Unit 1
Define Scarcity and why it exists
The occurrence of not having enough of a resource to satisfy all of the desire for it.
If there was no scarcity everyone could have everything they ever wanted
If price changes very drastically and demand does not what is the demand considered?
Inelastic
What is the difference between fixed inputs and variable inputs
Fixed can not be changed in the short run variable can be changed in the short run
What are the four kinds of market structures
Perfect Competition. Monopolistic Competition. Oligopoly. Monopoly.
Who are the sellers in factor markets and who are the buyers?
Households=Sellers
Firms=Buyers
What are the 3 main economic systems and give an example of a country using one of these 3 systems
Market Economy (Pure Free Economy)
Command Economy (Pure Planned Economy)
A mix of the two (This is the most popular)
(Countries will vary)
If the demand curve were to shift to the right what would happen to the quantity and Price? Separately what would happen if the supply curve shifted to the right?
Q increase P increase for D
Q increase P Decrease for S
P=?
What is the profit-maximizing quantity in a perfect competition model?
MR/AR/D
ATC=MC=P
Rank the order of market structures from highest barriers of entry to lowest.
Monopoly->Oligopoly->Monopolistic Competition->Perfect Competition
What is the MRP Formula?
Change in Total Revenue/Change in Inputs
How do you shift the PPC curve? Give 2 examples
Investment in more capital/Investment in infrastructure and other public goods/Investment in research and development (R&D)/Technological improvements/Investment in human capital/Rule and laws that promote stability/Easier access to more land resources
If a government were to implement a price ceiling below the equilibrium price how would it affect the market?
Supplier would be producing to little and consumers would want to much because the price is lower than equilibrium creating a shortage.
What is the production function and what does it determine?
The relationship between output quantity and a variable input
Total product, marginal product, average product.
List what will happen on the graph when a Monopoly perfectly price discriminates
MR = D again. Allocatively efficient again. CS is gone. DWL is gone.
In a Monopsony which way do the MFC and MRP curves go and at what point should the firm stop hiring?
MFC=Up MRP=Down
When MRP=MFC