Microeconomics Flashcards

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Questions and Answers

What can a survey of hobbies and purchases help a producer assess?

demand to choose a business

What is the standard of living?

the level at which consumers enjoy desired goods

What is the difference between absolute and comparative advantage?

Absolute advantage is the ability to produce at a lower cost, while comparative advantage is the ability to produce at a lower opportunity cost.

What does profit equal?

the total amount of money made minus the production cost Signup and view all the answers

How can producers make the most profit?

by decreasing marginal cost, raising prices, and keeping marginal costs below marginal revenues Signup and view all the answers

What results from market saturation?

excess supply Signup and view all the answers

In a monopoly, there are substitutes available.

False Signup and view all the answers

What causes natural monopolies to occur?

when one producer can meet the market's entire demand Signup and view all the answers

How does the government sanction technological monopolies?

by issuing a patent for technology Signup and view all the answers

What type of monopoly does Wellness Pharmaceuticals have on Lexabuzac?

technological monopoly Signup and view all the answers

How does the government enable government monopolies to exist?

by creating and running a monopoly Signup and view all the answers

What is an example of a government monopoly in the United States?

the U.S. Postal Service Signup and view all the answers

What does the lack of competition within a monopoly mean?

monopolists allow consumers to set the price Signup and view all the answers

How many producers dominate the market in an oligopoly?

a few Signup and view all the answers

What helps enable an oligopoly to form within a market?

a small number of large firms have most of the sales, and barriers to entry exist Signup and view all the answers

Which type of industry in the United States is often considered part of an oligopoly?

car industry Signup and view all the answers

In an oligopolistic market, consumer choice is abundant.

False Signup and view all the answers

Why is competition limited in an oligopoly?

high entry costs prevent new producers from entering the market Signup and view all the answers

Who sets the price in monopolistic competition?

producers and consumers Signup and view all the answers

Which aspect of monopolistic competition gives consumers more choice?

few barriers to market entry exist Signup and view all the answers

What is pure competition?

producers compete in a market by selling identical items Signup and view all the answers

The market for which item generally involves pure competition?

wheat Signup and view all the answers

What is consumer sovereignty?

the power of the consumer to determine what goods and services are produced Signup and view all the answers

Why is the automobile industry considered an oligopoly?

it has significant barriers to entry and is dominated by a few key players Signup and view all the answers

What does a producer with an absolute advantage have the ability to do?

produce a good or service at a lower cost than any competitor can Signup and view all the answers

Which calculation helps determine which producer has the absolute advantage?

amount produced divided by resources used Signup and view all the answers

What is marginal cost?

change in cost divided by production change Signup and view all the answers

What is an example of market saturation?

there are three shoe stores on one block and they have trouble finding customers Signup and view all the answers

What are the factors of production in business?

land, labor, and capital Signup and view all the answers

What is the difference between marginal cost and marginal revenue?

marginal cost is for making one unit, while marginal revenue is for selling one more unit Signup and view all the answers

What is a monopoly?

a market that has a single supplier of a good or service Signup and view all the answers

Why are utilities examples of natural monopolies?

the cost of production restricts competition in the market Signup and view all the answers

How do producers differentiate themselves in monopolistic competition?

by product features Signup and view all the answers

Why is pure competition considered an unsustainable system?

producers cannot make a profit if they keep dropping their prices Signup and view all the answers

Which quality best describes a producer with an absolute advantage?

efficient Signup and view all the answers

How do specialized producers decrease their opportunity costs?

by limiting the types of goods produced Signup and view all the answers

What is the total revenue for Motherboards, Inc.?

the amount the company receives from the sale of all its computer parts Signup and view all the answers

What is the best definition of elasticity in economics?

elasticity of demand measures how the amount of a good changes with price changes Signup and view all the answers

What is the likely action of a clothing store owner regarding unsold jeans?

the store owner would lower the price to encourage consumers Signup and view all the answers

What is a price ceiling?

the highest amount a landlord can charge for rent Signup and view all the answers

Explain price floors and price ceilings.

Price floors help producers by raising prices, price ceilings help consumers by lowering prices. Signup and view all the answers

What occurs when supply and demand coordinate?

equilibrium occurs when supply and demand coordinate to set prices and production Signup and view all the answers

What is a possible result of disequilibrium?

excess demand Signup and view all the answers

Excess supply is created when price or _______ move away from the equilibrium point.

quantity Signup and view all the answers

What is the role of producers in economics?

producers supply goods and services Signup and view all the answers

What happens when prices drop below the point where supply and demand meet?

it results in disequilibrium Signup and view all the answers

What will happen when supply is higher than demand?

prices will fall until the demand rises Signup and view all the answers

Study Notes

Producers and Demand Assessment

A survey of hobbies and purchases aids producers in assessing demand, crucial for business decisions.
Producers aiming for profit can lower marginal costs, increase prices to raise marginal revenue, and maintain marginal costs below revenues.

Standard of Living

Standard of living reflects the level at which consumers enjoy the goods and services they desire.

Comparative vs Absolute Advantage

Absolute advantage: ability to produce at a lower cost than competitors.
Comparative advantage: ability to produce at a lower opportunity cost.

Profit and Market Conditions

Profit is calculated as total revenue minus production costs.
Market saturation occurs when there is an excess supply, leading to reduced profitability for producers.

Monopoly Characteristics

In a monopoly, no substitutes are available, creating a lack of competition.
Natural monopolies arise when a single producer can satisfy the entire market's demand by meeting production costs.
Technological monopolies exist when companies hold patents, restricting competition by controlling innovative products like pharmaceuticals.

Government and Monopolies

Governments may create and regulate monopolies, such as the U.S. Postal Service, which operates as a government monopoly.
Technology monopolies are supported by government patents.

Oligopoly Dynamics

An oligopoly is characterized by a few dominant producers, limited consumer choice, and significant barriers to market entry, such as brand loyalty.
The car industry in the U.S. is a prime example of an oligopoly, where a few firms dominate sales.

Market Structures and Consumer Choice

Monopolistic competition allows consumer choice due to few barriers to entry.
Pure competition entails producers selling identical products, often seen in commodities like wheat.

Consumer Sovereignty

Consumer sovereignty empowers buyers to influence the production of goods and services.

Utility and Market Sustainability

Utilities like electricity and water exemplify natural monopolies due to their high production costs.
Pure competition is viewed as unsustainable because producers cannot maintain profitability under constant price reductions.

Elasticity of Demand

Elasticity measures how demand for a good varies with price fluctuations, impacting sellers' pricing strategies.

Price Mechanisms

A price ceiling, such as the maximum rental charge, can hinder market dynamics.
Price floors elevate prices to help producers, while price ceilings help consumers reduce expenses.
Equilibrium occurs when the interaction of supply and demand establishes prices and production levels.

Impact of Disequilibrium

Disequilibrium can lead to excess demand or excess supply, underscoring the need for prices to adjust to create balance.
When prices fall below equilibrium, it results in disequilibrium, pushing prices to eventually rise as demand adjusts.

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Description

Test your knowledge of key microeconomic concepts with these flashcards. Each card presents important terms and definitions related to consumer behavior, demand assessment, and production advantages. Perfect for students looking to enhance their understanding of microeconomics.