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ECON 1100 FINAL EXAM REVIEW 2025
WITH VERIFIED 100% CORRECT
ANSWERS
Buyers Gain Consumer Surplus When the market price is? - correct answers ✔✔Less than the highest price buyers are willing to pay. A decrease in the supply of cars, ceteris paribus, leads to a ______ in the equilibrium price of cars and a ______ in the consumer surplus to buyers of cars? - correct answers ✔✔Increase; Decrease Which of the following is true regarding an effective (binding) price floor? - correct answers ✔✔A deadweight loss results from a price change which of the following is true about a firm in the short run? - correct answers ✔✔AFC = ATC - AVC If marginal product is above the average product? - correct answers ✔✔Average product is rising If government wants to minimize the deadweight loss associated with a tax, it should impose the tax in a market in which: - correct answers ✔✔Demand and supply are both inelastic 4 Basic Resources - correct answers ✔✔land, labor, capital, entrepreneurship
Law of Supply - correct answers ✔✔as price goes up supply goes up; as price goes down supply goes down Law of Demand - correct answers ✔✔as price goes down demand goes up; as price goes up, demand goes down Factors of Production - correct answers ✔✔Land, Labor, Capital, and Entrepreneurial ability Opportunity Cost - correct answers ✔✔Alternative that is given up when a choice is made A market economy is characterized by? - correct answers ✔✔Buyers and Sellers Absolute Advantage - correct answers ✔✔Producing more output than another country Comparative Advantage - correct answers ✔✔Producing an output at a lower cost than another country Trade Surplus - correct answers ✔✔Exports exceed imports Trade Deficit - correct answers ✔✔Imports exceed exports Normal Good - correct answers ✔✔Increase in income leads to increase in demand; vice-versa Inferior Good - correct answers ✔✔Demand decreases when income increases; vice versa
Elastic Demand - correct answers ✔✔If price elasticity is greater then 1 Inelastic Demand - correct answers ✔✔If price elasticity is less then 1 Unit elastic demand - correct answers ✔✔If price elasticity is equal to 1 Perfectly elastic - correct answers ✔✔Horizontal demand curve Perfectly inelastic - correct answers ✔✔Vertical demand curve Total Revenue = - correct answers ✔✔P x Q Determinants of elasticity - correct answers ✔✔-Luxury or necessity -the share of total budget -availability of substitutes -the time dimension If the income elasticity coefficient is negative, the product is a/an ____ good - correct answers ✔✔inferior If the income elasticity coefficient is positive, the product is a/an ___ good - correct answers ✔✔normal Law of diminishing marginal utility - correct answers ✔✔As consumption of one good increases realative to other goods, additional satisfaction gained from consuming yet another unit of that good eventually declines
Total Utility / Quantity Law of diminishing returns - correct answers ✔✔marginal cost increases as output increases in the short run Marginal Benefit - correct answers ✔✔Max amount the consumer is willing to pay for each additional unit Consumer Surplus - correct answers ✔✔max amount consumer is willing to pay - what consumer actually pays Producer Surplus - correct answers ✔✔Amount the producer receives - amount the producer is willing to accept Marginal Cost - correct answers ✔✔Additional cost of producing more units of outputs The MC curve is also the supply curve in a __________? - correct answers ✔✔Perfectly Competitive market Total Surplus = - correct answers ✔✔CS + PS The efficiency rule is? - correct answers ✔✔to continue an activity as long as MB > MC or stop where MB = MC price ceiling - correct answers ✔✔a max legal price for output, set below equilibrium price
Functions of Government - correct answers ✔✔-Providing a legal framework -Promoting competition and regulating business -Correcting externalities -Providing public goods and regulating common resources -Assisting families in poverty -Promoting economic growth and macroeconomics stabilization Short run - correct answers ✔✔Period of time in which one or more factors of productions are held constant Long run - correct answers ✔✔All factors of production are variable Fixed inputs - correct answers ✔✔Factors of production that are held constant in the short run Variable inputs - correct answers ✔✔Factors of production that can be changed in the short run Coase Theorm - correct answers ✔✔Private parties may be able to solve the problem of externalities, provided property rights are clearly defined and transactions cost are low Total Cost = - correct answers ✔✔TFC + TVC Economies of Scale - correct answers ✔✔A firms inputs increase by some % and output increases by an even larger % "U" shaped
Characteristics of perfect competition - correct answers ✔✔(1) a large number of small firms (2) identical products sold by all firms (3) perfect resource mobility or the freedom of entry into and exit out of the industry (4) perfect knowledge of prices and technology. Monopolistic competition - correct answers ✔✔An imperfectly competitive market structure, characteristics by many buyers and sellers, differentiated products, no barriers to entry, and perfect information Nash equilibrium - correct answers ✔✔The combination of strategies that result from analyzing the playoff matrix and pretending what each firm will likely do Monopsony - correct answers ✔✔An industry that is controlled by a single firm In the long run, firms in monopolistic competitive markets are highly inefficient and can only break even. - correct answers ✔✔ Monopolistic competition has a downward sloping demand curve. - correct answers ✔✔ In the short run, a monopolistically competitive firm maximizes profit or minimizes losses by producing that quantity that corresponds to when marginal revenue equals marginal cost. - correct answers ✔✔ Long run equilibrium - correct answers ✔✔Occurs when the firms in a competitive industry are earning zero economic profit
