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Which factor does NOT directly influence the supply of a product?
Which factor does NOT directly influence the supply of a product?
Given demand $Q_d = 90 - 10P$ and supply $Q_s = 10 + 6P$, what is the outcome if the government imposes a price ceiling of 4?
Given demand $Q_d = 90 - 10P$ and supply $Q_s = 10 + 6P$, what is the outcome if the government imposes a price ceiling of 4?
With $Q_s = 3P$ and $Q_d = 12 - P$, if a price floor is set twice the equilibrium price, what market condition occurs?
With $Q_s = 3P$ and $Q_d = 12 - P$, if a price floor is set twice the equilibrium price, what market condition occurs?
What is the typical outcome of government-set minimum prices?
What is the typical outcome of government-set minimum prices?
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If both demand and supply decrease with different rates, how will the equilibrium price and quantity be affected?
If both demand and supply decrease with different rates, how will the equilibrium price and quantity be affected?
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How do ticket speculators typically impact market conditions?
How do ticket speculators typically impact market conditions?
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If a firm has total revenue of $600,000, explicit costs of $400,000, and implicit costs of $100,000, what are the firm's accounting profit and economic profit respectively?
If a firm has total revenue of $600,000, explicit costs of $400,000, and implicit costs of $100,000, what are the firm's accounting profit and economic profit respectively?
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What is a common result of imposing price controls/price capping in a market?
What is a common result of imposing price controls/price capping in a market?
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Consider a market where demand decreases substantially while supply decreases only slightly. Which outcome is most likely to occur?
Consider a market where demand decreases substantially while supply decreases only slightly. Which outcome is most likely to occur?
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A firm operating in a perfectly competitive market has a total cost (TC) function of $TC = 2Q^2 - 8Q + 20$. If the market price is $20, what quantity will the firm produce to maximize profit, and what will be the profit?
A firm operating in a perfectly competitive market has a total cost (TC) function of $TC = 2Q^2 - 8Q + 20$. If the market price is $20, what quantity will the firm produce to maximize profit, and what will be the profit?
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According to the given information, a firm's total cost function is given as $TC = 400 + 10Q$, where Q is the quantity produced. If the market price for the good is 50 units, what output level corresponds to the point where the total revenue equals total costs?
According to the given information, a firm's total cost function is given as $TC = 400 + 10Q$, where Q is the quantity produced. If the market price for the good is 50 units, what output level corresponds to the point where the total revenue equals total costs?
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With two goods, good A and good B, there is a direct relationship between the price of A and the demand of B. What type of goods are, A and B, likely to be?
With two goods, good A and good B, there is a direct relationship between the price of A and the demand of B. What type of goods are, A and B, likely to be?
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A firm in a perfectly competitive market has a total cost function of $TC = Q^2 - 4Q + 10$. If the market price is $10, what quantity will the firm produce in order to maximize profit and what is the maximum profit?
A firm in a perfectly competitive market has a total cost function of $TC = Q^2 - 4Q + 10$. If the market price is $10, what quantity will the firm produce in order to maximize profit and what is the maximum profit?
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Under what circumstances should a firm in a perfectly competitive market decide to shut down in the short run to minimize its losses?
Under what circumstances should a firm in a perfectly competitive market decide to shut down in the short run to minimize its losses?
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An airline is considering selling a standby ticket for $300 on a flight with some empty seats. The average cost per seat is $500, but the marginal cost of an extra passenger is very low. This scenario best exemplifies which of the following concepts?
An airline is considering selling a standby ticket for $300 on a flight with some empty seats. The average cost per seat is $500, but the marginal cost of an extra passenger is very low. This scenario best exemplifies which of the following concepts?
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Which of the following statements is the BEST example of a testable, positive economic statement?
Which of the following statements is the BEST example of a testable, positive economic statement?
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Which of the following represents a normative economic statement about wage levels?
Which of the following represents a normative economic statement about wage levels?
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According to the theory of comparative advantage, specialization in production should be based on which of the following?
According to the theory of comparative advantage, specialization in production should be based on which of the following?
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If economic agents engage in trade based on comparative advantage, what is the likely outcome in terms of their consumption possibilities?
If economic agents engage in trade based on comparative advantage, what is the likely outcome in terms of their consumption possibilities?
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An airline with 200 seats is operating a flight with 10 empty seats. A standby passenger offers $300 for a ticket, while the average cost per seat is $500. What economic principle justifies the airline selling the standby the ticket?
An airline with 200 seats is operating a flight with 10 empty seats. A standby passenger offers $300 for a ticket, while the average cost per seat is $500. What economic principle justifies the airline selling the standby the ticket?
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Which of the following BEST explains the difference between a positive and a normative economic statement?
Which of the following BEST explains the difference between a positive and a normative economic statement?
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If the price of a good increases by 15% and total revenue decreases by 3%, what is the approximate percentage change in quantity demanded and the elasticity of demand?
If the price of a good increases by 15% and total revenue decreases by 3%, what is the approximate percentage change in quantity demanded and the elasticity of demand?
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A 40% increase in the price of a good leads to a 20% decrease in the quantity sold. What best describes the demand for this good?
A 40% increase in the price of a good leads to a 20% decrease in the quantity sold. What best describes the demand for this good?
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Which of these characteristics is least likely to be associated with goods that have a high price elasticity of demand?
Which of these characteristics is least likely to be associated with goods that have a high price elasticity of demand?
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If a 5% decrease in price causes a 2% increase in quantity supplied, the supply is best described as:
If a 5% decrease in price causes a 2% increase in quantity supplied, the supply is best described as:
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When an indirect tax is introduced, and demand for the product is highly elastic compared to its supply, who predominantly bears the tax burden?
When an indirect tax is introduced, and demand for the product is highly elastic compared to its supply, who predominantly bears the tax burden?
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Given the price elasticity of demand for a product is 1.2 and the price elasticity of supply is 0.8. If a tax is imposed, which is likely to bear a greater share of the tax burden?
Given the price elasticity of demand for a product is 1.2 and the price elasticity of supply is 0.8. If a tax is imposed, which is likely to bear a greater share of the tax burden?
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If a good has a price elasticity demand of 1.5 and a price elasticity of supply of 0.5 and a tax is levied on this good, who are most likely to bear the majority of the tax burden?
If a good has a price elasticity demand of 1.5 and a price elasticity of supply of 0.5 and a tax is levied on this good, who are most likely to bear the majority of the tax burden?
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If a 20% decrease in price leads to a 60% increase in quantity demanded, this implies the demand is:
If a 20% decrease in price leads to a 60% increase in quantity demanded, this implies the demand is:
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Which of the following is least likely to characterize a good with inelastic demand?
Which of the following is least likely to characterize a good with inelastic demand?
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The price elasticity of supply for a particular good is 0.6. What does this indicate about the responsiveness of quantity supplied to a price change?
The price elasticity of supply for a particular good is 0.6. What does this indicate about the responsiveness of quantity supplied to a price change?
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When a tax is imposed on a good with an inelastic demand and an elastic supply, who primarily bears the tax burden?
When a tax is imposed on a good with an inelastic demand and an elastic supply, who primarily bears the tax burden?
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What is the primary consequence of implementing a tariff in international trade?
What is the primary consequence of implementing a tariff in international trade?
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How does the imposition of a tariff typically affect total surplus in a market?
How does the imposition of a tariff typically affect total surplus in a market?
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If a firm increases its production by 25%, what will be the approximate percentage change in average fixed cost (AFC)?
If a firm increases its production by 25%, what will be the approximate percentage change in average fixed cost (AFC)?
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Given that production increases by 75% and variable cost increases by 50%, what is the likely impact on average total cost (ATC)?
Given that production increases by 75% and variable cost increases by 50%, what is the likely impact on average total cost (ATC)?
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A company produces 100,000 units, sells them at $5 each, has explicit costs of $375,000, and implicit costs of $50,000. What are the accounting and economic profits respectively?
A company produces 100,000 units, sells them at $5 each, has explicit costs of $375,000, and implicit costs of $50,000. What are the accounting and economic profits respectively?
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In a scenario with a tax on a good, if demand is relatively inelastic and supply is relatively elastic, which party is most likely to bear a larger portion of the tax burden?
In a scenario with a tax on a good, if demand is relatively inelastic and supply is relatively elastic, which party is most likely to bear a larger portion of the tax burden?
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A tariff is imposed on imported goods. From the perspective of total social welfare, what is the primary outcome?
A tariff is imposed on imported goods. From the perspective of total social welfare, what is the primary outcome?
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If average fixed cost (AFC) is currently $X$ and production increases by 25%, what does the new AFC equal to?
If average fixed cost (AFC) is currently $X$ and production increases by 25%, what does the new AFC equal to?
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A firm is operating with total costs of $T$ at a production level of $Q$. If production increases by 75% and the total variable cost goes up by 50%, how would the average total cost (ATC) behave?
A firm is operating with total costs of $T$ at a production level of $Q$. If production increases by 75% and the total variable cost goes up by 50%, how would the average total cost (ATC) behave?
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Study Notes
Microeconomics Applications
- Airline Cost Evaluation: An airline evaluates a flight's cost based on 200 seats at $100,000, resulting in a cost per seat of $500. If 10 seats are empty, the company might consider selling a ticket to a standby passenger willing to pay $300, even though the average cost is estimated at $500. The marginal cost might be minimal (e.g., sandwich and water). This decision is rational if the passenger's payment exceeds the marginal cost.
- Marginal Analysis: This example shows a trade-off between efficiency and equity where a decision is made based on marginal analysis.
- Comparative Advantage: Not this case.
- Positive Statement: A positive statement describes a factual relationship, in this case, if the price of a good decreases, the quantity demanded increases, if the government raises spending, employment increases.
- Normative Statement: A normative statement expresses an opinion or value judgment, for instance, the government must increase the minimum wage to reduce inequality, or the trade of arms must be banned.
- Comparative Advantage Theory: A theory suggesting that economic units should specialize in producing products where they have the lowest opportunity cost.
- Comparative Advantage and Trade: Two economic agents trading based on comparative advantage will both consume above the production possibility frontier, potentially improving their welfare.
- Supply Factors: Factors directly affecting supply include prices of production factors, technology, and production costs. Consumer income is not a direct supply factor.
- Equilibrium Price/Quantity: With supply function Qs = 10 + 6P and demand Qd = 90 - 10P, the equilibrium price is 5 and quantity 40. A price ceiling of 4 creates excess demand (shortage).
- Price Floor: A government-imposed price minimum (floor) results in a supply surplus (excess supply). If the price floor is twice the equilibrium price, a supply surplus of 12 units emerges (Qd=6 Units and Qs =18 in this example).
- Price Controls/Surplus/Shortage: Setting minimum prices by the government leads to surpluses (excess supply). When both demand and supply decrease, the equilibrium price and/or quantity may increase, decrease, or remain unchanged, depending on the rate of decrease for each.
- Ticket Speculation: Ticket speculators disrupt markets, but they often move markets toward equilibrium.
Elasticity of Demand
- Inelastic vs Elastic Demand: If a 30% price increase results in a 50% quantity decrease, the demand is elastic. If the price increase leads to a smaller percentage quantity decrease, the demand is inelastic.
- Total Revenue and Elasticity: Total revenue increases by 5% if the price of an item increases by 10%. Demand is inelastic.
- Price Elasticity of Demand: Demand is inelastic if a 10% price change results in a smaller percentage change in quantity demanded. If the change is similar in magnitude, demand is unitary elastic. If the quantity change is greater in magnitude than the price change, the demand is elastic.
- Tax Burden: If demand is more inelastic than supply, the tax burden falls primarily on consumers.
Market Structures
- Perfect Competition: Perfect competition is characterized by free entry and exit, homogeneous products, and price-taking firms.
- Monopoly: A monopoly exists when one firm controls the market. A profit-maximizing monopolist sets output where marginal revenue equals marginal cost, often charging above the competitive market price.
- Monopolistic Competition: Monopolistic competition differs from perfect competition by allowing firms to differentiate their products.
- Oligopoly: In an oligopoly, few firms control the market, often leading to strategic interactions and interdependence. Cartels, groups of firms that collude to act like a monopolist, are not stable as individual companies have incentives to increase their profits by producing more.
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Description
Explore key concepts in microeconomics through practical applications. This quiz covers airline cost evaluation, marginal analysis, and the distinction between positive and normative statements. Test your understanding of how these concepts influence economic decisions.
