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Econ Unit II

A desire to buy a product is the only requirement needed for demand to exist
marginal utility describes satisfaction a consumer receives with the purchase of each additional unit
a demand curve illustrates the quantity demanded at all possible prices at a given time
the law of demand states that more of a product will be purchased at low prices than at high ones
a supply curve is a graph that shows the various quantities supplied at a single market price
productivity will decrease if workers are unmotivated
if producers expect lower prices in the future, they may withhold some of the supply
when more suppliers enter the market, the market supply will typically decline
the theory of production deals with the relationship between the factors of production and the output of goods and services
the law of variable proportions states that in the short run, output will not change as one production input is varied while the others remain constant
the production function describes the relationship of changes in output to different amounts of a single input while other inputs are held constant
an increase in output as each new input is added, as in the addition of a worker, describes Stage 1 of the stages of production
fixed cost is the cost that a business incurs even if there are no employees and no production takes place
the number of items sold multiplied by the average price of each item yield the total revenue of a business
the law of supply states that suppliers will normally offer less for sale at higher prices and more for sale at lower prices
the market supply curve shows the quantities offered at various prices by all firms that offer the product for sale in a given market
an increase in the cost of inputs can cause the supply curve to shift to the left
the supply curve is likely to be elastic for products that can be made quickly without huge amounts of capital and skilled labor
the introduction of technology usually has no effect on supply
the mix of variable costs and fixed costs that a business faces affects the way the business operates
marginal cost is the change in total revenue when one more unit of output is sold
the four important measures of cost are: total cost, fixed cost, variable cost, and marginal cost
the profit-maximizing quantity of output occurs when marginal cost is exactly equal to total revenue
marginal analysis compares the additional benefits of an action to its additional costs
economists often use an academic model to help analyze behavior and predict outcomes
market equilibrium is the situation in which the quantity of output supplied is equal to the quantity demanded
the amount of a price change is affected by the elasticity of both the supply and the demand curves
if the price of an item is too high in a competitive market, a shortage appears until the price goes down
perfect competition is not necessary for the theory of competitive pricing to be practical
market situation lacking one or more of the characteristics of perfect competition are called imperfect competition
perfect competition requires a market structure with freedom for firms to enter or leave the market
oligopoly is a market structure with one very large firm
a government monopoly is a monopoly based on ownership or control of a manufacturing method or process
the us government intervenes in the economy to reduce to costs of imperfect competition
the government can “internalize an externality” by using the tax system
a condition of perfect competition is characterized by product differentiation
the monopolistic competitor operates in a market with many well-informed buyers and sellers
non-price competition is the use of advertising, giveaways, and other promotional campaigns to win customers
smaller firms have the advantage of economies of scale over larger firms
market failure can occur when resources do not move freely from one industry to another
economists describe an unintended side effect of a business activity as an externality
the us government uses taxes to reduce the effects of negative externalities
corporations selling stock to the public must disclose their financial and operating information to both the public and the securities and exchange commission
for most products and services, increased price results in
demand for fewer products
an increase in the price of milk causes a decrease in the demand for cereal. the two products are
advertising, fashion trends, and new product introductions serve to
create consumer demand
because a modest price increase has little or no effect, the demand for the product is
a business doubled the price of a product in order to increase profits. what scenario might have occurred?
a dramatic decline in revenues demonstrated the elasticity of the product
a demand schedule shows
a listing of the various quantities demanded of a particular product at all prices that might prevail in the market
consumers’ willingness to replace a costly item with a less costly item is an example of
the substitution effect
an increase in the price of cameras results in a decrease in the demand for film. the two products are
when a customer’s need for a product is not urgent, demand tends to be
when a manufacturer of pain medication reduced the price of the medication by 30%, profits declined by almost exactly 30%. demand for the product is
unit elastic
all of the following can change the market supply curve EXCEPT
a change in the demand for the product
the supply of a product normally decreases if
taxes on the product increase
when employees are getting in each other’s way, the firm is operating
in stage II of production
the theory of production deals with the relationship between the factors of production and
the output of goods and services
rent payments and property taxes would be defined as
fixed costs
many businesses are engaging in e-commerce because
fixed costs are minimal
what is the variable input in this production and cost table?
units of cost
which of the following is NOT a reason why prices effectively perform the allocation function?
prices remain surprisingly stable despite unexpected events
in a market economy, a high price is a signal for
producers to supply more and consumers to buy less
at a given price, a surplus occurs when
the quantity supplied is greater than the quantity demanded
the federal minimum wage law demonstrates
a societal choice for economic equity over efficiency
when economic or political conditions are unstable
the price of gold decreases
prices enable a market economy to adjust to unexpected events by
adjusting consumption and production
all of the following are characteristics of allocation by rationing EXCEPT
if a competitive market is at equilibrium, and if there is a sudden increase in demand, then a temporary
shortage will occur and the price will increase
the theory of competitive pricing
is a set of ideal conditions and outcomes
deficiency payments are part of a federal program to assist
perfect competition is characterized by all of the following EXCEPT
sellers acting together to set prices
a monopoly that is based on the ownership or control of a manufacturing method, process, or other scientific advance is a
technological monopoly
the government is involved in the us economy for all of the following reasons EXCEPT to
promote the development of market externalities
under perfect competition
no seller sells a product above the prevailing market price
when a major car company lowers its prices, other car makers will probably
lower their prices

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