If a household's income doubles, its budget constraint will ______________.
Shift out parallel to the old one
If MUx/Px < MUy/Py, then ____________________.
Spending a dollar less on X and a dollar more on Y increases utility.
We can state the utility-maximizing rule in words in the following way: A person maximizes utility when she equalizes the _______ across products.
Marginal utility per dollar spent
Assume leisure is an inferior good instead of a normal good. The income effect of a wage increase will lead to a _______ demand for leisure and a _______ labor supply.
A rise in the price of Pepsi that causes a household to shift its purchasing pattern toward Coke and away from Pepsi is the _________ effect of a price change.
Assume leisure is a normal good. The substitution effect of a wage decrease implies a ________ demand for leisure and a ________ labor supply.
Ellen is spending her entire income on goods X and Y. Her marginal utility from the last units of X and Y that she consumes is 25. Ellen's utility is only maximized if __________________.
The prices of X and Y are the same
The law of diminishing marginal utility refers to _____________________.
A consumer's decrease in additional satisfaction as she consumes more and more units of a good.
Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10. The clothing and food pairs in Jane's choice set include _________ units of clothing and ________ units of food.
Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10. What is the equation for Jane's budget constraint?
$25 x Clothing + $10 x Food= $500
Marginal utility is the _________ satisfaction gained by consuming __________ of a good.
Additional; one more unit
Assume the total product of three workers is 120 and the total product of four workers is 160. The fourth worker's average product is ________ while her marginal product is _________.
A firm will begin to experience diminishing returns all the output where marginal _________________.
An___________ in a firm's scale of production leads to ____________ average total cost when there are economies of scale.
An economist is studying the price behavior of Atlanta's 100 dog kennels. She says she will limit her analysis to a time period that allows for neither new kennels to enter the market nor existing ones to leave it. The economist is referring to the ___________ time period.
Both Kate and Kyle own saltwater taffy factories. Kate's factory has low fixed costs and high variable costs. Kyle's factory has high costs and low variable costs. Currently each factory is producing 1,000 boxes of taffy at the same total cost. If each produces ___________________________________.
more, the costs of Kate's factory will exceed those of Kyle's factory
Average variable and average total costs get closer together as output increases because _______________ as output increases.
average fixed costs decrease
A firm is experiencing ____________ on the downward sloping portion of a firm's long run average cost curve.
increasing returns to scale
As long as existing firms earn economic losses in an industry, new firms will __________ the industry and the industry supply curve will shift to the the ______________.
An industry is in ____________ if firms have an incentive to enter or exit in the _____________ run
A firm is better off operating than shutting down when price adequately covers _____________.
average variable cost
A short run total cost schedule is a __________ cost schedule shifted upward by the amount of __________ cost.
total variable; total fixed
Assume Dell Computer Company operates a perfectly competitive market producing 5,000 computers per day. At this output level, price exceeds the firm's marginal and average variable costs. It follows that producing one more computer will cause this firm's _______________.
profits to increase
A firm facing a perfectly price elastic demand curve, ceteris paribus ______________________.
will have zero quantity demanded if it raises its price above the market price.
A firm's long run average cost curve represents the minimum cost of producing each level of output when the scale of production can be adjusted.
True or False
An individual wheat farmer produces wheat in a perfectly competitive market. An increase in the market demand for wheat will cause the farmer's marginal revenue to _________ and his profit maximizing level of output to _________.
The marginal revenue product of labor curve will always shift to the right if _______________.
product demand increases and product price increases
A decrease in the wage rate will change _____________________.
the amount of labor employed, and it may also change the amount of other inputs employed.
The price of any factor of a production in a competitive market depends on the value of the final product it is used to produce.
True or False
The formula for marginal revenue product of labor (L is for labor, X is the output) is ______________.
A firm's marginal cost curve in a perfectly competitive product market is the same as its ________ curve. Similarly, a firm's marginal revenue product curve in a perfectly competitive labor market is the same as its _________ curve.
A firm will continue hiring labor as along as the MRP of labor _________ the market wage rate.
is greater than or equal to
A firm hires labor, capital, and land to produce tomatoes. Currently the marginal product of the last unit of labor input is 20, the marginal product of the last unit of capital input is 30, and the marginal product of the last unit of land input is 100. The market wage is $10 and the market price for capital is $15. If the firm is using the optimal combination of inputs, then the price of land is ___________.
A decrease in the productivity of a factor of production will ____________.
shift is marginal revenue product curve to the left
The law of ________ explains why a marginal revenue product schedule eventually declines.
diminishing marginal returns
A car manufacturing company adopts a new technology that, ceteris paribus, increases the productivity of capital. At the same time, workers unionize and demand higher wages. Assume that for this firm capital and labor are substitutable. What is most likely to occur?
capital will be substituted for labor
When a large amount of output is produced per unit of the input, the input is said to exhibit __________.
The marginal revenue product of labor is _________.
the additional revenue a firm earns by employing one additional unit of labor.
The marginal cost of a unit of labor in perfectly competitive labor market is ______________.
the market wage rate
A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market.The market price of soybeans is $1 a bushel, the wage rate is $12, the farmer employs six workers and the marginal product of the sixth worker is 10. What wold you advise this farmer to do?
reduce employment because the wage paid is greater than the marginal revenue product
Assume that automobiles are a normal good. An increase in income will ___________________.
shift the marginal revenue product curve of auto workers to the right
The number of seats available in a stadium is fixed at 80,000. The equilibrium price for a ticket to a football game at a stadium is $30. The equilibrium price for a ticket to a baseball game at the stadium is $20. What would be true?
the demand for each baseball game must be lower than the demand for each football game