In the short run, the average total cost curve slopes upward because of: When each factor is paid an amount equal to the value of the marginal product of the last unit of that factor employed in the factor market as a whole, this is referred to as: the marginal productivity theory of income distribution. This is an example of a wage disparity due to: Wage differences across jobs that reflect the fact that some jobs are less pleasant than others are called compensating differentials. The production-possibilities frontier separates outcomes that are possible for an individual (or a group) to produce from those that cannot be produced. Budweiser is a brand name that many people recognize. A local grocery store benefits when a new furniture factory moves to town and hires workers because: the new jobs at the new factory will increase local incomes, some of which will be spent at the local grocery store. demand to increase and supply to increase. Production Possibilities Table The table below shows consumption without trade, marginal opportunity costs, absolute advantage, and comparative advantage. Whenever marginal benefit is less than marginal cost, the decision maker should do _____ of the activity. If these are your only three choices, what is the opportunity cost of reading? (Table: Fish and Coconut Production Possibilities) Use Table: Fish and Coconut Production Possibilities. Total revenue is maximized when demand is. The price elasticity of demand for gasoline in the short run has been estimated to be 0.4. If a person engages in mental accounting, he or she: The process of assigning different values to dollars in different accounts is known as: The optimal consumption bundle is always represented by a point. The line along which values of the x-variable are measured is called the _____. When the price falls to $8, the quantity demanded increases to 130. In the circular-flow diagram, an organization that produces goods or services for sale is a: The assumption that all factors remain constant except for the variables being studied is called: A simplified version of reality that is used to understand economic situations is called a(n): (Table: Production Possibilities Schedule II) Examine the figure Production Possibilities Schedule II. Which example illustrates the law of demand? The law enacted in 1890 which was intended to prevent the creation of more monopolies and to break up existing ones in the United States was the: If Coke is able to use price discrimination successfully, some customers may be willing to pay more for a Coke than another very similar soda. 12. Recall from above that the opportunity cost of catching a fish (the good on the y-axis) is given by the reciprocal of the absolute value of the slope. If this represents the production possibility frontier and Urbanville is producing at combination C and moves to combination D, what is its opportunity cost of this move? The value of a negative number without the minus sign is called the _____. Within the circular-flow diagram, the factor market is the place where: firms buy the resources they need for the production of goods and services. The quantity demanded is the same as the quantity supplied. Households derive income from all EXCEPT: In the long run, all of the firms in a perfectly competitive industry will: produce at an output level at which average total cost equals marginal cost. The circular-flow diagram illustrates how firms _____ goods and services and _____ factors of production. When the price falls to $8, the quantity demanded increases to 130. Demand for Wendy's hamburgers is more inelastic than the demand for all fast food. If all other variables remain unchanged, then the adjustment in this economy would be best represented in the production possibilities figure by a movement from point A toward: point D (an outward shift of the entire curve). 1/2 b. An increase in the price of substitutes for ice cream, such as frozen yogurt. Which statement would cause total surplus to fall with certainty? If countries engage in international trade: they will be consuming outside their production possibility frontiers. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total revenue from gasoline in the short run, all other things unchanged? These goods are homogeneous, meaning that consumers/producers cannot differentiate between corn or oil from either country. A list of all the possible combinations of fish and coconuts open to Crusoe makes up his production possibilities.The production-possibilities frontier separates outcomes that are possible for an individual (or a group) to produce from those that cannot be produced.Because Crusoe cannot exchange, his production-possibilities frontier is also his consumption-possibilities frontier. In the long run, when a firm adds physical capital, its variable cost will decrease. Which group of U.S. workers had the highest median earnings in 2011? As a result, there is: The marginal social benefit of pollution: is the benefit to society of one more unit of pollution. Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to: (Table: Production Possibilities Schedule II) Examine the table Production Possibilities Schedule II. You can think of the production-possibilities frontier as the way economists visualize scarcity. Because people will behave rationally in most markets. The economy's factors of production are not equally suitable for producing different types of goods. Big Island can also produce any combination of goods that lies on its linear PPC. If Katniss spends all her time fishing, she can catch 40 fish. Jim being paid $7.25 an hour to work at a restaurant is an example in the circular flow of a: household selling a resource in the factor market. Compared to the condition before the increase in marginal costs, the monopolist will _____ its price and _____ its level of production. Now they decide to engage in trade. If it uses all of its resources to produce steel, it can produce 250 tons of steel and 0 tons of wheat. Having large enterprises as buyers of the products supplied by the oligopoly. Equilibrium price increases and equilibrium quantity increases. For these customers, cups of coffee are differentiated by: Among the drawbacks of brand names is the fact that they: may encourage the consumption of expensive substitutes for generic items. If peanut butter is an inferior good, what would happen to the price and quantity sold of peanut butter as incomes fall during an economic recession? Juan spends all of his income on baseball cards and candy. The table below shows the production potential of Katniss and Peeta. A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve. The efficient way to reduce pollution is to impose strict environmental standards on all polluters. This means that: Jon and Tom Cruise benefited from this transaction. Thus, Robinson is said to have a comparative advantage in coconut gathering while Friday has a comparative advantage in fishing. Suppose at a price of $10 the quantity demanded is 100. Total surplus is the excess of consumer surplus over producer surplus. Tom produces and consumes 9 fish and 2 coconuts Market power in the United States was often gained in the latter part of the nineteenth century by: As a New York businessperson who does a lot of flying, Jared is keenly aware of even small changes in airfare from New York to Chicago. When a good is nonrival in consumption, the most efficient price for the consumption of the good is: The efficient level of provision of a public good is the level at which its marginal social benefit is equal to the marginal social cost of its production. However, Lucy refuses to sell the stock, thinking that if she waits long enough, she will recover her investment. Cause marginal utility to more inelastic than the output at which average total costs increase as it more! By 11 points the factor can produce 250 tons of wheat more difficult for oligopolistic firms enforce. 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