AGB 144 Final Exam 246 Questions and Verified Answers.
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AGB 144
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AGB 144
AGB 144 Final Exam 246 Questions and Verified Answers.AGB 144 Final Exam 246 Questions and Verified Answers.AGB 144 Final Exam 246 Questions and Verified Answers.AGB 144 Final Exam 246 Questions and Verified Answers.
AGB 144 Final Exam 246 Questions and Verified
Answers.
Law of Diminishing Marginal Utility - ANS all wants are insatiable, but the want for a
particular item can be satisfied at some point
Total Cost - ANS TFC/Q
Average Variable Cost - ANS TVC/Q
Average Total Cost - ANS TC/Q and AFC+AVC
Marginal Cost - ANS the additional cost of producing one more unit of output
Change in total cost/change in quantity TC2-TC1/Q2-Q1
Total Revenue - ANS Price x Quantity Sold
Marginal Revenue - ANS Change in Total Revenue/Change in Quantity
Average Revenue - ANS Total Revenue/Quantity
Law of Demand - ANS as price decreases, demand increases
Utility Maximizing Rule - ANS to maximize satisfaction the consumer should allocate
their income so that the last dollar spent on each product yields the same amount of
marginal utility
To Maximize Utility - ANS MU of A/$A = MU of B/$B
All income should be spent
Triple Bottom Line - ANS People (Employees, Consumers), Planet, Profit
Break Even Point - ANS Point at which all costs are recovered
ATC = MC
Productive Efficiency - ANS produce goods in least cost way
Allocative Efficiency - ANS -right mix of goods are produced
-maximize consumer and producer surplus
Four Market Models - ANS Pure Competition (Agriculture), Pure Monopoly (Electric
Companies), Monopolistic Competition (Cell Phone Companies), and Oligopoly (OPEC)
Pure Competition characteristics - ANS Very large number of sellers, Standardized
product, Price takers, free entry and exit from the market
,Short Run - ANS Plant capacity is fixed but can adjust the degree to which the plant is
used
Long Run - ANS Plant capacity variable
Constant Returns to Scale - ANS As a firm increases production, average cost remains
constant
Diseconomies of Scale - ANS As a firm increases production, average cost increases
Producer Surplus - ANS Surplus benefit received by supplier, price received by
producer minus minimum acceptable price for the producer
Consumer Surplus - ANS Surplus benefit received by consumers, maximum price
consumers are willing to pay minus the actual price they pay
Total Product - ANS Total quantity that is produced
Private Goods - ANS Rivalry, Excludability
Losses and Shrinking Packages - ANS Status Quo: People react when the price rises,
they don't always notice when the package gets smaller
Demand-Side Market Failures - ANS Demand curve doesn't reflect actual willingness to
pay
Ex: fireworks, roadways, shoveling sidewalks
Increasing Cost Industry - ANS Entry of new firms increases cost of resources, exit
decreases cost of resources
Demand (slope) - ANS Individual firm (perfectly elastic), Total market (downward
sloping)
Normal Profit - ANS what the entrepreneur could have made elsewhere
Accounting Profit - ANS Total Revenue - Explicit Costs
Overstates the success of your business
Economic Profit - ANS Total Revenue - (Explicit Costs + Implicit Costs)
Gives an accurate picture of the success of your business
Explicit Costs - ANS Monetary payments for resources that a firm doesn't own
Ex. salaries, rent, inputs
, Implicit Costs - ANS The opportunity costs of using the resources that the firm does
own; Ex. OC of land, OC of natural resources
Elasticity - ANS have to continually lower the price by larger and larger amounts to
convince consumers to purchase more
Decreasing Cost Industry - ANS Entry of firms decrease costs of resources, Exit of firms
increases cost of resources
Constant Cost Industry - ANS Entry/exit doesn't affect resource prices
Economies of Scale - ANS As a firm produces more, there is a lower average cost of
production; Ex. labor specialization, managerial specialization, efficient capital
Fixed Cost - ANS Cost that doesn't vary with production; Ex. rent, electricity, salary
Framing Effects and Advertising - ANS New information can alter your perception of a
gain or loss
Shutdown - ANS Price < minimum AVC
Variable Costs - ANS Costs that vary with production; Ex. input costs, hourly wages
Suppose that tacos pizza are substitutes and that soda pizza are complements, we
would expect an increase in the price of pizza to - ANS Reduce the demand for soda
and increase the demand for tacos
Examples of command economies are - ANS Cuba and North Korea
The law of demand states that, other things equal, - ANS Price and quantity demanded
are inversely related
Command systems are also known as - ANS Communism
Inelastic - ANS Not responsive to price change; 1% change in prices leads to a less
than 1% change in quantity demanded
Other things equal, what might shift the demand curve of gasoline to the left? - ANS The
development of a low-cost electric automobile (decrease in demand)
Example of an inferior good - ANS used clothing
The advent of DVD's has virtually removed the market for videocassettes. This is an
example of - ANS Creative destruction
Mid-Point Formula - ANS E (d) = [Q2-Q1/ (Q2+Q1)/2] / [P2-P1/ (P2+P1)/2]
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