Second PUC Mid-Term Economics Exam

Microeconomics studies the behavior of individual economic units like consumers, firms, and industries.

An indifference curve shows all combinations of two goods that provide the same level of satisfaction to a consumer.

Average revenue is calculated by dividing total revenue by the quantity of output sold.

Market equilibrium occurs at the point where the quantity demanded equals the quantity supplied.

Imports refer to goods and services purchased from other countries.

Inferior goods are those whose demand decreases as income increases.

The want-satisfying capacity of a good or service is known as utility.

Total cost (TC) is the sum of total fixed cost (TFC) and total variable cost (TVC).

Positive economics deals with objective and testable statements about economic phenomena. It focuses on 'what is' and uses data and analysis to explain economic behavior and outcomes. It avoids value judgments and subjective opinions.

Normative economics involves subjective statements and value judgments about what 'should be' in the economy. It focuses on policy recommendations based on personal beliefs and opinions. It often uses words like 'should' or 'ought to.'

A production possibility frontier (PPF) is a curve showing the maximum combinations of two goods that an economy can produce, given its resources and technology. It demonstrates the concept of scarcity and opportunity cost.

Monotonic preferences mean a consumer always prefers more of a good to less of it, all else equal. This implies that indifference curves have a negative slope.

Two main approaches explain consumer behavior: 1. Utility maximization: Consumers seek to maximize their satisfaction or utility by choosing the best combination of goods given their budget. 2. Behavioral economics: This focuses on the psychological and cognitive factors influencing consumer choices, recognizing that people don't always act perfectly rationally.

Short-run costs are the costs that a firm incurs in the short run, where at least one input of production is fixed. These costs include:

1. Fixed costs (FC): Costs that remain constant regardless of the output level.
2. Variable costs (VC): Costs that change directly with the level of output.
3. Total cost (TC): The sum of FC and VC.
4. Average fixed cost (AFC): FC divided by the quantity of output.
5. Average variable cost (AVC): VC divided by the quantity of output.
6. Average total cost (ATC): TC divided by the quantity of output.

Price elasticity of supply (PES) measures the responsiveness of the quantity supplied of a good to changes in its price. It's calculated as the percentage change in quantity supplied divided by the percentage change in price. Formula: PES = (%ΔQuantity Supplied) / (%ΔPrice)

Marginal revenue product of labor (MRP) is the additional revenue generated by employing one more unit of labor. It's calculated as the change in total revenue divided by the change in labor input.