economics proceeds by making models of ( ), which are simplified representations of reality.
the demand curve shows ( )
the conflict between the scarce economic wants of society and its limited resources gives rise to the economizing problem.
the only requirement for a market to be perfectly competitive is for the market to have many buyers and sellers.
econimics is the study of
scarce resources mean
in market, prices will transfer information about supply and demand
economic equilibrium means the economic status will not be changed without others changing.
market allocation of resources means market use prices as signals to allocate resources to their highest valued use.
if there are two goods with positive prices and the price of one good is reduced, while income and other prices remain constant, then the size of the budget set is reduced.
if preferences are transitive, more is always preferred to less.
with quasi-linear preferences, the slope of indifference curves is constant along all rays through the origin.
hans has 27 dollars, which he decides to spend on x and y. commodity x costs $16 per unit and commodity y costs $10 per unit. he has the utility function u (x, y)=5x2 2y2 and he can purchase fractional units of x and y.
wanda littlemore's utility function is u (x, y) = x 63y2.her income is 184. if the price of x is 1 and the price of y is 33, how many units of good x will wanda demand?
if one utility function is a monotonic transformation of another, then the former must assign a higher utility number to every bundle than the latter.
if a consumer does not have convex preferences, then a point of tangency between her indifference curve and her budget line must be an optimal consumption point.
isobel consumes positive quantities of both jam and and juice. the price of jam is 5 cents per unit and the price of juice is 10 cents per unit. her marginal utility of jam is 10 and her marginal utility of juice is 5.
if the equlibrium price of gasoline is $1.00 per gallon and the government places a price ceiling on gasoline of $1.50 per gallon, the result will be a shortage of gasoline
if preferences are quasilinear, then for very high incomes the income offer curve is a straight line parallel to one of the axes.
if two goods are substitutes, then an increase in the price of one of them will increase the demand for the other.
an engel curve is a demand curve with the vertical and horizontal axes reversed.
daisy received a tape recorder as a birthday gift and is not able to return it. her utility function is u(x,y,z)=x z1/2f(y)where z is the number of tapes she buys, y is the number of tape recorders she has and x is the amount of money she has left to spend. f(y)=0if y<1and f(y)=8 if y is 1 or greater. the price of tapes is 2 and she can easily afford to buy dozens of tapes. how many tapes will she buy?
mike consumes two commodities, x and y; and his utility function is min{x 2y,y 2x}. he chooses to buy 8 units of good x and 16 units of good y. the price of good y is 0.50. what is his income?
quasilinear preferences are homothetic when the optimal amount of one of the goods is not affordable.
walt consumes strawberries and cream but only in the fixed ratio of three boxes of strawber ries to two cartons of cream. at any other ratio, the excess goods are totally useless to him. the cost of a box of strawberries is 10 and the cost of a carton of cream is 10. walt's income is 200.which of the following is true?
madonna buys only two goods. her utility function is cobb-douglas. her demand functions have which of the following properties?
the downward sloping demand curve can be explained by：
other things held constant, which of the following would not cause a change in demand for beef?
the strong axiom of revealed preference requires that if a consumer chooses x when he can afford y; and chooses y when he can afford z; then he will not choose z when he can afford x.
if a consumer maximizes a utility function subject to a budget constraint and has strictly convex preferences, then his behavior will necessarily satisfy the weak axiom of revealed preference and the strong axiom of revealed preference.
let a stand for the bundle (7,9);b stand for the bundle (10,5); and c stand for the bundle (6,6). when prices are (2,4); betty chooses c. when prices are (12,3) she chooses a. which of the following is true?
remember that the laspeyres price index uses the old quantities for the weights. in 1971, good x cost 3 and good y cost 1. the current price of good x is 3 and the current price of good y is 5. in 1971 the consumption bundle was (x,y) = (3,5). the current consumption bundle is (x,y) = (9 ,4). the laspeyres index of current prices relative to 1971 prices is closest to which of the following numbers?
it follows from the weak axiom of revealed preference that if a consumer chooses x when he could afford y and chooses y when he could afford x; then his income must have changed between the two observations.
at prices (4,12); harry chooses the bundle (9,4). at the prices (8,4); harry chooses the bundle (2,9). is this behavior consistent with the weak axiom of revealed preference?
if the bundle x is revealed (directly or indirectly) as preferred to the bundle y and x ¹ y, then it is never the case that the y is revealed (directly or indirectly) as preferred to x; so the necessary and sufficient condition for well-behaved preference is ( )
revealed preference ysis tests the behavioral hypothesis that a consumer chooses the most preferred bundle from those available. discover the consumer's preference relation.
a giffen good must be an inferior good.
the compensated demand function refers to the demand function of someone who is adequately paid for what he for she sells.
in the case of homothetic preferences the entire change in demand from a price change is due to the substitution effect.
walt considers x and y to be perfect substitutes. they originally cost 10 and 9 respectively. his income is 720. one day the price of x drops to 8. which of the following is true?
suppose that bananas are a normal good and woody is currently consuming 100 bananas at a price of 10 cents each.
john purchases two goods, x and y. good x is an inferior good for some range of income.there must be another range of income for which good x is a normal good.
the following can be said about the income and substitution effects of a price increase on the demand for the good whose price rose:
when the price of x rises, marvin responds by changing his demand for x. the substitution effect is the part of this change that represents his change in demand:
nonnegative means ( )
opposite to that of the price change, ( ) just like the sultsky substitution effect
if a rational utility maximizer is a net demander of a good, and if an increase in its price causes him to buy more of it, then it must be an inferior good.
if a consumer is a buyer of some goods and a seller of others, then a change in prices will generate an extra income effect in the slutsky equation due to the revaluation of the consumer's endowment.
if a utility maximizer is a net seller of something and the price of that good rises while other prices stay constant, her situation might improve so much that she becomes a net buyer
marsha mellow is very flexible. she consumes x and y. she says `give me x or give me y; i don't care. i can't tell the difference between them.' she is currently endowed with 14 units of x and 6 units of y. the price of x is 4 times the price of y. marsha can trade x and y at the going prices, but has no other source of income. how many units of y will marsha consume?
if leisure is a normal good, then an increase in non-labor income will reduce labor supply.
mr. cog has 18 hours per day to ide between labor and leisure. his utility function is u (c,r) = cr; where c is dollars per year spent on consumption and r is hours of leisure. if he has a nonlabor income of 40 dollars per day and a wage rate of 8 dollars per hour, he will choose a combination of labor and leisure that allows him to spend:
if abishag owns 12 quinces and 10 kumquats, and if the price of kumquats is 3 times the price of quinces, how many kumquats can she afford if she buys as many kumquats as she can?
if abishag owns 16 quinces and 15 kumquats, and if the price of kumquats is 4 times the price of quinces, how many kumquats can she afford if she buys as many kumquats as she can?
the share price of grath oil is currently $77.06. several months ago, when the price was $51.21, charles bought 186 shares of grath oil. if he sells all of his stock in grath oil today, how much profit will he make? → $1,504.17
consumer's surplus is another name for excess demand.
the equivalent variation in income from a tax is the amount of extra income that a consumer would need in order to be as well off after the tax is imposed as he was originally.
with quasilinear preferences, the equivalent variation and the compensating variation in income due to a tax are the same.
ella's utility function is min{4x,y}. if the price of x is 15 and the price of y is 20, how much money would she need to be able to purchase a bundle that she likes as well as the bundle(x,y) = (5,8)?
sir plus has a demand function for mead that is given by the equation d(p) = 100-p.if the price of mead is 75, how much is sir plus's net consumer surplus?
sam has quasilinear preferences and his demand function for x is d(p) = 15-p/3.the price of x is initially $15 per unit and increases to $24 per unit. sam's change is consumer surplus is the closest to:
( ) is the difference between what consumers are willing and able to pay for a good and what they actually pay for the good.
( ) depict the various quantities that buyers would be willing and able to purchase at different prices
the inverse demand curve p (x) for a good x measures the price per unit at which the quantity x would be demanded.
if a price changes, then changes in consumption at the intensive margin are changes that happen because consumers alter the amounts that they consume, but do not either stop consuming or start consuming the good.
if the demand function is q = 3m=p; where m is income and p is price, then the absolute value of the price elasticity of demand decreases as price increases.
marginal revenue is equal to price if the demand curve is horizontal.
the constant elasticity of demand for cigarettes has been estimated to be 0.5. to reduce oking by 75%, approximately how much tax needs to be added to a $1 pack?
market demand relevant to industry marketing expenditure show infinity, is said to be ( )
( )occurs when the quantity demanded changes little as price changes
elasticity of demand means a measure of how responsive consumers are to price changes.
price floor means a legal minimum price that buyers must pay for a product.
if the supply curve is vertical, then the amount supplied is independent of price.
the supply curve slopes up and to the right. if the demand curve shifts upward to a new curve which is everywhere higher than the old curve (but possibly of different slope) and if the supply curve does not shift, then the equilibrium price and quantity must necessarily increase.
an economic situation is pareto optimal only if there is no way to make someone better off.
the demand for pickles is given by p=131-2q and supply is given by p=5 7q. what is the equilibrium quantity?
the demand function for fresh strawberries is q = 200-5p and the supply function is q=60 2p. what is the equilibrium price?
if a quantity tax is collected from competitive suppliers of a good, placing a tax on the good causes the price paid by consumers to increase more than if the tax had been collected directly from the buyers.
the demand function for x is d(p) = 65-2p and the supply function is s(p) = 20 p. the price that should be set to restrict quantity supplied to 30 units is closest to:
the demand function for rental apartments is q = 960-7p and the supply function is q = 160 3p. the government makes it illegal to charge a rent higher than 35. how much excess demand will there be?
( )factors other than price that locate the position of a demand curve 1. consumers' tastes 2. of consumers in the market 3. consumers' incomes 4. the prices of related goods 5. expected prices shifts the curve
a good (or service) whose consumption declines as income rises and increases as income decreases increase in income=decrease in consumption decrease in income=increase in consumption
the production set of a firm is the set of all products the firm can produce.
a production isoquant is a locus of combinations of inputs that are equally profitable.
if a firm moves from one point on a production isoquant to another point on the same isoquant, which of the following will certainly not happen?
in any production process, the marginal product of labor equals:
the production function f (x,y) = x y has constant returns to scale
( ) means the relationship between the inputs employed by a firm and the max output it can produce with those inputs.-technology is process to turn in to out production function represents firms technology
does ( ) decline eventually as the number of workers increases
the marginal product of a factor is just the derivative of the production function with respect to the amount of this factor, holding the amounts of other factor inputs constant.
the weak axiom of profit maximizing behavior states that in a modern mixed economy, firms have only a weak incentive to maximize profits.
a fixed factor is a factor of production that is used in fixed proportion to the level of output.
just as in the theory of utility maximizing consumers, the theory of profit maximizing firms allows the possibility of "giffen factors". these are factors for which a fall in price leads to a fall in demand.
the production function is given by f (l)=6l2/3 . suppose that the cost per unit of labor is 12 and the price of output is 6, how many units of labor will the firm hire?
when farmer hoglund applies n pounds of fertilizer per acre, the marginal product of fertilizer is 1-(n=200) bushels of corn. if the price of corn is $1 per bushel and the price of fertilizer is $0.40 per pound, then how many pounds of fertilizer per acre should farmer hoglund use in order to maximize his profits?
which of the following is a short-run adjustment?
in a perfectly competitive industry, the demand curve for the total output of the industry may be downward sloping.
price equals marginal cost is a sufficient condition for profit maximization
the cost function c(w1,w2,y) expresses the cost per unit of output of producing y units of output if equal amounts of both factors are used.
if it costs $10 to set up and later clean a bagel press and bagels cost $1 per week, per bagel, to store, how many times should the bagel press be run each week to produce 500 bagels a week to be sold continuously?
if output is produced according to q = 4lk, the price of k is $10, and the price of l is$10, then the cost minimizing combination of k and l capable of producing 16 units of output is
the average variable cost curve must always be u shaped.
the marginal cost curve passes through the minimum point of the average fixed cost curve.
which of the following is most likely to be an implicit cost for company x?
to the economist, total cost includes:
in a perfectly competitive industry, the demand curve for the total output of the industry may be downward sloping.
price equals marginal cost is a sufficient condition for profit maximization
the change in producer's surplus when the market price changes from p1 to p2 is half of the area to the left of the marginal cost curve between p1 and p2.
for a perfectly competitive firm operating at the profit-maximizing output level in the short run, its marginal cost equals market price
microsoft is a/an ___ in windows operating system.
monopoly is ___.
monopoly maximizes its profit mainly rely on its ___.
when monopolistic profit has been maximized, its marginal cost is ___ than its marginal revenue.
deadweight loss of monopoly is ___.
for a monopolist who faces a downward sloping demand curve, marginal revenue is less than price whenever quantity sold is positive.
mr can possibly be negative.
( ) is a method of setting prices that occurs when marginal revenue equals marginal cost or supply quanity where tr exceeds tc by greatest amount.
barries of entry is ( )
to sell at a larger q, monopoly must
a monopolist sells in two markets. the demand curve for her product is given by p1 =119-2x1 in the first market and p2 = 123-5x2 in the second market, where xi is the quantity sold in market i and pi is the price charged in market i. she has a constant marginal cost of production, c = 3; and no fixed costs. she can charge different prices in the two markets. what is the profit-maximizing combination of quantities for this monopolist?
a monopolist has a constant marginal cost of $2 per unit and no xed costs. he faces separate markets in the u.s. and england. he can set one price p1 for the american market and another price p2 for the english market. if demand in the u.s. is given by q1 = 8,400-700p1,and demand in england is given by q2 = 5,000-500p2; then the price in america will:
a monopolist finds that a person's demand for its product depends on the person's age. the inverse demand function of someone of age y; can be written p = a(y)-q where a(y) is an increasing function of y. the product cannot be resold from one buyer to another and the monopolist knows the ages of its consumers. if the monopolist maximizes its profits:
a monopolist has discovered that the inverse demand function of a person with income m for the monopolist's product is p = 0.002m-q. the monopolist is able to observe the incomes of its consumers and to practice price discrimination according to income (second-degree price discrimination). the monopolist has a total cost function, c(q) = 100q. the price it will charge a consumer depends on the consumer's income, m; according to the formula:
wobble's weebles is the only producer of weebles. it makes weebles at constant marginal cost c (where c > 0) and sells them at a price of p1 per weeble in market 1 and at a price of p2 per weeble in market 2. the demand curve for weebles in market 1 has a constant price elasticity of demand equal to -2. the demand curve for weebles in market 2 has a constant price elasticity equal to -3/2. the ratio of the profit maximizing price in market 1 to the profit maximizing price in market 2 is:
a monopolist sells in two markets. the demand curve for her product is given by p1 = 303-3*x1 in the first market and p2 = 253-5*x2 in the second market, where xi is the quantity sold in market i and pi is the price charged in market i. she has a constant marginal cost of production, c = 3; and no fixed costs. she can charge different prices in the two markets. what is the profit-maximizing combination of quantities for this monopolist?
if a monopsonist pays the wage rate w; then the amount of labor that he can hire is l(w) = aw, where a is a positive constant. the marginal cost of labor to the monopsonist is:
the frangle industry is a monopoly, with a demand curve 100-p; where p is the price of frangles. it takes one unit of labor and no other inputs to produce a frangle. the frangle-makers guild is a strong union. the guild sets a wage and prevents anyone from working for less than that wage. the frangle monopoly must pay that wage but can hire as much labor as it chooses to.if the guild chooses a wage so as to maximize the total earnings (wage times number of units of labor hired) of frangle-makers, then:
the bauble industry is competitive with free entry. there is a fixed-coefficient technology. one unit of labor and one unit of plastic are required for each bauble. workers in the bauble industry must all belong to the bauble-makers union. the union sets the wage that will be paid to all bauble-makers. the price of plastic is 10 dollars per unit and the demand function for baubles is 1000-10p. long run equilibrium requires that the price of baubles equals the cost of production. the wage per unit of labor that maximizes total revenue of workers is:
a coal producer has a monopoly on coal. a different monopoly controls the railroad that takes the coal to market. each monopolist chooses prices to maximize its profits. if the coal monopolist buys the railroad then it will increase its profits by raising the market price of coal.
for a monopsonist, the more elastic the supply of labor, the greater the difference between the marginal cost of labor and the wage rate.
if a monopolist faces a competitive labor market, it will hire labor up to the point where the price of output times the marginal product of labor equals the wage rate
if a labor market is dominated by a monopolist, it is possible that the imposition of a minimum wage law could increase the amount of employment in that market.
a firm in a competitive industry takes account of the fact that the demand curve it confronts has a significant negative slope.
price equals marginal cost is a sufficient condition for profit maximization
a firm produces one output, using one input, with the production function f(x) = 2x1/3 where x is the amount of input. the cost function for this firm is proportional to the price of the input times the cube of the amount of output.
a competitive firm has a continuous marginal cost curve. it finds that as output increases, its marginal cost curve first rises, then falls, then rises again. if it wants to maximize profits, the firm should never produce at a positive output where price equals marginal cost and marginal cost decreases as output increases.
duopoly in which two identical firms are engaged in bertrand competition will not distort prices from their competitive levels.
a stackelberg leader will necessarily make at least as much profit as he would if he acted as a cournot oligopolist.
in the cournot model, each firm chooses its actions on the assumption that its rivals will react by changing their quantities in suchaway as to maximize their own profits.
competition among firms in an industry can lower prices and profits
monopoly always has constant elasticity demand.
a game has two players. each player has two possible strategies. one strategy is called “cooperate”, the other is called “defect”. each player writes on a piece of paper either a c for cooperate or a d for defect. if both players write c; they both get a payoff of $100. if both players defect they each get a payoff of 0. if one player cooperates and the other player defects, the cooperating player gets a payoff of s and the defecting player gets a payoff of t . to defect will be a dominant strategy for both players if:
big pig and little pig have two possible strategies, press the button, and wait at the trough. if both pigs choose wait, both get 2. if both pigs press the button then big pig gets 7 and little pig gets 3. if little pig presses the button and big pig waits at the trough, then big pig gets 10 and little pig gets 0. finally, if big pig presses the button and little pig waits, then big pig gets 6 and little pig gets 1. in nash equilibrium,
a situation where everyone is playing a dominant strategy must be a nash equilibrium.
in a nash equilibrium, everyone must be playing a dominant strategy
in the prisoners' dilemma game, if each prisoner believed that the other prisoner would deny the crime, then both would deny the crime.
a general has the two possible pure strategies, sending all of his troops by land or all of his troops by sea. an example of a mixed strategy is where he sends 1=4 of his troops by land and 3=4 of his troops by sea.
in nash equilibrium, each player is making an optimal choice for herself, given the choices of the other players
an allocation of the endowment that improves the welfare of all consumer is a pareto-improving allocation.
in a edgeworth box there are lot of allocations that are pareto-optimal.
an externality is a cost or a benefit imposed upon someone by actions taken by others.
an economic situation involves a production externality if one firm’s production possibility is affected by the choices of the other firms not the consumers’.
ronald coase’s insight is that most externality problems are due to an inadequate specification of property rights.
to say that preferences are single peaked means that everybody either prefers more public goods to less or everybody prefers less public goods to more.
if a pure public good is provided by voluntary contributions, economic theory predicts that in general too little will be supplied.
one of the problems with the clarke tax mechani is that when it is used, people have an incentive to lie about their preferences.
a all economy has only two consumers, ben and penelope. ben's utility function is u (x; y) = x 84y1/2 . penelope's utility function is u (x; y) = x 7y. atapareto optimal allocation in which both iniduals consume some of each good, how much y does ben consume?