lecture 1

Question 1

what is a model

Answer 1

simplified representation of reality

Question 2

what is ppc

Answer 2

production possibility curve

Question 3

what does the possibility curve represents?

Answer 3

it captures maximum output possibilities for 2 or more good given a set of input if inputs are used efficiently

Question 4

what does inputs are used efficiently mean?

Answer 4

there is no time waste

Question 5

true or false: all the points on the ppc are efficient

Answer 5

true

Question 6

where on the ppc graph oh does it show inefficient production point?

Answer 6

all the points below

Question 7

where on the ppc graph oh does it show unattainable production point?

Answer 7

all points outside the ppc

Question 8

what is absolute advantage?

Answer 8

when a producer can provide a good or service in greater quantity for the same cost or same quantity at a lower cost than its competitors.

Question 9

what is comparative advantage?

Answer 9

company’s ability to produce a good or service at a lower opportunity cost compared to another producer.

Question 10

what is a market?

Answer 10

set of
all the consumers and suppliers who are willing to
buy and sell that good or service at a given price.

Question 11

what is market equilibrium?

Answer 11

Market Equilibrium occurs when the price and the
quantity sold of a given good is stable.

Question 12

what are he characteristics of a perfectly competitive market?

Answer 12

• many buyer and s
• same product everywhere (homogenous goods)
  -No Externality( external factor)
  -good are excludable and rival
  -full information- (everyone has assess to the same info)
  -free entry and exit

Question 13

what is Marginal Benefit?

Answer 13

the additional benefit arising from a unit increase in a particular ac

Question 14

what is Marginal Cost?

Answer 14

the cost added by producing one additional unit of a product or service.

Question 15

when marginal benefits >_ Marginal cost, what should happen?

Answer 15

GO! take acton

Question 16

when marginal benefits< Marginal cost, what should happen?

Answer 16

Don’t take the action

Question 17

what does the cost benefit principle state?

Answer 17

states that an action
should be taken if the marginal benefit is greater
than the marginal cost.

Question 18

what is economic surplus?

Answer 18

is the
difference between the marginal benefit and the
marginal cost of taking that action.

Question 19

what is the Quantity Supplied by a supplier represents?

Answer 19

quantity of a given good or service that
maximizes the profit of the supplier.

Question 20

true or false, maginal cost= opportunity cost

Answer 20

true

Question 21

what does the supply curve represents?

Answer 21

the relationship between the price o a good or service d the quantity supplied of that good or service

Question 22

what are sunk costs?

Answer 22

once paid it can not be recovered

Question 23

what are fixed cost?

Answer 23

costs that dont vary

Question 24

what are variable costs?

Answer 24

cost tends to varies

Question 25

formula for total cost?

Answer 25

fixed cost + variable cost

Question 26

how to find the average variable cost?

Answer 26

Variable cost / Quantity

Question 27

how to find the Average Total cost?

Answer 27

total cost / Quantity

Question 28

How to find the marginal cost?

Answer 28

change in total cost / change in quantity

Question 29

Y does the graph for the marginal cost graph decrease initially

Answer 29

The decreases is due to the addition of a worker which helps to increases the quantity, and this allows one worker to specialise on one task, improving efficiency.

Question 30

Y does the graph for the marginal cost graph increases towards the end

Answer 30

when we increases the quantity we need to increase the number of workers which may cause collisions between worker in the work space as time would be wasted as machines would be used by someone else causing the marginal cost to increases and the next new person cannot produce as much quantities causing the MC to increase

Question 31

where does the ATC cut the MC graph?

Answer 31

The ATC graph intersects the MC graph at the lowest point so when the ATC vertex is the lowest it intersects with the MC graph

Question 32

what is lower the ATC or AVC

Answer 32

AVC is lower than the ATC

Question 33

where does the AVC cut the MC graph?

Answer 33

The AVC graph intersects the MC graph at the lowest point so when the AVC vertex is the lowest it intersects with the MC graph

Question 34

when should they shut down in the short term?

Answer 34

when price is below the min of the AVC

Question 35

when should they shut down in the Long term?

Answer 35

when the price is min of the ATC

Question 36

what shifts the supply curve to the right

Answer 36

- price of input decreases - Advancement in technology -drop in demand of other products - increases no. of suppliers