Quiz 2

Question 1

Law of demand

Answer 1

As price goes up demand goes down

Question 2

PED

Answer 2

Price elasticity of demand

=%Qdem/p

Question 3

PED determines

Answer 3

Necessities versus luxuries

Availability of close substitutes

The more narrowly of that is to find the higher the PED

Question 4

Accounting profits

Answer 4

TR- out of pocket costs

Question 5

Economic profits

Answer 5

TR- out of pocket costs and implicit

Question 6

Short run

Answer 6

Inputs are fixed
Able to vary some inputs
In example, plant and equipment is FIXED

Question 7

Long run

Answer 7

Overtime all inputs can vary

Long period of time

Question 8

MPL

Answer 8

• Marginal product of labor
• Additional q of outputs produced by more units of labor
• equal to slope
• =workers/labor

Question 9

Costs

Answer 9

Implicit and explicit

Question 10

Fixed costs

Answer 10

Don’t very with level of output

Ex. Building rent, car interest

Question 11

Variable costs

Answer 11

Varies with the level of output

Question 12

Total costs

Answer 12

Total fixed costs + total variable costs

Question 13

Marginal cost

Answer 13

Addition to cost generated by producing one more unit

Question 14

Average cost curves

Answer 14

=total fixed cost/output

AFC=TFC/Q

Question 15

Constant shape of LRATC

Answer 15

Horizontal

Question 16

Increasing returns shape of LRATC

Answer 16

Downward slope

Question 17

Decreasing returns shape LRATC

Answer 17

Upward slope

Question 18

PED >1

Answer 18

Elastic

Question 19

PED <1

Answer 19

Inelastic

Question 20

PED =1

Answer 20

Unitary/elastic

Question 21

PED =0

Answer 21

Inelastic