Abbreviations

Question 1

4 resources

Answer 1

LCLE

land + capital (capital stock = physical + human capitals) + labor + entrepreneurship

Question 2

if we focus on the production of capital goods, the ppf shifts out; if consumer goodds the PPF doesnt shift out as much

Answer 2

producing more capital goods = less consumer goods

Question 3

what explains the shape of ppf

Answer 3

law of increasing oppor. cost

Question 4

if two countries have the same opportunity cost to produce more goods

Answer 4

then there is no need for trade

Question 5

questions regarding allocation

Answer 5

W H W (which goods + how should we get it + who should get it)

Question 6

price = signal

Answer 6

helps to create a sensible allocation of resources

Question 7

product market VS. resources market

Answer 7

firms selling products in the market VS households selling thier labor and skills

Question 8

law of demand

Answer 8

inverse relationship between P & Q

demand schedule = list

Question 9

factors that change demand = WETOPIP

Answer 9

wealth (direct relationship) + expected prices (direct) + taste ( direct) + other variables (i.e major factory closes in a small town, demand decreases –> direct) + price of related good (compliment inverse; substitute direct) + income (direct) + population (direct)

Question 10

factors that change supply = IENCOPT

Answer 10

input cost (inverse) + expected price ( if the price of a product is expected to increase in the future, then the current supply would decrease) + number of firms (increase in number of firms increase in supply) + change in weather and natural events + other variables (taxation) +price of alternatives (when the price of alternate good increases the supply of the good asking about decreases because the firm would want to produce the good with higher prices) + technology

Question 11

ceiling

Answer 11

restrict over-pricing + below the eq + shortage + black market i.e rent control

Question 12

floor

Answer 12

helps producers by ensuring minimum + above eq + surplus + total governemnt expenditure = excess supply x price

Question 13

excise tax + 1 condition VS. ad valorem tax

Answer 13

a specific good or service

Question 14

better to tax which party

Answer 14

producers

Question 15

stock VS. quantity variable

Answer 15

stock =quantity a moment in time

flow = a process that takes time

Question 16

both supply and demand are viewed as stock variables in the housing market

Answer 16

1. when price chanegs –> no shift ; when housing stock changes –> supply shifts
2. increase in home prices increases the costs for both producers and consumers

Question 17

does the slope of the demand curve tells us elasticity

Answer 17

no; it does not explain the significance of change in Q / Q

Question 18

midpoint formula + results of various types of elasticity

Answer 18

as we move down the demand curve, it becomes more inelastic

Question 19

TR and elasticity
inelastic demand: P ? TR?
elastic: P? TR?
unit elastic: P? TR?

Answer 19

in - direct
e- inverse
u- no change

Question 20

income elasticity of demand (% QTy/ %income)
+?
-?

Answer 20

+ normal

- inferior

Question 21

cross-price elasticity (%QTY/ %price of Z)
+?
-?

Answer 21

+substitue - compliment

Question 22

meaning of relative price Px/ Py = RP + OP+ AV

Answer 22

1. relative price of x
2. the opportunity cost of one more unit of x
3. the absolute value of the slope of the consumer’s budget line

Question 23

the slope of the budget line represents

Answer 23

the opportunity cost of producing one additional unit on the horizontal axis in the terms of the good on the vertical axis

Question 24

MU = the slope of TU

Answer 24

direct relationship between the two curves

Question 25

both a poor student and a millionare purchase food and diamonds. The Diamond is cheaper for the millionaire

Answer 25

because the tradeoffs are the same (parallel budget line but one is significantly closer to the intersection of X & Y axis than the other)

Question 26

If the income doubles and the price of X & Y also double

Answer 26

budget line no change

Question 27

shifters of budget line= IP

Answer 27

income (parallel shift comparing to the original ) price of the good (rotates --> both slope and intercept of x/y/xy good will change)

Question 28

why do people want to choose on a point on the budget line

Answer 28

more is better

Question 29

MU = delta utility / delta one additional unit of good (graphing, the x coordinate lies between two x units)

Answer 29

the slope of TU

Question 30

How to maximize utility

Answer 30

MUx/Px= MUy /Py

Question 31

substitution effect?

Answer 31

the substitution effect explains that once P increases, Qty demanded moves in the opposite direction of P

Question 32

income effect

Answer 32

a rise in p = less purchasing power

Question 33

formula ofr MPL diminishing marginal returns to labor law of diminishing marginal returns

Answer 33

MPL = change in output / change in labor the marginal product of labor decreases as more workers are hired as more input is added to a fixed amount of other inputs, the marginal return would decline

Question 34

If the marginal product is constant but not zero, the graph would be shaped?

Answer 34

the total product graph would be a straight line

Question 35

as a result of the improvement in technology, the original line would?

Answer 35

the original total product curve shifts up as a sign for increase

Question 36

total cost = 2 variables

Answer 36

explicit + implicit SUNK cost SHOULD NOT be considered during a decision making process

Question 37

Least cost rule ? depends on PNT

Answer 37

a business firm will produce any given output level using the least-cost combination of inputs available to it (the output can be 0_ price othe firm must pay for its inputs + nature of the technology + time horizon

Question 38

``` fixed cost variable cost total fixed cost TVC TC ```

Answer 38

Fixed cost = costs of fixed inputs, which remain constant as output changes Variable cost = costs of variable inputs, which change with output Total fixed cost (TFC) = the cost of all inputs that are fixed in the short run Total variable cost (TVC) = the cost of all variable inputs used in producing a particular level of output Total cost (TC) = TFC + TVC

Question 39

MC

Answer 39

change in tc / change in Q

Question 40

what's the relationship between MPL and MC

Answer 40

When the marginal product of labor MPL rises, marginal cost (MC) FALLS. When MPL falls, MC RISES. Since MPL ordinarily rises and falls, MC will do the OPPOSITE : it will fall then rise. Therefore, the MC curve is U shaped

Question 41

how's avc and mc shape related

Answer 41

The U shape of the AVC curve results from the U-shape of the MC curve, which in turn is based on increasing and then diminishing marginal returns to labor

Question 42

atc VS. avc and afc

Answer 42

The U shape of the ATC curve results from the behavior of both AVC and AFC. At lower levels of output (low Q), AVC & AFC are both failing, so the ATC curve slopes downward. At higher levels of output (high Q), rising AVC overcomes falling AFC, and the ATC curve shapes upward

Question 43

the change of total cost is determined by?

Answer 43

change in labor

Question 44

how can average rise at the end

Answer 44

as long as marginal is higher than average

Question 45

how would avc behave if Q increases

Answer 45

appraoch 0

Question 46

where does MC corsses AVC AND atc

Answer 46

MIN point