Deck 13 Flashcards Preview

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Flashcards in Deck 13 Deck (20):
1

The kinked demand curve is associated with what kind of market?

Oligopoly

2

In markets controlled by monopolists, price is set where:

Marginal revenue equals marginal cost

3

What happens to equilibrium price and quantity when supply and demand both increase?

Equilibrium quantity increases but equilibrium price is indeterminate

4

Price elasticity of demand =

Percent change in quantity demanded / percent change in price

5

The elasticity of supply =

Percent change in quantity supplied / change in price

6

Change in quantity demanded/supplied is caused by:

A change in price; movement along the demand/supply curve

7

Change in demand/supply is caused by:

Changes in something other than price; shift of the demand/supply curve

8

Fundamental Law of Supply

As price increases, quantity supplied will also increase

9

Fundamental Law of Demand

As price increases, quantity demanded will decrease

10

When does a surplus occur?

Price floor is greater than the equilibrium price; Supply is greater than demand

11

When does a shortage occur

Ceiling price is less than the equilibrium price; supply is lower than demand

12

Price inelasticity

Price elasticity of demand is less than 1; quantity demanded or supplied of a good is unaffected when the price of that good changes

13

Price Elasticity

Price elasticity of demand is greater than 1

14

When demand is price inelastic and prices increase, how does total revenue change?

TR increases

15

When demand is price elastic and prices increase, how does total revenue change?

TR decreases

16

Marginal Product

The change in total product resulting from a one-unit increase in the quantity of an input employed

17

Perfect Competition

No individual firm can influence the market price; Large number of suppliers, homogenous products, no barriers to entry

18

Monopolistic competition

Many sellers compete to sell a differentiated product; few barriers to entry

19

Oligopoly

Few sellers dominate the sales of a product and entry is difficult; firms control quantity and price

20

Monopoly

Single firm with a unique product, set both quantity and price