final exam review Flashcards
(56 cards)
A demand curve usually has a
negative slope because price and quantity demanded are inversely related. (Quantity X axis, Price Y axis
A new hormone will increase the amount of milk each cow produces. If this hormone is
adopted by many dairies, what will be the effect on the milk market?
an increase in supply, lower equilibrium price, and higher equilibrium quantity
If a firm is deciding how much output to produce and sell in a perfectly competitive market,
and if the price of the good is greater than its marginal cost,
more should be produced
-more revenue can be made
If the government imposes a ceiling price on apartment rents, we would expect to observe
all of the following except one. Which is the exception?
an increase in the number of new apartment complexes being built
When compared to firms in perfect competition, monopolists tend to charge __________
prices and offer __________ quantities of output.
higher; lower
Which of the following best describes elastic demand?
A small change in price leads to a significant change in quantity demanded.
If the price of a t-shirt increases by 10% and the quantity demanded decreases by 10%,
what type of elasticity is this?
Unitary elastic demand
Which of the following statements is true for inelastic demand?
Price increase leads to a small decrease in quantity demanded.
When the price elasticity of demand (ED) is greater than 1, what type of demand is it?
Elastic demand
What does a perfectly elastic demand curve look like?
Horizontal
In a unit elastic demand curve, what happens to total revenue when the price changes?
Stays the same
What type of goods have a negative cross-price elasticity of demand
complements
Which of the following is true for perfectly inelastic supply?
Supply remains constant regardless of price
If the price of a good increases by 15% and the quantity demanded decreases by 30%, what
type of elasticity is this?
Elastic demand
What does a negative cross-price elasticity indicate?
The goods are complements
What does the law of diminishing marginal utility state?
As you consume more of a good, the satisfaction from each additional unit decreases
What does the term ‘utility’ refer to in economics?
The pleasure or satisfaction received from consuming goods or services
When should a person stop consuming a good according to utility theory?
When marginal utility becomes zero or negative
What is ‘disutility’?
The point where marginal utility becomes negative and consumption makes you
worse off
What is marginal utility?
The extra satisfaction from consuming one more unit
According to utility analysis, what happens if a good is free?
Consumers stop consuming once marginal utility is zero
What is consumer surplus?
The difference between what a consumer is willing to pay and what they actually
pay
How does the price of goods affect demand according to the law of demand?
Lower prices increase demand