Microeconomics Final Exam Questions & Answers 2024/2025

Microeconomics Final Exam Questions & Answers 2024/2025 absolute advantage - ANSWER-the ability to produce a good using fewer inputs than another producer average fixed cost (AFC) - ANSWER-Total fixed cost divided by the number of units of output; a per-unit measure of fixed costs. AFC = FC/Q average total cost (ATC) - ANSWER-Total cost divided by the number of units of output ATC = TC/Q or ATC = AFC + AVC average variable cost (AVC) - ANSWER-variable cost divided by the number of units of output AVC = VC/Q budget constraint - ANSWER-the limits imposed on household choices by income, wealth, and product prices. capital - ANSWER-goods used to produce other goods cartel - ANSWER-a group of firms that gets together and makes joint price and output decisions to maximize joint profits ceteris paribus - ANSWER-a devise used to analyze the relationship between two variable while the values of other variables are held unchanged. clayton act - ANSWER-act outlawed specific monopolistic behaviors such as tying contracts command economy - ANSWER-An economy in which a central government either directly or indirectly sets output targets, incomes, and prices comparative advantage - ANSWER-the ability to produce a good at a lower opportunity cost than another producer complements - ANSWER-two goods for which an increase in the price of one leads to a decrease in the demand for the other and vice versa consumer goods - ANSWER-goods produced for present consumption consumer sovereignty - ANSWER-The idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase). consumer surplus - ANSWER-The difference between the maximum amount a person is willing to pay for a good and its current market price. cross price elasticity of demand - ANSWER-measures the responsiveness of the quantity demand of a good to a change in the price of another good. diseconomies of scale - ANSWER-The property whereby long-run average total cost rises as the quantity of output increases (right-most upward sloping part of the long-run ATC) demand curve - ANSWER-a graph that shows the amount of a product that would be bought at all possible prices in the market depreciation - ANSWER-the decline in an asset's economic value over time diminishing marginal utility - ANSWER-the point reached when an additional unit of a product consumed is less satisfying than the one before economic theory - ANSWER-A statement or set of related statements about cause and effect, action and reaction economics - ANSWER-the study of how individuals and nations make choices about ways to use scarce resources to fulfill their needs and wants efficiency - ANSWER-producing what people want at the least possible cost elastic demand - ANSWER-the percentage change in quantity demanded is greater than the percentage change in price in absolute value elasticity - ANSWER-a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price equilibrium - ANSWER-the point at which quantity demanded and quantity supplied are equal entrepreneur - ANSWER-a person who organizes, manages, and takes on the risks of a business equity - ANSWER-(n.) the state of being just, fair, or impartial; fair and equal treatment; something that is fair; the money value of a property above and beyond any mortgage or other claim shortage - ANSWER-quantity demanded exceeds quantity supplied surplus - ANSWER-quantity supplied exceeds quantity demanded externality - ANSWER-unintended side effect that either benefits or harms a third party not involved in the activity that caused it fallacy of composition - ANSWER-The incorrect belief that what is true for the individual, or part, must necessarily be true for the group, or whole. firm - ANSWER-an organization that comes into being when a person or a group of people decides to produce a good or service to meet a perceived demand. transforms inputs into outputs. primary producing unit in a market economy fixed cost - ANSWER-a cost that does not change, no matter how much of a good is produced. there are none in the long-run continues...