Microeconomics Exam 2-Chapters 5, 6,
7, 13 Questions and Answers
Welfare Economics - ANSWER-The study of how the allocation of resources affects
economic well-being
Willingness to pay - ANSWER-The maximum amount a buyer will pay for a good
Consumer Surplus - ANSWER-The amount a buyer is willing to pay for a good minus
the amount the buyer actually pays for it
Cost - ANSWER-The value of everything a seller must give up to produce a good
Producer Surplus - ANSWER-The amount a seller is paid for a good minus the
seller's cost of providing it
Efficiency - ANSWER-The property of a resource allocation of maximizing the total
surplus received by all members of society
Equality - ANSWER-The property of distributing economic prosperity uniformly
among members of society
Total Revenue - ANSWER-The amount a firm receives for the sale of its outputs
Total Cost - ANSWER-The market value of the inputs a firm uses in production
Profit - ANSWER-Total Revenue-Total Cost
Explicit Costs - ANSWER-Input costs that require an outlay of money by the firm
Implicit Costs - ANSWER-Input cost that do not require an outlay of money by the
firm
Economic Profit - ANSWER-Total Revenue-Total Cost, including both explicit and
implicit costs
Accounting Profit - ANSWER-Total Revenue-Total Explicit Cost
Production Function - ANSWER-The relationship between quantity of inputs used to
make a good and the quantity of output of that good
Marginal Product - ANSWER-The increase in output that arises from an additional
unit of input
Diminishing marginal product - ANSWER-The property whereby the marginal
product of an input declines as the quantity of the input increases
7, 13 Questions and Answers
Welfare Economics - ANSWER-The study of how the allocation of resources affects
economic well-being
Willingness to pay - ANSWER-The maximum amount a buyer will pay for a good
Consumer Surplus - ANSWER-The amount a buyer is willing to pay for a good minus
the amount the buyer actually pays for it
Cost - ANSWER-The value of everything a seller must give up to produce a good
Producer Surplus - ANSWER-The amount a seller is paid for a good minus the
seller's cost of providing it
Efficiency - ANSWER-The property of a resource allocation of maximizing the total
surplus received by all members of society
Equality - ANSWER-The property of distributing economic prosperity uniformly
among members of society
Total Revenue - ANSWER-The amount a firm receives for the sale of its outputs
Total Cost - ANSWER-The market value of the inputs a firm uses in production
Profit - ANSWER-Total Revenue-Total Cost
Explicit Costs - ANSWER-Input costs that require an outlay of money by the firm
Implicit Costs - ANSWER-Input cost that do not require an outlay of money by the
firm
Economic Profit - ANSWER-Total Revenue-Total Cost, including both explicit and
implicit costs
Accounting Profit - ANSWER-Total Revenue-Total Explicit Cost
Production Function - ANSWER-The relationship between quantity of inputs used to
make a good and the quantity of output of that good
Marginal Product - ANSWER-The increase in output that arises from an additional
unit of input
Diminishing marginal product - ANSWER-The property whereby the marginal
product of an input declines as the quantity of the input increases
