June P2 Easy
196 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What does price elasticity of demand measure?

  • How much the quantity demanded of a good responds to a change in the price of that good (correct)
  • How much the price of a good responds to a change in the quantity demanded
  • How the quantity demanded of one good responds to the price change of another good
  • The responsiveness of quantity supplied to a change in price

    • What is the characteristic of elastic demand?

  • The percentage change in quantity demanded is equal to the percentage change in price
  • A small price change causes a significant change in quantity demanded (correct)
  • Quantity demanded is relatively insensitive to price changes
  • A large price change causes a small change in quantity demanded

    • Which of the following makes demand more elastic?

  • Increase in the price of the good
  • Decrease in consumer income
  • Availability of compliments
  • Availability of substitutes (correct)

    • What is the characteristic of inelastic supply?

    <p>The capacity to increase production is limited, making supply less responsive to price changes</p> Signup and view all the answers

    What does cross elasticity of demand measure?

    <p>How the quantity demanded of one good responds to the price change of another good</p> Signup and view all the answers

    What is an example of a complementary good?

    <p>Cars and fuel</p> Signup and view all the answers

    What is the characteristic of a normal good?

    <p>Positive income elasticity</p> Signup and view all the answers

    Why is understanding elasticity important for businesses?

    <p>To make more informed decisions regarding pricing strategies and production adjustments</p> Signup and view all the answers

    What is the effect of a longer time period on elasticity of supply?

    <p>It makes supply more elastic</p> Signup and view all the answers

    What is the effect of an increase in consumer income on the demand for inferior goods?

    <p>It decreases the demand</p> Signup and view all the answers

    What is the primary role of understanding relationships between markets in economics?

    <p>To analyze how changes in one market affect others</p> Signup and view all the answers

    What do relative prices represent in economics?

    <p>The cost of one good or service in terms of another</p> Signup and view all the answers

    What is the effect of higher prices on supply, according to the Law of Supply?

    <p>Increased production and supply</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its demand, assuming it is elastic?

    <p>Demand decreases</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on the demand for its complement?

    <p>Demand for the complement increases</p> Signup and view all the answers

    What is the primary objective of most businesses?

    <p>Profit maximization</p> Signup and view all the answers

    How do production costs and revenue impact a firm's profit, according to the economic framework of businesses?

    <p>They have both short-run and long-run implications for profit</p> Signup and view all the answers

    What is the effect of an increase in the price of a substitute good on the demand for the original good?

    <p>Demand for the original good increases</p> Signup and view all the answers

    What is the main difference between accounting profit and economic profit?

    <p>Accounting profit is calculated by subtracting explicit costs from total revenue, while economic profit is calculated by subtracting both explicit and implicit costs from total revenue.</p> Signup and view all the answers

    What is the purpose of calculating normal profit?

    <p>To determine the minimum profit needed for sustainability</p> Signup and view all the answers

    What is the definition of fixed costs?

    <p>Costs that do not vary with the level of output</p> Signup and view all the answers

    What is the formula for calculating average total cost?

    <p>TC divided by Q</p> Signup and view all the answers

    What is the term for the cost of producing one additional unit of output?

    <p>Marginal cost</p> Signup and view all the answers

    What occurs when increasing the scale of production leads to a lower cost per unit?

    <p>Economies of scale</p> Signup and view all the answers

    What is the term for the total income from sales?

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

    What is the formula for calculating marginal revenue?

    <p>Change in TR when one more unit is produced</p> Signup and view all the answers

    What is the definition of profit?

    <p>TR minus TC</p> Signup and view all the answers

    What is the main concept of price elasticity?

    <p>How the quantity demanded changes in response to a change in price</p> Signup and view all the answers

    What is the primary role of understanding relationships between markets in economics?

    <p>To understand how changes in one market affect others</p> Signup and view all the answers

    What does the Law of Supply state?

    <p>Higher prices encourage increased production and supply</p> Signup and view all the answers

    What happens to the demand for a good when its price increases, assuming it is elastic?

    <p>Demand decreases</p> Signup and view all the answers

    What is the primary objective of most businesses?

    <p>Profit maximization</p> Signup and view all the answers

    How do production costs and revenue impact a firm's profit?

    <p>The relationship between cost, revenue, and profitability is crucial</p> Signup and view all the answers

    What happens to the demand for a good when the price of its substitute decreases?

    <p>Demand increases</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on the demand for its complement?

    <p>Demand increases</p> Signup and view all the answers

    Why are relative prices important in economics?

    <p>They influence consumer and producer decisions</p> Signup and view all the answers

    What happens to the quantity demanded when the price elasticity of demand is unit elastic?

    <p>The percentage change in quantity demanded is equal to the percentage change in price.</p> Signup and view all the answers

    Which of the following affects the price elasticity of supply?

    <p>Availability of production resources</p> Signup and view all the answers

    What is the cross elasticity of demand between two complementary goods?

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

    What happens to the demand for an inferior good when consumer income increases?

    <p>The demand decreases</p> Signup and view all the answers

    Which of the following is an example of an inferior good?

    <p>Generic brands</p> Signup and view all the answers

    What is the primary role of understanding elasticity in businesses?

    <p>To set prices that optimize revenue</p> Signup and view all the answers

    When is the demand for a good more elastic?

    <p>When there are many substitutes</p> Signup and view all the answers

    What happens to the supply of a good when the price elasticity of supply is elastic?

    <p>The supply increases significantly</p> Signup and view all the answers

    What is the effect of a longer time period on the price elasticity of demand?

    <p>The demand becomes more elastic</p> Signup and view all the answers

    Which of the following is an example of a normal good?

    <p>Quality clothing</p> Signup and view all the answers

    What is the primary difference between accounting profit and economic profit?

    <p>Accounting profit only considers explicit costs, whereas economic profit considers both explicit and implicit costs.</p> Signup and view all the answers

    What is the purpose of calculating normal profit?

    <p>To calculate the minimum profit needed for sustainability.</p> Signup and view all the answers

    What is the term for the cost of producing one additional unit of output?

    <p>Marginal cost</p> Signup and view all the answers

    What occurs when increasing the scale of production leads to a lower cost per unit?

    <p>Economies of scale</p> Signup and view all the answers

    What is the term for the total income from sales?

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

    What is the formula for calculating marginal revenue?

    <p>MR = ΔTR / ΔQ</p> Signup and view all the answers

    What is the definition of fixed costs?

    <p>Costs that do not vary with the level of output</p> Signup and view all the answers

    What is the formula for calculating average total cost?

    <p>ATC = TC / Q</p> Signup and view all the answers

    What is the primary objective of most businesses?

    <p>To maximize profits</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its demand, assuming it is elastic?

    <p>Demand decreases</p> Signup and view all the answers

    What is the primary role of understanding relationships between markets in economics?

    <p>To analyze how changes in one market affect others</p> Signup and view all the answers

    What is the effect of higher prices on demand, assuming the good is elastic?

    <p>Demand decreases</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on the demand for its substitute?

    <p>Demand for the substitute increases</p> Signup and view all the answers

    What do relative prices represent in economics?

    <p>The ratio of the price of one good to another</p> Signup and view all the answers

    What is the primary objective of most businesses?

    <p>Profit maximization</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on the demand for its complement?

    <p>Demand for the complement decreases</p> Signup and view all the answers

    What is the effect of higher prices on supply, according to the Law of Supply?

    <p>Supply increases</p> Signup and view all the answers

    How do production costs and revenue impact a firm's profit, according to the economic framework of businesses?

    <p>Costs and revenue are directly related</p> Signup and view all the answers

    What is the price elasticity of demand when the quantity demanded is relatively insensitive to price changes?

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

    What happens to the demand for a good when its price increases, assuming it has an elastic demand?

    <p>The demand decreases significantly</p> Signup and view all the answers

    Which of the following factors makes demand more elastic?

    <p>Availability of substitutes</p> Signup and view all the answers

    What is the characteristic of a luxury good?

    <p>It has an elastic demand</p> Signup and view all the answers

    What is the effect of a longer time period on the price elasticity of demand?

    <p>It becomes more elastic</p> Signup and view all the answers

    What is the characteristic of an elastic supply?

    <p>Suppliers can increase output without a significant rise in cost</p> Signup and view all the answers

    What is the cross elasticity of demand between two substitute goods?

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

    What is the effect of an increase in consumer income on the demand for a normal good?

    <p>The demand increases</p> Signup and view all the answers

    What is the main difference between accounting profit and economic profit?

    <p>Accounting profit only considers explicit costs, while economic profit considers both explicit and implicit costs</p> Signup and view all the answers

    What does the average fixed cost (AFC) represent?

    <p>The fixed cost divided by the quantity of output</p> Signup and view all the answers

    What is the primary role of understanding elasticity in businesses?

    <p>To set prices that optimize revenue</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its complement?

    <p>The demand for the complement decreases</p> Signup and view all the answers

    What is the purpose of calculating normal profit?

    <p>To determine the minimum profit needed for sustainability</p> Signup and view all the answers

    What occurs when increasing the scale of production leads to a lower cost per unit?

    <p>Economies of scale</p> Signup and view all the answers

    What is the formula for calculating marginal revenue?

    <p>MR = ΔTR / ΔQ</p> Signup and view all the answers

    What is the definition of profit?

    <p>Total revenue minus total cost</p> Signup and view all the answers

    What is the term for the cost of producing one additional unit of output?

    <p>Marginal cost</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its demand, assuming it is elastic?

    <p>The demand will decrease</p> Signup and view all the answers

    What is the primary objective of most businesses?

    <p>To maximize profit</p> Signup and view all the answers

    What is the term for the total income from sales?

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

    What type of profit does not account for implicit costs?

    <p>Accounting Profit</p> Signup and view all the answers

    What is the term for costs that vary directly with the level of production?

    <p>Variable Costs</p> Signup and view all the answers

    What is the term for the cost of producing one additional unit of output?

    <p>Marginal Cost</p> Signup and view all the answers

    What happens when increasing the scale of production leads to a lower cost per unit?

    <p>Economies of Scale</p> Signup and view all the answers

    What is the term for the total income from sales?

    <p>Total Revenue</p> Signup and view all the answers

    What is the formula for calculating marginal revenue?

    <p>MR = ΔTR / ΔQ</p> Signup and view all the answers

    What is the definition of profit?

    <p>TR - TC</p> Signup and view all the answers

    What is the purpose of calculating normal profit?

    <p>To calculate the minimum profit needed for sustainability</p> Signup and view all the answers

    What is the characteristic of increasing returns to scale?

    <p>Output increases by a greater proportion than inputs</p> Signup and view all the answers

    Why are revenue and cost calculations important for businesses?

    <p>To maximize profits and make informed decisions</p> Signup and view all the answers

    What is the effect of a change in the price of a good on its quantity demanded, when the price elasticity of demand is inelastic?

    <p>Quantity demanded is relatively insensitive to price changes</p> Signup and view all the answers

    Which of the following factors affects the price elasticity of supply?

    <p>Production Capacity</p> Signup and view all the answers

    What is the relationship between the quantity demanded of two goods when they are substitutes?

    <p>Positive cross elasticity</p> Signup and view all the answers

    What happens to the demand for a normal good when consumer income increases?

    <p>Demand increases</p> Signup and view all the answers

    What is the effect of a longer time period on the price elasticity of demand?

    <p>Demand becomes more elastic</p> Signup and view all the answers

    What is the primary role of understanding elasticity in businesses?

    <p>To make more informed decisions regarding pricing strategies and production adjustments</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its quantity supplied, when the price elasticity of supply is elastic?

    <p>A small change in price causes a significant change in quantity supplied</p> Signup and view all the answers

    What is the relationship between the quantity demanded of a good and its price, when the price elasticity of demand is unit elastic?

    <p>The percentage change in quantity demanded is equal to the percentage change in price</p> Signup and view all the answers

    What happens to the demand for an inferior good when consumer income decreases?

    <p>Demand increases</p> Signup and view all the answers

    What is the primary role of understanding cross elasticity of demand?

    <p>To understand the interdependencies between different products</p> Signup and view all the answers

    What is the primary objective of most businesses in the economic framework?

    <p>Maximize profit</p> Signup and view all the answers

    Which of the following factors influences demand?

    <p>Consumer preferences</p> Signup and view all the answers

    What is the relationship between the price of a good and its demand, according to the Law of Demand?

    <p>Higher prices decrease demand</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on the demand for its substitute?

    <p>Demand for the substitute increases</p> Signup and view all the answers

    What is the relationship between the price of a good and its supply, according to the Law of Supply?

    <p>Higher prices increase supply</p> Signup and view all the answers

    What is the primary role of understanding relative prices in economics?

    <p>To compare the value of different goods</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on the demand for its complement?

    <p>Demand for the complement decreases</p> Signup and view all the answers

    What is the relationship between the dynamics of markets and the economy?

    <p>Changes in one market affect other markets and the economy</p> Signup and view all the answers

    What is the main difference between accounting profit and economic profit?

    <p>Economic profit accounts for opportunity costs, while accounting profit does not</p> Signup and view all the answers

    What is the purpose of calculating average fixed cost?

    <p>To understand how fixed costs change with output</p> Signup and view all the answers

    What occurs when a firm experiences increasing returns to scale?

    <p>Output increases by a greater proportion than inputs</p> Signup and view all the answers

    What is the formula for calculating total revenue?

    <p>Price x Quantity</p> Signup and view all the answers

    What is the term for the cost of producing one additional unit of output?

    <p>Marginal cost</p> Signup and view all the answers

    What is normal profit?

    <p>The break-even point where a business makes just enough profit to continue operating</p> Signup and view all the answers

    What is the purpose of calculating marginal revenue?

    <p>To determine the optimal level of output</p> Signup and view all the answers

    What is the formula for calculating average variable cost?

    <p>Variable cost divided by quantity</p> Signup and view all the answers

    What is the term for the total income from sales?

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

    What occurs when a firm experiences economies of scale?

    <p>The cost per unit decreases</p> Signup and view all the answers

    What is the primary role of understanding relationships between markets in economics?

    <p>To analyze how changes in one market affect others</p> Signup and view all the answers

    What is the effect of higher prices on demand, according to the Law of Demand?

    <p>Higher prices decrease demand</p> Signup and view all the answers

    What is the effect of an increase in the price of one good on the demand for its substitute?

    <p>Demand for the substitute increases</p> Signup and view all the answers

    What is the primary objective of most businesses?

    <p>To maximize profit</p> Signup and view all the answers

    How do changes in relative prices affect resource allocation in an economy?

    <p>Changes in relative prices influence consumer and producer decisions</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on the demand for its complement?

    <p>Demand for the complement increases</p> Signup and view all the answers

    Why are relative prices important in economics?

    <p>Because they influence consumer and producer decisions</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its demand, assuming it is a normal good?

    <p>Demand decreases</p> Signup and view all the answers

    What is the primary role of price elasticity of demand in a business?

    <p>To set prices that optimize revenue</p> Signup and view all the answers

    When is the price elasticity of demand more elastic?

    <p>When the product consumes a larger portion of the consumer's income</p> Signup and view all the answers

    What is the characteristic of inelastic demand?

    <p>Quantity demanded is relatively insensitive to price changes</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on the demand for its substitute?

    <p>The demand for the substitute increases</p> Signup and view all the answers

    What is the primary role of price elasticity of supply in a business?

    <p>To plan production levels</p> Signup and view all the answers

    What is the characteristic of elastic supply?

    <p>Suppliers can increase output without a significant rise in cost</p> Signup and view all the answers

    What is the cross elasticity of demand between two substitute goods?

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

    What is the effect of an increase in consumer income on the demand for a normal good?

    <p>The demand increases</p> Signup and view all the answers

    What is the primary role of understanding cross elasticity of demand in a business?

    <p>To analyze the interdependencies between different products</p> Signup and view all the answers

    What is the effect of a longer time period on the price elasticity of demand?

    <p>The demand becomes more elastic</p> Signup and view all the answers

    What is the primary difference between accounting profit and economic profit?

    <p>Accounting profit is calculated based on explicit costs, while economic profit is calculated based on opportunity costs.</p> Signup and view all the answers

    What is the break-even point in a business?

    <p>The point where a business's total revenue equals its total costs.</p> Signup and view all the answers

    What is the term for the cost of producing one additional unit of output?

    <p>Marginal cost</p> Signup and view all the answers

    What occurs when increasing the scale of production leads to a lower cost per unit?

    <p>Economies of scale</p> Signup and view all the answers

    What is the formula for calculating total revenue?

    <p>TR = P x Q</p> Signup and view all the answers

    What is the term for the total income from sales?

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

    What is the definition of profit?

    <p>TR - TC</p> Signup and view all the answers

    What are fixed costs?

    <p>Costs that do not vary with the level of output</p> Signup and view all the answers

    What is the purpose of calculating normal profit?

    <p>To determine the minimum profit needed for sustainability</p> Signup and view all the answers

    What is the formula for calculating marginal revenue?

    <p>MR = ΔTR / ΔQ</p> Signup and view all the answers

    What happens to the quantity demanded when the price of a good increases, assuming it is inelastic?

    <p>It decreases slightly</p> Signup and view all the answers

    Which of the following products tend to have more elastic demand?

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

    What is the effect of an increase in the price of a substitute good on the demand for the original good?

    <p>It increases</p> Signup and view all the answers

    What happens to the supply of a good when the price elasticity of supply is inelastic?

    <p>It is difficult to increase production</p> Signup and view all the answers

    What is the effect of an increase in consumer income on the demand for normal goods?

    <p>It increases</p> Signup and view all the answers

    What is the cross elasticity of demand between two substitute goods?

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

    What happens to the demand for a good when its price elasticity of demand is unit elastic?

    <p>It changes proportionally to the price change</p> Signup and view all the answers

    What is the effect of a longer time period on the price elasticity of supply?

    <p>It increases</p> Signup and view all the answers

    What is the primary role of understanding elasticity in businesses?

    <p>To set prices that optimize revenue</p> Signup and view all the answers

    What happens to the demand for a good when the price of its complementary good increases?

    <p>It decreases</p> Signup and view all the answers

    What is the primary objective of a business?

    <p>Profit maximization</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on its demand, assuming it is a normal good?

    <p>Demand increases</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its demand for its substitute?

    <p>Demand for the substitute increases</p> Signup and view all the answers

    What is the role of relative prices in economics?

    <p>To influence consumer and producer decisions</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on the demand for its complement?

    <p>Demand for the complement increases</p> Signup and view all the answers

    What is the relationship between cost, revenue, and profitability in a business?

    <p>Profit is the difference between cost and revenue</p> Signup and view all the answers

    What is the effect of higher prices on supply, according to the Law of Supply?

    <p>Supply increases</p> Signup and view all the answers

    What is the effect of an increase in consumer income on the demand for a normal good?

    <p>Demand increases</p> Signup and view all the answers

    What is the primary objective of most businesses?

    <p>Profit Maximization</p> Signup and view all the answers

    What is the effect of higher prices on demand, according to the Law of Demand?

    <p>Decreases demand</p> Signup and view all the answers

    What is the impact of an increase in the price of a good on the demand for its substitute?

    <p>Increases demand for the substitute</p> Signup and view all the answers

    What is the relationship between revenue and profitability in the economic framework of businesses?

    <p>The relationship between revenue and profitability is complex and dependent on various factors</p> Signup and view all the answers

    What is the effect of an increase in consumer income on the demand for a normal good?

    <p>Increases demand</p> Signup and view all the answers

    What is the impact of a decrease in the price of a good on the demand for its complement?

    <p>Increases demand for the complement</p> Signup and view all the answers

    What is the role of understanding relationships between markets in economics?

    <p>To analyze how changes in one market affect others</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its supply, according to the Law of Supply?

    <p>Increases supply</p> Signup and view all the answers

    What type of profit does not account for implicit costs such as opportunity costs?

    <p>Accounting Profit</p> Signup and view all the answers

    Which of the following costs varies directly with the level of production?

    <p>Variable Costs</p> Signup and view all the answers

    What is the term for the minimum profit needed for sustainability?

    <p>Normal Profit</p> Signup and view all the answers

    What is the formula for calculating average total cost?

    <p>ATC = TC / Q</p> Signup and view all the answers

    What occurs when increasing the scale of production leads to a lower cost per unit?

    <p>Economies of Scale</p> Signup and view all the answers

    What is the term for the total income from sales?

    <p>Total Revenue</p> Signup and view all the answers

    What is the formula for calculating marginal revenue?

    <p>MR = ΔTR / ΔQ</p> Signup and view all the answers

    What is the definition of profit?

    <p>TR - TC</p> Signup and view all the answers

    What is the term for the cost of producing one additional unit of output?

    <p>Marginal Cost</p> Signup and view all the answers

    What is the primary objective of most businesses?

    <p>To maximize profit</p> Signup and view all the answers

    What is the primary difference between elastic and inelastic demand?

    <p>Elastic demand is responsive to price changes, whereas inelastic demand is not.</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on its demand, assuming it is elastic?

    <p>The demand increases.</p> Signup and view all the answers

    Which of the following factors affects the price elasticity of demand?

    <p>Availability of substitutes.</p> Signup and view all the answers

    What is the characteristic of a normal good?

    <p>Positive income elasticity.</p> Signup and view all the answers

    What is the effect of an increase in consumer income on the demand for a normal good?

    <p>The demand increases.</p> Signup and view all the answers

    What is the primary role of understanding elasticity in businesses?

    <p>To make informed decisions regarding pricing strategies and production adjustments.</p> Signup and view all the answers

    What is the effect of a longer time period on the price elasticity of demand?

    <p>The demand becomes more elastic.</p> Signup and view all the answers

    What is the cross elasticity of demand between two substitute goods?

    <p>Positive.</p> Signup and view all the answers

    What is the primary difference between the price elasticity of demand and the price elasticity of supply?

    <p>Elasticity of demand measures responsiveness to changes in price, whereas elasticity of supply measures responsiveness to changes in income.</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its demand, assuming it has an elastic supply?

    <p>The demand decreases.</p> Signup and view all the answers

    More Like This

    CH SUM : Micro Economics
    150 questions

    CH SUM : Micro Economics

    TalentedParody avatar
    TalentedParody
    Microeconomics: Dynamics of Markets
    216 questions

    Microeconomics: Dynamics of Markets

    TalentedParody avatar
    TalentedParody
    Economics of Lending and Market Fairness
    37 questions

    Economics of Lending and Market Fairness

    AdvancedTigerEye avatar
    AdvancedTigerEye
    Microeconomics and Pharmaceuticals
    24 questions

    Microeconomics and Pharmaceuticals

    FaultlessBoron avatar
    FaultlessBoron
    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser