Micro Final

Question 1

PPB

Answer 1

production possibility boundary - amount of resources possible to produce
- can shift with changes in technology, price of resources or production

Question 2

positive

Answer 2

statement that can be proven/fact based

Question 3

normative

Answer 3

statement that is opinion based

Question 4

absolute advantage

Answer 4

can produce greater quantity or mangnitude

Question 5

comparative advantage

Answer 5

can produce with lower opportunity costs than other country

Question 6

specialization

Answer 6

will specialize where they have lower comp. advanange

Question 7

trade

Answer 7

you must give away less than it would cost you to produce yourself

Question 8

demand

Answer 8

price change causes shift along demand curve (Qd)

- shifts in curve = consumer income, compliments, substitues

Question 9

compliments

Answer 9

purchased with a product (printer and ink)

Question 10

substitutes

Answer 10

ex. pepsi and coke

Question 11

supply

Answer 11

shifts due to technology, tax, entry/exit

Question 12

Equalibrium

Answer 12

set supply = to demand, solve for P sub back in to find q

Question 13

Tax

Answer 13

subtract from entire supply equation

Question 14

Elasticity of demand

Answer 14

change in Q relative to P

Question 15

inelastic demand

Answer 15

not responsive to change in price (less than 1)

Question 16

elastic demand

Answer 16

very responsive to change in price (greater than 1)

Question 17

inelastic supply

Answer 17

not responsive to change in price

Question 18

elastic supply

Answer 18

very responsive to change in price

Question 19

percentage change

Answer 19

% change in Q/ % change in P

Question 20

Equation for when you have two points

Answer 20

(Q2-Q1/P2-P1) x ((P2+P1/Q2+Q1)

Question 21

one point

Answer 21

change q/change p - this is slope of demand cureve x (p/q)

Question 22

greater than 1

Answer 22

elastic

Question 23

less than 1

Answer 23

inelastic

Question 24

normal goods

Answer 24

when income increases Qd increases

Question 25

inferior goods

Answer 25

when income increases Qd decreases

Question 26

giffin goods

Answer 26

inferior good where income effect is greater than substitution effect

Question 27

how to find if inferior or normal?

Answer 27

% change in Qd / % change in income ----- + (normal), - (inferior)

Question 28

cross price elastity

Answer 28

% change Qd for goodx / % change in price for goodY

Question 29

to find percentage change in something

Answer 29

old demand - new demand / old demand

Question 30

Economic surplus

Answer 30

consumer and producer surplus together

Question 31

Price floors

Answer 31

minimum price set, creates a surplus

Question 32

price ceiling

Answer 32

maximum price set, creates a shortage

Question 33

quota

Answer 33

same as floor and celing but vertical

Question 34

deadweight loss

Answer 34

loss of economic surplus due to government intervention

Question 35

black market

Answer 35

go up to demand curve from the quantity being supplied to find price on the black market

Question 36

marginal utility

Answer 36

increases when consumption decreases, decreases when consumption increases

Question 37

budget line

Answer 37

plot all possbible purchases (like PPB)

Question 38

indifference curve

Answer 38

where it is tangent with budget line = purchase. Furtehr from origin the better

Question 39

to max utility or long run coss

Answer 39

MUx/Px = MUy/Py

Question 40

income and substitution effect

Answer 40

1. draw budget line and indif curve (point A) 2. draw new budget line and indif curve (point B) 3. shift new budget line to tough old indifference curve (C) Dis between A and C is substituion effect Dis. between B and C is income effect

Question 41

If income and substituion move in same direction

Answer 41

normal good

Question 42

If income and substituion move in opposite direction s

Answer 42

inferior good

Question 43

marginal labour and capital

Answer 43

ML/MK decreases with more employees / capital

Question 44

Assumptions

Answer 44

1. many sellers, 2. many buyers, 3. no differenciation 4. free entrance

Question 45

Perfect competition

Answer 45

many firms with same product. - zero profit - produce where MC = ATC

Question 46

Monopoly

Answer 46

price makers - produce where MC = MR and charge up to the demand curve - deadweight loss is between MC and demand

Question 47

Monopolistic competition

Answer 47

many small firms w different products and prices (setters) - SR = monopoly (MR = MC and charge P) - LR = firms enter shifting demand and Rev down until demand is tangent to ATC

Question 48

Game theory

Answer 48

make pay off matrix

Question 49

Nash equalibrium

Answer 49

scenario where NEITHER firms would change their strategy

Question 50

Dominant strategy

Answer 50

which strategy will maximize the payout for each firm regardless of what the other does? - if it would change based on other firm there is no dominant strategy