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Terms in this set (31)
Two goods are substitutes if a decrease in the price of one decreases the quantity demanded of the other.
Elasticity of demand equals the ratio of the percentage change in the price of a good to the percentage change in the quantity demanded.
The elasticity of a straight-line demand curve remains constant throughout its length.
Historical date on prices and quantities sold do not provide the basis for drawing an accurate demand curve.
A consumer will consume the combination of goods at the point of tangency between the budget line and the indifference curve.
The marginal cost of producing a fifth unit is the total cost of producing five units minus the total cost of producing four units.
A short-run production situation is where at least one factor (or input) is fixed during the production period.
A long-run production situation, on the other hand, is when all factors (or inputs) are fixed.
A production indifference curve shows the various combinations of two inputs that can be used to produce any given level of output.
An increase in the price of either input in a two-point production situation will change the slope of the budget line.
If a product constitutes a large portion of a consumer's income, demand will be more inelastic.
If there are many close substitutes available for a good, its elasticity of demand will be higher.
Total physical product shows what happens to the quantity of an output when the firm changes the quantity of an input.
The "law" of diminishing returns asserts that marginal returns will ultimately diminish when the quantity of one input is increased.
If MRP>P, a firm should use less of that input.
The law of diminishing marginal returns is the same as increasing returns to scale.
The behavior of historical cost curves says nothing about the cost advantages or disadvantages of a single large firm.
Demand curve becomes flatter
If consumers become more sensitive to changes in the price of a good, the good's:
Responsiveness of quantity demanded to a change in price and change in revenue as price changes
Elasticity provides a guide to both:
Percentage change in quantity of X demanded/ percentage change in price of Y
The definition of cross elasticity of demand for two products X and Y is:
Marginal revenue product equals the price of the input
The rule for optimal input use implies that a firm should use additional units of an input until:
In the above table, the marginal physical product of labor after the addition of the fourth worker is:
Its marginal physical product times the price of steel
The marginal revenue product of an hour of labor used in steel production is equal to:
First declines to a minimum and then increases as output increases
The typical average cost curve:
Decreasing returns to scale
If a firm increases inputs by 15 percent and output increases by 12.5 percent, the firm is experiencing:
Product indifference curve and the budget line are tangent
Production costs for a given output will be minimized when the:
Income elasticity of demand
The relationship between a change in consumer income and a resulting change in demand for a good is:
A factory produces 1,000 radios a year,
Which of the following is a fixed cost to farmer McDonald?
Which of the following is correct?
MRP of additional labor becomes equal to MRP of additional tools
Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?
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