Econ Final JMU Milliman

Economic studies:

How society uses its scare resources to satisfy its unlimited desires.

True or False: There is a positive relationship between the amount of rainfall and the amount of umbrellas bought

True

Association Causation Fallacy:

Factor A is associated (correlated) with Factor B... (But it doesn't necessarily mean Factor A is causing factor B.)

Fallacy of Composition

What is true for a part is automatically true for another. (Nope)

Ignoring Secondary effects

Example: farmers using a insect repellent that at first causes an increase in crop yields... but ultimately leads to a damaged eco system.

The Production Possibilities frontier model amd its association constructs- such as distribution boxes and decision-making graphs- can be used to best illustrate which set on concepts:

1.The impact of technology on productive capability and opportunity cost.

2. Marginalism and how output is allocated among groups in society.

True of False:Liberal Mixed market and market socialism systems may have similar policies for government involvement in education, but the former system has more private ownership of land and capital resources than the latter system.

True

Indicate if the Demand for steak- a normal good- will increase(I), decrease(D) or stay unchanged(U).

...

Pork a substitute for steak increases in price.

I

Unemployment in the nation increases significantly.

D

The price of steak declines

U

The price of steak sauce increases dramatically

D

A government report states that there is a clear link between the consumption of steak and cancer

D

More pastureland increases the amount of steak production

U

It is expected that, in 2 months from now, the prices of steak will skyrocket.

I

Indicate in each case whether the supply of beer will Increase(I), decrease (d), or remain unchanged(u).

...

A social trend to consume more wine coolers at bars start up

U

Beer prices decline

U

Brewery workers wages increase

D

The price of hops, an important ingredient in brewing decreases.

I

What will not cause the demand for ice cream to change

A change in price of ice cream.

derived demand

In economics derived demand is demand for a factor of production or intermediate good that occurs as a result of the demand for another intermediate or Economics help - Derived In essence, the demand for one is dependent on that whose demand its demand is derived from. ex. decrease in the demand for chocolate bars reduces the demand for sugar.

Price ceiling below equilibrium price causes

quantity supplied to decrease`

Price ceiling below equilibrium price short term causes

Quantity demanded to be greater than quantity supplied

Demand Factors

...

P

Price of the good itself (slides along curve)

P⌄c

Price/Quality/Availability of Compliment goods (shifts demand)

P⌄s

Price/Quality/Availability of substitute good

Pop

Population Size of the pool/ potential pool of Buyers

E

Earning(income) of the buyers

Exp

Expectations of future Price of the good

Pre

Preference/ Tastes for the good

Supply Shift Factors

...

P

Price of good itself

P⌄AG

Price of alternate good

P⌄rr

Price/availability/quality of relevant resources

S#

Seller number and capacity

Exp

Expectations of future price of good

T

Technology used to produce the good

Elasticity=

R/IC

R=

percent change in quantity

IC=

Percent change in price... use the midpoint formula.

The more specific...

The more elastic

No effect on equilibrium quantity when there is an increase in supply mean

Perfectly price inelastic

if total spending of a good remains the same while the price increases, the demand for good x is considered

unitary price elasticity

What is NOT a determinant of price sensitivity for gasoline

the quantity of gasoline produced

TR=

Price x Output

Marginal Cost=

change in total cost/change in quantity

profit box

below MR, above where you hit the MC/ATC Curve

Total cost

where it meets atc curve

Each point on the LRAC curve shows, for a given output level

The minimum possible average cost per unit when the plant size can be changed.

ATC

total cost/quantity

A factor which tends to make succesful collusion among firms easier to achieve:

Inelastic Market demand

What is the price and output level of a firm un a regulation, total profic zero, natural monopoly:

where ATC and D=AR meet.

A natural monopoly is most likely to be found in which of the following settings:

when gains from specialization exceed coordination and control losses over the entire range of industry output

Long-run firm market dynamics under natural monopoly... longrun equalibrium conditions-

1. Market level S=D

2.Firm level MR=MC

3.Firm profits zero

Under the public interest theory of regulation, the government regulations dealing with externalities would most likely attempt to:

encourage production of goods with positive externalilties.

All else equal, the ______ broadly an industry is defined, the ______ substitutes it likely has, and the demand for its output will more likely be _____ price elastic.

more; fewer; less

Which is NOT an entry barrier

Ownership of private property