June P2 Mix
168 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 is Accounting Profit?

  • Revenue minus explicit and implicit costs
  • Revenue plus explicit costs
  • Revenue minus explicit costs (correct)
  • Revenue divided by explicit costs

    • What is the difference between Fixed Costs and Variable Costs?

  • Fixed Costs do not vary with output, while Variable Costs do (correct)
  • Fixed Costs are always lower than Variable Costs
  • Fixed Costs vary with output, while Variable Costs do not
  • Fixed Costs are always higher than Variable Costs

    • What is the formula for Average Total Cost?

  • FC divided by Q
  • VC divided by Q
  • MC divided by Q
  • TC divided by Q (correct)

    • What happens to costs in the long run?

    <p>All costs become variable</p> Signup and view all the answers

    What is Marginal Revenue?

    <p>The additional income from selling one more unit</p> Signup and view all the answers

    What is Economies of Scale?

    <p>When increasing the scale of production leads to a lower cost per unit</p> Signup and view all the answers

    What is the formula for Total Revenue?

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

    What is Normal Profit?

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

    What is the purpose of understanding revenue and cost interactions?

    <p>To determine the optimal level of output</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 primary objective of most businesses?

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

    What is the Law of Supply?

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

    What is the relationship between the price of a good and its demand?

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

    What is a substitute in the context of demand and supply?

    <p>A good that is a cheaper alternative to another good</p> Signup and view all the answers

    What is the importance of relative prices in economics?

    <p>They influence consumer and producer decisions about what to buy or produce</p> Signup and view all the answers

    What is the impact of a decrease in the price of one good on the demand for a related good?

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

    What is the dynamic relationship between markets?

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

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

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

    What is price elasticity of demand a measure of?

    <p>The responsiveness of quantity demanded to a change in price</p> Signup and view all the answers

    When is the elasticity of demand considered inelastic?

    <p>When the elasticity is less than 1</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 cross elasticity of demand a measure of?

    <p>The responsiveness of the quantity demanded of one good to a change in the price of another good</p> Signup and view all the answers

    What is income elasticity of demand a measure of?

    <p>The responsiveness of quantity demanded to a change in consumer income</p> Signup and view all the answers

    What is the term for a good that has a negative income elasticity of demand?

    <p>Inferior good</p> Signup and view all the answers

    What is the primary purpose of understanding price elasticity of demand?

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

    When is the elasticity of supply considered elastic?

    <p>When the elasticity is greater than 1</p> Signup and view all the answers

    Which of the following is a factor that affects the price elasticity of supply?

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

    What is the term for a good that has a positive cross elasticity of demand with another good?

    <p>Substitute good</p> Signup and view all the answers

    What does the price elasticity of demand measure?

    <p>The responsiveness of quantity demanded to a change in price of the same good</p> Signup and view all the answers

    What is the term for a good with an elasticity of demand greater than 1?

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

    Which of the following makes demand more elastic?

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

    What does the price elasticity of supply measure?

    <p>The responsiveness of quantity supplied to a change in price</p> Signup and view all the answers

    What is the term for a good with a positive cross elasticity of demand with another good?

    <p>Substitute Good</p> Signup and view all the answers

    What is the term for a good with a negative income elasticity of demand?

    <p>Inferior Good</p> Signup and view all the answers

    Why is understanding price elasticity of demand important for businesses?

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

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

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

    What is the effect of an increase in the availability of production resources on the elasticity of supply?

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

    Why is understanding price elasticity of supply important for businesses?

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

    What is the primary role of relative prices in economics?

    <p>To influence consumer and producer decisions about what to buy or produce</p> Signup and view all the answers

    What happens to demand when the price of a substitute good increases?

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

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

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

    How do higher prices affect supply in a market?

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

    What is the effect of a decrease in the price of one good on the demand for a related good?

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

    What is the significance of understanding the relationships between markets?

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

    What is the impact of changes in supply and demand on relative prices?

    <p>Relative prices shift dynamically</p> Signup and view all the answers

    What is the primary factor that influences demand in a market?

    <p>Price expectations</p> Signup and view all the answers

    What is the primary purpose of calculating economic profit?

    <p>To account for opportunity costs</p> Signup and view all the answers

    Which type of cost varies directly with the level of production?

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

    What is the result of increasing the scale of production, leading to a lower cost per unit?

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

    What is the additional income from selling one more unit of a product?

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

    What is the minimum profit needed for a business to sustain itself?

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

    What is the term for the change in output in response to a proportional increase in all inputs?

    <p>Returns to Scale</p> Signup and view all the answers

    What is the sum of fixed and variable costs?

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

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

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

    What is the calculation for total revenue?

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

    What is the result of a business's revenue exceeding its total cost?

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

    What is the primary role of relative prices in influencing consumer and producer decisions?

    <p>Deciding what to buy or produce, affecting resource allocation</p> Signup and view all the answers

    How do changes in the price of one good affect the demand for a related good that is a substitute?

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

    What is the result of a decrease in the price of one good on the demand for a related good that is a complement?

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

    What is the key factor that influences demand in a market?

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

    How do higher prices affect supply in a market?

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

    What is the significance of understanding the relationships between markets?

    <p>It influences resource allocation in an economy</p> Signup and view all the answers

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

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

    What is the effect of changes in supply and demand on relative prices?

    <p>Relative prices are dynamically adjusted</p> Signup and view all the answers

    What does the price elasticity of demand measure?

    <p>The responsiveness of quantity demanded to a change in price</p> Signup and view all the answers

    Which of the following goods tend to have inelastic demand?

    <p>Necessity goods</p> Signup and view all the answers

    What is the effect of an increase in the availability of production resources on the elasticity of supply?

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

    What is the term for a good that has a positive cross elasticity of demand with another good?

    <p>Substitute good</p> Signup and view all the answers

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

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

    What is the primary purpose of understanding price elasticity of demand?

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

    What is the term for a good that has a negative income elasticity of demand?

    <p>Inferior good</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 another good?

    <p>It increases the demand for the other good</p> Signup and view all the answers

    What is the primary role of relative prices in economics?

    <p>To allocate resources efficiently</p> Signup and view all the answers

    What is the effect of a decrease in the price of one good on the demand for a complementary good?

    <p>It increases the demand for the complementary good</p> Signup and view all the answers

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

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

    What is the purpose of calculating marginal cost?

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

    What is the result of increasing returns to scale?

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

    What is the significance of the break-even point in a business?

    <p>It represents the point where the business makes just enough profit to continue operating in the market.</p> Signup and view all the answers

    What is the primary difference between the short run and the long run in terms of costs?

    <p>In the short run, certain costs are fixed, while in the long run, all costs become variable.</p> Signup and view all the answers

    What is the purpose of calculating average total cost?

    <p>To evaluate the efficiency of a firm's production process.</p> Signup and view all the answers

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

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

    What is the significance of understanding the interaction between cost and revenue in a business?

    <p>It is crucial for determining profitability and guiding business decisions.</p> Signup and view all the answers

    What is the primary purpose of calculating marginal revenue?

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

    What is the significance of economies of scale in a business?

    <p>It leads to a decrease in the cost per unit of output.</p> Signup and view all the answers

    What determines how resources are distributed in an economy?

    <p>The relationships between markets</p> Signup and view all the answers

    Which of the following factors is most likely to increase the demand for a particular good?

    <p>A decrease in the price of the good</p> Signup and view all the answers

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

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

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

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

    Which of the following is an example of a relative price?

    <p>The price of a house in terms of the number of hours worked</p> Signup and view all the answers

    How do changes in supply and demand affect relative prices?

    <p>They shift relative prices</p> Signup and view all the answers

    What is the significance of understanding the relationships between markets in an economy?

    <p>It is essential for analyzing how changes in one market affect others</p> Signup and view all the answers

    What is the primary factor that influences the relationship between cost, revenue, and profitability in a firm?

    <p>The relationship between the firm's cost, revenue, and profitability</p> Signup and view all the answers

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

    <p>Accounting profit considers only explicit costs, while economic profit considers both explicit and implicit 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

    In the long run, what happens to fixed costs?

    <p>They become variable costs</p> Signup and view all the answers

    What is the term for a situation where 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 purpose of calculating total revenue?

    <p>To understand the dynamics of cost and revenue interactions</p> Signup and view all the answers

    What is the term for a good that has an elasticity of demand exactly equal to 1?

    <p>Unit Elastic Good</p> Signup and view all the answers

    What is the term for the minimum profit needed for a business to sustain itself in the market?

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

    Which of the following factors tends to make demand more inelastic?

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

    What is the formula for average fixed cost?

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

    What is the term for the change in output in response to a proportional increase in all inputs?

    <p>Returns to scale</p> Signup and view all the answers

    What is the effect of an increase in the price of a complementary good on the demand for another good?

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

    What is the purpose of understanding the dynamics of cost, revenue, and profitability?

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

    What is the primary purpose of understanding price elasticity of supply?

    <p>To plan production levels</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 term for the total income from sales?

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

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

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

    What is the term for the responsiveness of quantity supplied to a change in price?

    <p>Price elasticity of supply</p> Signup and view all the answers

    Which of the following is a factor that affects the price elasticity of supply?

    <p>Production capacity</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 effect of an increase in the availability of production resources on the elasticity of supply?

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

    Which of the following types of profit takes into account both explicit and implicit costs?

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

    What is the purpose of calculating the marginal cost of production?

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

    Which of the following is a characteristic of economies of scale?

    <p>Lower cost per unit of production</p> Signup and view all the answers

    What is the effect of a change in price on total revenue if the demand is elastic?

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

    Which of the following is a key concept in the short run cost structure of a firm?

    <p>Fixed costs</p> Signup and view all the answers

    What is the relationship between the price of a good and its demand in a market?

    <p>Inversely proportional</p> Signup and view all the answers

    What is the purpose of calculating the average total cost of production?

    <p>To evaluate the efficiency of production</p> Signup and view all the answers

    Which of the following is a characteristic of constant returns to scale?

    <p>Output increases proportionally to inputs</p> Signup and view all the answers

    What is the effect of a decrease in the price of a complementary good on the demand for another good?

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

    Which of the following is a factor that affects the price elasticity of supply?

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

    What is the primary factor that distinguishes elastic demand from inelastic demand?

    <p>The size of the price change</p> Signup and view all the answers

    Which of the following statements about cross elasticity of demand is true?

    <p>It highlights the interdependencies between different products</p> Signup and view all the answers

    What is the effect of an increase in the time period on the elasticity of supply?

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

    Which of the following goods would likely have an inelastic demand?

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

    What is the primary purpose of understanding price elasticity of supply?

    <p>To plan production levels and adjust to changes in market conditions</p> Signup and view all the answers

    Which of the following would lead to an increase in the price elasticity of demand for a good?

    <p>An increase in the time period</p> Signup and view all the answers

    What is the term for a good that has a positive income elasticity of demand?

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

    Which of the following factors does NOT affect the price elasticity of demand?

    <p>Production capacity of the firm</p> Signup and view all the answers

    What is the effect of an increase in the availability of production resources on the elasticity of supply?

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

    Which of the following is a practical application of understanding elasticities in business?

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

    What is the primary implication of understanding the relationships between different markets?

    <p>To analyze how changes in one market affect others, influencing prices, supply, and demand across the economy</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its demand, assuming the good is not inelastic?

    <p>Demand decreases as consumers seek cheaper alternatives</p> Signup and view all the answers

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

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

    What is the result of a decrease in the price of one good on the demand for a related good, assuming the goods are complements?

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

    What is the primary factor that influences the profitability of a firm in the long run?

    <p>Cost</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 primary implication of understanding the dynamic relationship between markets?

    <p>To analyze how changes in one market affect others, influencing prices, supply, and demand across the economy</p> Signup and view all the answers

    What is the primary role of relative prices in economics?

    <p>To influence consumer and producer decisions about what to buy or produce</p> Signup and view all the answers

    What is the primary influence on the allocation of resources in an economy?

    <p>Relative prices</p> Signup and view all the answers

    Which of the following statements is true about the relationship between markets?

    <p>A change in one market can have a ripple effect on other markets</p> Signup and view all the answers

    What is the result of an increase in the price of a substitute good?

    <p>A decrease in the demand for the original good</p> Signup and view all the answers

    Why are relative prices important in economics?

    <p>They influence consumer and producer decisions about what to buy or produce</p> Signup and view all the answers

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

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

    What is the effect of a decrease in the price of one good on the demand for a related good?

    <p>An increase in demand for the related good if they are complements</p> Signup and view all the answers

    What is the dynamic relationship between markets characterized by?

    <p>An intricate web of interactions and interdependencies</p> Signup and view all the answers

    What is the primary factor that influences demand in a market?

    <p>All of the above</p> Signup and view all the answers

    A 20% increase in the price of a good results in a 15% decrease in the quantity demanded. What can be inferred about the elasticity of demand?

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

    Which of the following factors would make the price elasticity of supply more elastic?

    <p>An increase in the time to respond to price changes.</p> Signup and view all the answers

    If the cross elasticity of demand between two goods is -2, what can be inferred about the goods?

    <p>They are complementary goods.</p> Signup and view all the answers

    A good has an income elasticity of demand of 1.5. What happens to the quantity demanded when consumer income increases by 10%?

    <p>The quantity demanded increases by 15%.</p> Signup and view all the answers

    Why is understanding price elasticity of demand important for businesses?

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

    Which of the following would make the demand for a good more elastic?

    <p>An increase in the proportion of income spent on the good.</p> Signup and view all the answers

    What happens to the elasticity of supply over time?

    <p>It 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 effect of an increase in production capacity on the elasticity of supply?

    <p>It makes supply more elastic.</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 limitation of accounting profit?

    <p>It does not account for opportunity costs.</p> Signup and view all the answers

    Which of the following cost structures is most relevant for short-term decision-making?

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

    What is the primary consequence of decreasing returns to scale?

    <p>Firms will experience higher average costs.</p> Signup and view all the answers

    Which of the following is a key factor in determining the optimal level of output?

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

    What is the primary objective of understanding revenue and cost interactions?

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

    What is the primary consequence of an increase in the price of a good?

    <p>The quantity demanded will decrease.</p> Signup and view all the answers

    Which of the following is a characteristic of a firm with increasing returns to scale?

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

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

    <p>To predict changes in the quantity demanded</p> Signup and view all the answers

    What is the primary consequence of a decrease in the availability of production resources?

    <p>The elasticity of supply will decrease.</p> Signup and view all the answers

    Which of the following is a characteristic of a firm with constant returns to scale?

    <p>The output increases proportionally to the inputs.</p> Signup and view all the answers

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser