Elasticity
If the price elasticity of as good is less than 1 the good is classified as ______
Inelastic
Minimum price that can be legally charged for a good or service
Price Floor
Lowest price accepted by a seller for one unit of a good
Willingness to Sell
or
Cost
Monetary costs such as rent and insurance
Explicit costs
If the fixed costs of making 2 units is $20, the variable costs of 2 units is $40, and the average total costs of 2 units is $30, how much is the fixed costs for 0 units?
$20 (Fixed costs do not depend on how many units are produced)
If the income elasticity of a good is negative the good is considered to be ______.
Inferior
Tax placed on a particular good such as gasoline or tobacco
Excise Tax
Abe, Bob, and Carl want to buy an ice cream cone. Abe is willing to spend $5. Bob is willing to spend $3. Carl is willing to spend $2. The market price is $2.50. The consumer surplus is ____.
$3
(5-2.50) + (3-2.50) + 0
Extra or additional output from adding an additional unit of a resource
Marginal Product
Time period where at least one input does not change
Short run
If the price elasticity of demand is elastic, the firm should ____ prices to increase revenues.
Decrease
To be effective, a price ceiling must be ____ equilibrium and will result in a _____.
below
shortage
Cost advantages reaped by companies when production becomes efficient.
Economies of scale
Term used when economic profits equal zero
Normal profit
If the cross elasticity of demand is -1.5, the goods are _____ and _____.
Complements and elastic
To raise money for a project, the government adds a tax to this type of good.
Inelastic
Adding resources will eventually result in smaller increase in output
Profit maximization point
Marginal Revenue = Marginal Cost
Name 2 of the factors which determine elasticity of price demand
Time to adjust
Availability of substitutes
Amount spent on good compared to your budget
Necessity of the item
Smallest amount of output the firm can produce and be producing at its lowest average cost.
Minimum efficient scale