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85 terms

stupid econ

STUDY
PLAY
A production function:
Is a technological relationship between factors of production and output
The change in total output that results from one additional unit of input is the:
Marginal physical product
The law of diminishing returns indicates that the marginal physical product of a factor declines as more:
Of the factor is used, holding other inputs constant
The planning period over which at least one resource input is fixed in quantity is the:
Short run
The long run refers to:
A period of time long enough for all inputs to be varied
Which of the following is equivalent to total cost?
Fixed costs plus variable costs
In the short run, a manufacturer should produce the next unit of output as long as:
Price is greater than marginal cost
Explicit costs:
Are the sum of actual monetary payments made for resources used to produce a good
Implicit costs:
Are the total value of resources used to produce a good but for which no direct payment is made
Economic profit is equal to total revenue minus:
Both implicit costs and explicit costs
Market structure is determined by:
The number and relative size of firms in an industry
Competitive firms cannot individually affect market price because:
Their individual production is insignificant relative to the production of the industry
Which list has market structures in the correct order from the most to the least market power?
Monopoly, oligopoly, monopolistic competition, perfect competition
Which of the following is characteristic of perfectly competitive markets?
A large number of firms
Which of the following is characteristic of a perfectly competitive market?
There are low barriers to entry
In a perfectly competitive market, an individual catfish farmer faces a firm demand curve that:
Is flat or horizontal
Which of the following is involved in a competitive firm's short-run production decision?
Choosing a rate of output using the existing plant and equipment
Marginal cost is:
The increase in total costs because of a one-unit increase in output
A competitive firm's profits are maximized where:
Price equals marginal cost
In a perfectly competitive market with positive economic profits:
Firms will enter until economic profits are zero
Which of the following firms is likely to have the greatest market power?
The sole producer of the latest computer microchip technology
The demand curve for an individual monopolist:
Is the same as the market demand curve
Which of the following might be used to protect a monopoly from competition?
A patent
Monopolists are price:
Makers, but perfectly competitive firms are price takers
The demand curve for a monopolist:
Lies above the marginal revenue curve at every point but the first
The change in total revenue that results from a one-unit increase in quantity sold is:
Marginal revenue
In order to sell one additional unit of output, a profit-maximizing monopolist must:
Reduce the price of all units sold
For a monopolist, after the first unit of output, marginal revenue is always:
Less than price
Which of the following rules is always satisfied when a monopoly maximizes profits?
Marginal revenue equals marginal cost
A monopolist sets price at a point on the _______ curve, corresponding to the rate of output determined by the intersection of _______.
Demand; marginal revenue and marginal cost
The study of aggregate economic behavior is referred to as:
Macroeconomics
Alternating periods of growth and contraction in real GDP define:
The business cycle
Which of the following is not a basic measure of macroeconomic performance?
Public goods
Which of the following is true during the expansionary phase of the business cycle?
Real GDP increases
The total value of goods and services produced within a nation's borders, measured in constant prices refers to:
Real GDP
Nominal GDP is defined as the:
Value of output in current dollars
All persons over age 16 who are either working for pay or actively seeking paid employment refers to:
The labor force
The unemployment rate is calculated by dividing:
The number of unemployed by the labor force and multiplying by 100
Inflation is defined as:
An increase in the average level of prices
The Consumer Price Index is:
A measure of changes in the average price of consumer goods and services
the ability and willingness to sell different quantities of a product at different prices in a given time period ceteris paribus
supply
change in total output divided by change in input quantity
MPP
costs of production that do not change when the rate of output is changed
fixed costs
costs of production that can be altered when the rate of output changes
variable costs
total cost divided by total output
average total cost
the dollar cost of all resources used in production
economic cost
include only explicit costs
accounting cost
the difference between total revenue and total cost
economic profit
the number and relative size of firms in an industry
market structure
ability to change the market price of a good or service
market power
a firm that has no market piwer and is not able to affect the price of products; is a price taker
competitive firm
market structure from least to most powerful:
perfect competition, monopolistic competition, oligopoly, duopoly, monopoly
in between perfect competition and monopoly
imperfect competition
existence of only two suppliers of a product
duopoly
a few suppliers of a product
oligopoly
represents many suppliers of a similar product in a market
monopolistic competition
short run profits are maximized when
price is equal to marginal cost
short run supply curve for competitive firms is
marginal cost
the sum of all quantities of a good or service that each firm is willing and able to supply at different prices ceteris paribus
market supply
characteristics of a competitive market
many firms, identical product, MC=P, low entry barriers, zero economic profit, buyers and sellers know about market opportunities
single producer that produces entire quantity supplied to market, represents entire industry,
monopoly
a grant given to a firm by the government; gives the firm exclusive ownership of an innovation
patent
market demand and monopoly demand:
are the same
monopolies maximize profit when:
MR=MC
barriers to entry include:
patents, legal harassment, exclusiv licensing, bundled products, government franchises
near monopolies are:
duopoly, oligopoly, and monopolistic competition
3 ?s with monopolies
for whom- not everyone, only some can afford; what- less output; how- breeding, harvesting, distributing (restricts technology development)
the three basic measures of macro performance
output growth (GRP), unemployment, inflation
market value in current prices of all goods and services produced in a given period of time; not adjusted for inflation
nominal GDP
market value in real prices of all goods and services produced in a given period of time; adjusted for inflation
real GDP
when a member of the labor force is not able to find a job
unemployment
due to factors such as weather, variations in tourism, etc causing loss of jobs
seasonal unemployment
results when people ar moving from one job to another
frictional unemployment
due to a mismatch between workers skills and job requirements
structural unemployment
when demand for goods and services decrease so production levels and demand for labor decreases
cyclical unemployment
between 4 and 6 percent unemployment
full unemployment
a decrease in averag level of prices of goods and services
deflation
a comparison of the changes in price of one good relative to the prices of other goods
relative price
the money you get in a given period
nominal income
the nominal income adjusted for inflation
real income
price changes after nominal income
income effects
people with some wealth affected differently by redistribution relative to people who do not have any wealth
wealth effects
measures the changes in average price of consumer goods and services
consumer price index
the percentage increase in average price level from one year to the next
inflation rate
a numeric goal for price stability established in full employment and balanced growth act; helps to keep inflation rate below 3 percent
the policy goal