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80 terms

Econ 200 Final Exam

STUDY
PLAY
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An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy
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normative statements are expressions of facts
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certain inherently desirable products such as education and health care should be produced so long as resources are available
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the production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment
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products and services are scarce because resources are scarce
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although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not
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the wants of consumers are expressed in the product market with "dollar votes"
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the guiding function of prices tends to keep resources flowing toward their most highly valued uses
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central planning in the Soviet Union and prereform China emphasized the expansion of the production of consumer goods to raise the domestic standard of living
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central planning is plagued with a coordination problem and an incentive problem
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surpluses drive market prices up; shortages drive them down
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if demand increases and supply simultaneously decreases, equilibrium price will rise
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an increase in quantity supplies might be caused bu an increase in production costs
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an increase in quantity supplied might be caused by an increase in business taxes
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consumers buy more of normal goods as their incomes rise
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toothpaste and toothbrushes are substitute goods
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if market demand increases and market supply decreases, the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes
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a decrease in supply of x increases the equilibrium price of x, which reduces the quantity for x and automatically returns the price of x to its initial level
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a price door in a competitive market will result in persistent shortages of a product
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a cieling price in a competitive market will result in persistent surpluses of a product
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the smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it
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if price and total revenue are directly related, demand is inelastic
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if price changes and total revenue changes in the opposite directions, demand is relatively elastic
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the income effect explains an exception to the law of demand
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if marginal utility is diminishing, total utility must also be declining
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the substitution effect suggest that, when consumers judge product quality by price, they will substitute high-priced products for low-priced products
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when a consumer is maximizing total utility, he or she cannot increase total utility by reallocating expenditures among different products
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a demand curve for a public good is determined bu summing horizontally the individual demand curves for the public good
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the optimal (economically-efficient) level of air pollution is zero emission
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the real opportunity cost of producing product x is the amounts of products y, z, and so forth, that night have been produced if resources had not been used to produce x
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the short run is a period of time during which all costs are fixed costs
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variable costs are costs that vary directly with output
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the law of diminishing returns explains why the long-run average total curve is U-shaped
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diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise
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at zero units of output a firm's variable costs are zero
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average fixed costs diminish continuously as output increases
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if the marginal-cost curve lies below the average-variable-cost-curve, the average-variable-cost-curve must be falling
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economic profit is found by subtracting accounting costs from total revenue
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the law of diminishing returns explains why short-run marginal cost curves are upward sloping
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the law of diminishing returns explains diseconomies of scale
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in maximizing profit a firm will always produce that output where total revenues are at a maximum
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in the short run a competitive firm will always choose to shut down if product price is less than the lowest attainable average total cost
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after all long-run adjustments have been completed, a firm in a competitive industry will produce that level of output where average total cost is at a minimum
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a competitive firm will produce in the short run so long as its price exceeds its average fixed cost
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marginal cost is a measure of the alternative goods which society forgoes in using resources to produce an additional unit of some specific product
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price and marginal revenue are identical for an individual purely competitive seller
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because the equilibrium position of a purely competitive seller entails an equality of price and marginal costs, competition produces up to an efficient allocation of economic resources
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the demand curve for a purely competitive industry is perfectly elastic, but the demand curves faced by individual firms in such an industry are down-sloping
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the total revenue curve of a competitive seller graphs as a straight, up-sloping line
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marginal revenue is the addition to total revenue-resulting from the sale of one more unit of output
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although individual purely competitive firms can influence the price of their product, these firms as a group cannot influence market price
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in a purely competitive industry competition centers more on advertising and sales promotion than on price
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in the long run a pure monopolist must produce at that output where average total cost is at a minimum
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in the short run a pure monopolist will maximize profits by producing at that level of output where the difference between price and average total cost is at minimum
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in the short run a pure monopolist will charge the highest price the market will bear for its product
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pure monopolists always earn economic profits
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the XYZ company can sell 4 units per week at $10 per unit and 5 units per week at $9 per unit, the marginal revenue of the fifth unit is $5
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because of their large -scale level of production, pure monopolists overallocate resources to their industry by producing beyond the P=MC output
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because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously
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price discrimination occurs every time a firm sells a good for two different prices
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natural monopoly may result where products produce substantial network effects and can be simultaneously consumed by a large number of consumers
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price discrimination will result in consumers with more elastic demand purchasing more of the good than when a single price is charged to all consumers in the market
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successful price discrimination requires that buyers charged the different prices be physically seperated
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price discrimination is illegal in the inited states under antitrust regulations
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extensive network effects may drive a market toward natural monopoly because consumers tend to choose a common, standard product that everyone is using
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in the long run monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve
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the monopolistically competitive seller maximizes profits by equating price and marginal cost
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monopolitically competitive firms are inefficient because they produce at a point on the rising segment of their average cost curves
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the demand curve of a monopolistically competitive producer is less elastic than that of a purely competitive producer
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the larger the number of firms and the less the degree of product differentiation, the greater will be the elasticity of a monopolistically competitive seller's demand curve
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the economic profits earned by monopolitisically competitive sellers are zero in the long run
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the excess capacity problem associated with monopolistic competition implies that fewer firms could produce the asme industry output at a lower cost
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the demand curve of amonopolistically competitive firm is more elastic than that of a pure monopolist
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the monopolistically competitive seller equates price and marginal cost in the maximizing profits
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if three or four homogeneous oligopolists collude, the resulting price and production outcomes will be similar to those of a pure monopoly
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generally speaking, the larger the number of firms in an oligopolist industry, the more difficult it is for those firms to collude
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the marekt structure called "oligopoly" includes industries with one or a small number of firms
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the u.s. breakfast cereal industry is an example of a differentiated oligopoly
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the us steel industry is an example of homogeneous oligopoly
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monopolistically competitive sellers produce efficiently because they obtain only normal profits in the long run