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The process by which resources are transformed into useful forms is Production

The concept of choice would become irrelevant if Scarcity was eliminated.


Which of the following is not a resource as the term is used by economists? Money
Opportunity cost, most broadly define, is What we give up, when we mae a
choice or a decision
!aboratory "or controlled# e$periments cannot be performed in economics because economics is a social science
%ational choice or rational decision&maing involves Weighing up marginal costs ' marginal
benefits associated with a decision
The (law of demand( implies that )s prices fall, *uantity demanded
increases
The *uantity demanded "+d# of a soft drin brand ) has decreased. This could be because The price of ) has increased
,emand curves in P&+ space are derived while holding constant -ncomes, tastes, ' the prices of other
goods
Suppose the demand for good . goes up when the price of good / goes down. We can say
that goods . and / are
0omplements.
-f the demand for coffee decreases as income decreases, coffee is ) normal good
Which of the following is consistent with the law of supply? )s the price of calculators rises, the
*uantity supplied of calculators
increases
When the maret operates without interference, price increases will distribute what is
available to those who are willing and able to pay the most. This process is nown as
Price %ationing
What is the effect of imposing a fi$ed per unit ta$ on a good on its e*uilibrium price and
*uantity?
Price rises, *uantity falls
) price floor is ) minimum price usually set by
government, that sellers must charge
for a good or service
The need for rationing a good arises when ,emand e$ceeds supply
-f a government were to fi$ a minimum wage for worers that was higher than the maret&
clearing e*uilibrium wage, economists would predict that
More worers would become employed
The price elasticity of demand is the %atio of the percentage change in
*uantity demanded to the percentage
change in price
-f the *uantity demanded of beef increases by 12 when the price of chicen increases by
342, the cross&price elasticity of demand between beef and chicen is
4.31
The burden "incidence# of a ta$ will fall mainly on the producers if Supply is inelastic and demand is
elastic
-ncome elasticity of demand is the 2 change in *uantity demanded divided by the 2
change in income. Which type of goods has negative income elasticity of demand?
-nferior goods
-f total revenue rises by 542 when price increases by 12, this means6 ,emand is price inelastic
-f a 12 increase in price causes no change in total revenue, this means6 ,emand is unit elastic
7conomists use the term utility to mean The satisfaction a consumer obtains
from a good or service
7conomists use the term marginal utility to mean )dditional satisfaction gained by the
consumption of one more unit of a
good
The law of diminishing marginal utility states that The satisfaction derived from each
additional unit of a good consumed will
decrease
7conomists have used the idea of diminishing marginal utility to e$plain why ,emand curves slope downwards.
,emand curves become flatter at lower
prices.
) consumer will buy more units of a good if the value of the good(s Marginal utility is greater than price
7conomists define an indifference curve as the set of points Which yield the same total utility
The curve that is traced out when we eep indifference curves constant and move the
budget line parallel to its original position is
the income&consumption curve
-ndifference curves cannot -ntersect each other
The main problem with marginal utility analysis is6 -ts cardinal measurement of utility
The costs that depend on output in the short run are both total variable costs and total
costs
the added revenue that a firm taes in when it increases output by one additional unit is Marginal revenue
) firm will shut down in the short run if Total variable costs e$ceed total
revenues
-f you were running a firm in a perfectly competitive industry you would be spending your
time maing decisions on
8ow much of each input to use
Maret power is ) firm(s ability to raise price without
losing all demand for its product
%elative to a competitively organi9ed industry, a monopoly Produces less output, charges higher
prices and earns economic profits.
-f firms can neither enter nor leave an industry, the relevant time period is the Short run
-n the long run There is no fi$ed factors of production
7conomic profits are The difference between total revenue '
total costs
) group of firms that gets together to mae price and output decisions is called ) 0artel
Price discrimination involves :irms selling the same product at
different prices to different consumers
)n industry that has a relatively small number of firms that dominate the maret is called ) concentrated industry.
) form of industry structure characteri9ed by a few firms each large enough to influence
maret price is
Oligopoly
) firm in a monopolistically competitive industry Must lower price to sell more output
-n monopolistic competition, firms achieve some degree of maret power ;y producing differentiated products
) <iffen good -s a good which people buy more of as
its price increases
) recession is ) period during which aggregate output
declines
The inde$ used most often to measure inflation is the 0onsumer price inde$
Per capita income is obtained by dividing =ational -ncome by Total population of that country
-mports for any economy are considered as6 !eaages
,isposable income is6 Total income minus net ta$es
The rate at which central ban lends to commercial bans is nown as ,iscount rate