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Brett's Econ 301 notes
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Key Concepts:
Terms in this set (50)
For a truck manufacturer, a decrease in the cost of steel will cause their supply curve to:
Shift to the right
The opportunity cost of an action is the
Value of the most highly valued alternative action given up
As prices fall, demand
Remains the same
Suppose there is a simultaneous increase in demand and decrease in supply, what effect will this have on the equilibrium quantity?
It may rise or fall
Seattle Seahawk quarterback Russell Wilson is in the third year of his four-year rookie deal that pays him $662,434 annually. Mr. Wilson can renegotiate his contract after this season, and there has been speculation he could receive a contract that pays him at least $20 million per year. Salary negotiations between Mr. Wilson and Seahawk management is an example of:
Consumer-producer rivalry
If the interest rate is 10% and cash flows are $5,000 at the end of year one and $7,000 at the end of year two, then the present value of these cash flows is
$10,330
Suppose the demand for good X is given by Qdx= 10 - 8Px + 3Py + M. Where Px is $2, Py is $3, and M is $50. Given these prices and income, how much of good X will be purchased?
53
An inferior good is a good
That consumers purchase less of when their incomes are higher
If consumers expect future prices to be higher
Stockpiling will happen when products are durable in nature
Consider a market characterized by the following inverse demand and supply functions: PX = 20 - 4QX and PX = 6 + 3QX? Compute the equilibrium price and quantity in this market.
$12 and 2 units, respectively
The minimum wage
Is an example of floor price
The supply function for good X is given by QSX = 1,000 + PX - 5PY - 2PW , where PX is the price of X, PY is the price of good Y, and PW is the price of input W. If the price of input W decreases by $10, then the quantity supplied of good X
Will increase by 20 units
Demand shifters do not include
The price of the good
If a price increase from $5 to $10 causes quantity demanded to fall from 150 to 100, what is the own-price elasticity?
-3/5
When quantity demanded exceeds quantity supplied
The price is below the equilibrium price
Consumer surplus is
The value consumers get from a good but do not pay for
Suppose the market demand for good X is given by QXd = 20 - 2PX. If the equilibrium price of X is $5 per unit then consumer surplus is
$25
If the demand function for a particular good is Q = 50 - 10P. Calculate the price elasticity demand when the price decreases from $3 to $2.
-1
Suppose that good X is a substitute for good Y. Then a decrease in the price of good Y leads to
A decrease in the demand of good X
The cross price elasticity of demand between goods X and Y is -3.5. If the price of X decreases by 7%, the quantity demanded of Y will:
Increase by 24.5%
A main role of economic profits is
to signal where resources are most highly valued.
Suppose the demand for good X is given by QDX= 10 + αXPX + αYPY + αMM . From the law of demand we know that αX will be:
Less than zero
Which of the following is probably not a normal good?
Macaroni and cheese
If the interest rate is 12.5%, what is the present value of $200 that you will receive in two years?
$158
As the interest rate increases, the opportunity cost of waiting to receive a future amount:
Increases
The maximum quantity of good Y that is affordable is:
M/PY
If the price of a good purchased by a utility maximizing consumer goes down, all other things remain the same, and the consumer's income is adjusted so that he can just barely attain his previous level of satisfaction, and if the consumer had indifference curves of the usual shape it will be found that
More of the good will be purchased than before
Which curve(s) does the marginal cost curve intersect at the (their) minimum point?
Average total cost curve and average variable cost curve
For the cost function C(Q) = 40 + 4Q + 2Q2, the average fixed cost of producing 5 units of output is
8
For the cost function C(Q) = 40 + 4Q + 2Q2, the marginal cost of producing the 5th unit of output is approximately
22
Suppose the production function is given by Q = 6K + 8L. What is the marginal product of capital when 10 units of capital and 10 units of labor are employed, and the selling price of Q is $2?
6
Suppose the production function is given by Q = 6K + 8L. What is the value of marginal product of labor when 10 units of capital and 10 units of labor are employed, and the selling price of Q is $2?
$16
The change in total output attributable to the last unit of an input is the:
Marginal product
A consumer with horizontal indifference curves, beef jerky on the horizontal axis, Twinkies on the vertical axis, views
Only Twinkies to be "goods."
What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and PX = $12, PY = $10, X = 50, and M = 1000?
40
Those withered, dead roses your sweetheart (ex-sweetheart) gave to you for Valentine's Day are now just a faded memory (nightmare). According to the article you read a few weeks ago about the current state of the flower industry, where were those flowers most likely produced?
Columbia
My wife tells me that she does not want another man in her life. What property of consumer behavior is she violating?
More is better
If income increases, the budget line
Shifts to the right
The rate at which a consumer is willing to substitute one good for another, while still maintaining a given level of satisfaction is called the
Marginal rate of substitution
Given that income is $300, the price of good Y is $15, and the price of good X is $20. What is the vertical intercept of the budget line?
20
Suppose that goods X and Y are normal goods and the price of good X decreases. Then the substitution effect will lead consumers to consume
More of good X and less of good Y
You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm:
Should use more L and less K to cost minimize
Changes in the price of an input cause:
Slope changes in the isocost line
The short-run is defined as the time-frame
In which there are fixed factors of production
An isocost line
Represents the combinations of K and L that cost the firm the same amount of money
If the price of capital decreases, in order to minimize the costs of producing a given level of output, the firm manager should use
Less labor and more capital
Average fixed cost
Declines continuously as output is expanded
Suppose the average total cost curve at a water bottling facility is U-shaped. When ATC is in the increasing stage, there exist
Diseconomies of scale
Suppose the production function is given by Q = 4K + 6L. What is the average product of capital when 10 units of capital and 5 units of labor are employed?
7
For the cost function C(Q) = 50 + 4Q + 2Q2, the total variable cost of producing 7 units of output is
126
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