Unit 1 - Basic Economic Concepts
What is the most desirable alternative given when making a choice?
Opportunity cost
What market condition occurs when quantity supplied is greater than quantity demanded?
surplus
What formula determines a firms profit maximizing output level?
MR = MC
Where does a monopoly’s marginal revenue curve sit in relation to its demand curve
Below it
Because the demand for resources depends on the demand for the final product, it is called what?
derived demand
What does producing inside a PPC indicate?
inefficiency
What market shortage or surplus is created by a binding price ceiling?
shortage
What is the economic time period where at least one input is fixed?
short run
What market structure features a few mutually interdependent firms?
oligopoly
How do you calculate marginal revenue product of labor?
marginal product times product price
it decreases
If the income elasticity of demand for a good is negative, why type of good is it?
inferior good
What is the shape of a perfectly competitive firms demand curve?
horizontal
What occurs when a monopoly charges every customer their maximum willingness to pay?
What is the shape of the marginal resource cost curve for a firms demand in a competitive labor market?
horizontal
If a price increase for Good X causes demand for Good Y to rise, what are the goods?
substitutes
If an excise tax is placed on an inelastic good, who bears most of the tax burden?
A firm should shut down in the short run if price falls below the minimum of what cost curve?
AVC
dominant strategy
What is a market with only one buyer of a resource called?
monopsony
If Country A gives up 2 shirts per bread and Country B gives up 3 shirts per bread, who has the comparative advantage in bread?
Country A
If a 10% price increase leads to a 25% drop in quantity demanded, what is the elasticity coefficient?
2.5
What law explains why marginal product eventually decreases as more variable inputs are added?
Law of Diminishing Marginal Returns
What type of economic inefficiency do monopolies cause by underproducing?
Deadweight loss
What algebraic rule determines the least cost combination of labor and capital?
M PL/PL = M PK/PK