market.</p> Signup and view all the answers

<p>A monopolist is a price-maker because they have the power to influence the price of their product or service due to the absence of close substitutes and barriers to entry. They can choose the price that maximizes their profits, rather than taking the market price as given.</p> Signup and view all the answers

<p>The monopolist's demand curve slopes downward because the firm faces the entire market demand. To sell more, the monopolist must lower its price. This is in contrast to a competitive firm's demand curve, which is perfectly elastic and horizontal, meaning they can sell as much as they want at the market price.</p> Signup and view all the answers

<p>The Price Elasticity of Demand measures the responsiveness of the quantity demanded of a good or service to changes in its price. It tells us how much the quantity demanded changes for each percentage change in the price.</p> Signup and view all the answers

<p>First-degree price discrimination is allocatively efficient because it allows the monopolist to capture all the consumer surplus, resulting in a situation where the price equals the marginal cost of production. This ensures that all units are produced and consumed up to the point where the marginal benefit to consumers equals the marginal cost to society.</p> Signup and view all the answers

<p>Monopolistic Competition features a market with numerous firms selling differentiated products but lacking perfect substitutes. Entry and exit are relatively easy, and these firms have some market power to set prices, but they face competition from close substitutes. Product differentiation is crucial for attracting customers, and advertising plays a significant role in this market structure.</p> Signup and view all the answers