Elasticity
Market Failures
Taxes
Costs
Calculations
100
Price Elasticity of Demand = % Change in X / % Change in Y. Name X and Y.
X = Quantity Demanded; Y = Price
100
What two things are not equal when there is a market failure
QD and QS 

QD > QS and the economy is not producing enough 

 or 

 QD < QS and the economy is producing too much

100
Federal income tax is progressive, regressive, or proportional?
Progressive
100
What you must give up to get something is called _____?
Opportunity cost
100
If consumers increase their purchases by 10% when the price is dropped by 2%, what is the price elasticity of demand?
5
200
When Elasticity is > 1 we say demand is _______.
Elastic
200
Club goods are: (rival, non-rival, excludable, non-excludable)
Non-rival and non-excludable
200
Federal income tax is consistent with which principle of taxation? What about the gasoline tax? (ability-to-pay, pay-as-you-go, benefits, explicit)
Ability-to-pay Benefits
200
The cost of producing another unit is called
MC
200
When Price changes from $1 to $9, quantity demanded changes from 110 to 90. What is the elasticity
1/8 or 0.125
300
When the product is inelastic, what is greater the Quantity Effect or the Price Effect?
Price Effect
300
What are the 4 types (categories) of goods For example, a product that is rival and excludable is called what? Name all 4 types
Private Good, Club Good, Common Resource, &  Public Good
300
Assume you pay a tax of $15 on income of $4,000. However, if your taxable income were $8,000, your tax payment would be $35. This tax structure is:
Progressive
300
Explain the difference between a fixed cost and a variable cost
Fixed costs do not depend on how much is produced and Variable costs do
300
Your company sold 100 units at an average price of $20 Your explicit costs were $500 Your implicit costs were $200 What is your accounting profit and what is your economic profit?
Accounting Profit = $1,500 Economic Profit = $1,300
400
The steeper the demand curve the more _______ the demand for the good.
Inelastic
400

If there are 2 people & the item is non-rival what is the social benefit (collective Willingness to Pay) for the 3rd unit? 

Qd Pa Pb 

1   4  3 

2   3 2 

3   1 0

$1
400
If your average tax rate does decreases as your income goes up, we say this tax is
Regressive
400
What is the difference between the short-run and the long-run?
In the short-run we have at least one input that is fixed In the long-run there are no inputs that are fixed (all inputs are variable) & the number of companies in the industry vary
400

What is the Var Cost of the 3rd unit? 

Output Total Cost 

0         $10 

1         $100 

2         $140 

3         $190 

4         $290

$180
500
When Price for a good falls, the Total Revenue collected by the sellers increases. The demand for the good must be_____.
Elastic
500
If there are 2 people & the item is non-rival and the item costs $6 to make, how many units should be produced? 

Qd Pa Pb 

1     4  3 

2     3 2 

3      1 0

1
500
Can you give an example of a regressive tax?
Answers vary
500
Accounting Profit tells you if your company is earning a profit; whereas, economic profit tells you if you are making
a good decission
500

What is the MC of the 3rd unit? 

Output Total Cost

0         $10 

1         $100

2         $140 

3         $190 

4         $290

$50
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