A rational decision maker
takes an action only if the marginal benefit is greater than the marginal cost
If a good is normal
then an increase in income will result in an increase in the demand for the good
Two goods are complements
if a decrease in the price of one good raises the demand for the other good
What would not shift the demand curve for a good or service?
A change in the price of the good or service
A decrease in resource costs to firms in a market will result in
a decrease in equilibrium price and an increase in equilibrium quantity
An early frost in the vineyards of Napa Valley would cause
a decrease in in the supply of wine, increasing price
What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?
Price will fall and the effect on quantity is ambiguous
Beef is a normal good. You observe that both the equilibrium price & quantity of beef has fallen over time. What is consistent with this observation?
consumer tastes have changed so as to prefer beef less than before
Suppose the price of Twinkies is reduced from $1.45 to $1.25 and as a result, the quantity of Twinkies demanded increases from 2,000 to 2,200. Using the midpoint method, the price of demand for Twinkies in the given price range is
If the price elasticity of demand for a good is 4.0, then a 10% increase in price would result in
a 40% decrease in quantity demanded
An example of an implicit cost of production would be
the income an entrepreneur could have earned working for someone else.
When adding another unit of labor lead to an increase in output that is smaller than increases in output that resulted from adding previous units of laor
we have the property of diminishing marginal product
Which of these assumptions is often realistic for a firm in the short run?
The firm can vary the number of workers it employs but not the size of its factory
In a competitive market
no single producer can influence the market price because many other sellers are offering a product that is essentially identical.
When a profit-maximizing firm in a competitive market has zero economic profit
accounting profit is positive
The Wheeler Wheat Farm sells wheat to a grain broker in Seattle, Washington. Since the market for wheat is generally considered to be competitive, the Wheeler Wheat Farm maximizes its profit
by choosing the quantity at which market price is equal to the farm's marginal cost of production
The short-run supply curve for a firm in a perfectly competitive market
is its marginal cost curve (above the average variable cost)
When profit maximizing firms in perfectly competitive markets are earning profits
new firms will enter the market
The practice of selling the same goods to different customers at different prices is known as
In a two-person repeated game, a tit-for-tat strategy starts with cooperation and then
each player mimics the other player's last move
measures the amount of a product a consumer can buy at a price below equilibrium price
A newly imposed minimum wage set above the equilibrium wage in a labor market will cause
some workers to get a raise and some workers to lose their job
Internalizing an externality refers to
making buyers and sellers take into account the external effects of their actions
A tax imposed on a market with an inelastic demand and an elastic supply will cause
buyers to pay the majority of the tax
Correct statement about tax burdens
A tax burden falls most heavily on the side of the market that is inelastic