ECON 103 Lecture Notes - Lecture 23: Marginal Revenue

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brownduck883

18 Aug 2018

School

George Mason University

Department

Economics

Course

ECON 103

Professor

Donald Boudreaux

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Document Summary

The supply and demand for productive resources: businesses supply goods & services, receive sales revenue, households, (investors, governments, and foreigners) demand goods. If one input becomes more expensive, producers will shift to lower-cost inputs: the better the substitute inputs, the more elastic the demand for the resource. Substitution in consumption: a high resource prices raises the product price and consumers substitute other goods, the (cid:373)ore elasti(cid:272) produ(cid:272)t"s de(cid:373)a(cid:374)d, the (cid:373)ore elasti(cid:272) is the de(cid:373)a(cid:374)d for the resour(cid:272)e. At the lower output, firms use less of the resource that increased in price. These lead to higher prices and a reduction in consumption. With time, the demand for a resource becomes more elastic. The long-run demand for a resource is almost always more elastic than demand in the short-run. Changes in product demand cause the demand for its input resources to change in the same direction.

Related Questions

DEMAND and SUPPLY FUNDAMENTALS: Shifts in Demand or Supply

Variables typically included in a multivariate demand function (other than the price and quantity of the item the demand function represents) are consumer tastes and preferences, the number of buyers, spendable (disposable) income, prices of substitute goods, prices of complementary goods, advertising expenditures, weather, and expectations. Recalling that the price of the item being considered is placed on the vertical axis, and the quantity on the horizontal axis, the other variables are termed demand shifters. Please answer the following questions about the affect changes in other variables might have on the demand for the item. These changes will either cause demand to increase(shift right) or decrease(shift left). Use either word as applicable, for the short answer.

If the price of a good increases because the demand for it increases, What would you expect the demand for its complement to do?

If the demand for coffee beans increases, then what is likely to happen to the demand for land on which to grow coffee?

If advertising expenditures for the good being considered are decreased, then demand for the good being considered will likely:

Lattes are a relatively expensive coffee drink. However, being a normal good, as consumersâ disposable income increases, the demand for Lattes should:

5. As the supply of tablet computers and e-readers increases relative to the demand for them, what change in demand for printed textbooks (having digital e-book versions) would you expect?

Variables typically included in a multivariate supply function (other than the price and quantity of the item the supply function represents) are prices of other goods that use similar input resources for production, expectations, the number of suppliers, techniques of production, taxes and subsidies, and prices of input resources, weather. Please answer the following questions about the affect changes in other variables might have on thesupplyof the item. These changes will either cause supply to increase(shift right) or decrease(shift left). Use either word as applicable, for the short answer.

If there is an increase in the number of producers of the item being considered, then the supply of it is likely to:

A tariff is a form of trade restriction (that behaves much like a tax). Suppose the United States removes a high tariff on imported broccoli that had been in effect for a long time. How should this affect the supply of imported broccoli?

A decrease in a government-provided subsidy of the item being considered is likely to ___________its supply.

If the price of an input resource decreases (and there are no cheaper substitutes for the resource) then producers of the item are likely to _____________ its supply?

Suppose broccoli growers have successfully lobbied Congress for a crop subsidy. Once the subsidy becomes available, the domestic broccoli supply is likely to:

113. A production possibilities frontier shows the
A) the maximum attainable combinations of two goods that can beproduced with the available resources.
B) combinations of two goods that consumers desire most.
C)maximum output of two goods that can be produced with an unlimitedquantity of resources.
D) demand for two goods.

114. Being on the production possibilities frontier implies thatmore of one good can be produced only by
A) decreasing the quantity of the other good produced.
B)increasing the quantity of the other good produced.
C) lowering the price of the good.
D) raising the price of the good.
E) None Of The Above

116. An output combinationis technically efficient if
A) it is possible to produce more of all goods.
B) it is possible toproduce more of one good without producing less ofanother.
C) it is not possible to produce more of one good without producingless of another.
D) it is not possible to produce more of one good at any cost.

117. Suppose in an economysome resources are not utilized in their most productive use. Ifsociety decides that it wants more of onegood,
A) it will have to increase the quantity of resources in theeconomy.
B) it will have to give up production and consumption of some othergood.
C) it can only do so iftechnology advances.
D) it can achieve this without giving up another good by employingthe under-utilized resources. E) None Of TheAbove

118. In the productionpossibilities frontier framework, unemployment is representedby
A) an inward shift of thecurve.
B) a point located inside the curve.
C) a point located outside the curve.
D) a point located on the curve

119. Which of the followingwould not shift a nation's production possibilities frontier?
A) a liberal immigrationpolicy that welcomes foreign labor
B) an increase in a nation's capital stock
C) discovery of oil, a vital input in the production process
D) an increase in the general price level.

132. If the price of SUVswere to increase, we would expect:
A) the demand for gasoline to increase.
B) the demand for gasoline to decrease.
C) the supply of gasoline to increase.
D) the supply of gasoline to decrease.
E) both B and D to occur.

E) None Of TheAbove

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Question 26 pts

Which of the following is not a reason why specialization and trade are beneficial to society?

	Specialization fosters learning by doing, thus lowering the unit-costs of products
	Firms and workers become less dependent on others for producing goods and services

	The total output of economic goods may be increased even without any increase in resources
	Scarce resources are utilized more efficiently by exploiting differences among them

Question 27 pts

Laissez-faire capitalism limits the government's economic functions to the following, except:

	Protecting private property rights
	Establishing a legal environment to enforce contracts among individuals

	Setting prices of individual goods and services
	Preventing individuals and firms from coercing others

Question 28 pts

A production system where various workers concentrate on different specialized tasks to contribute towards a whole product is referred to as:

	Roundabout production
	A coincidence of wants

	Freedom of enterprise
	Division of labor

Question 29 pts

The market system is said to be characterized by "consumer sovereignty." This is because:

	A sovereign government determines which consumer goods will be produced
	Firms must match their production decisions to the consumers' choices

	The prices of consumer goods are regulated by a sovereign government
	Consumer goods are considered to be more important than capital goods

Question 30 pts

Consumers express self-interest when they:

	Seek the lowest price for a product
	Reduce business losses

	Exclude others in their thinking
	Collect economic profits

Question 311 pts

Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:

	Point 5 to point 1
	Point 4 to point 1

	Point 2 to point 5
	Point 4 to point 6

Question 32 pts

The table below shows the weekly demand for hamburger in a market where there are just three buyers.

Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:

	17
	23

	24
	18

Question 33pts

If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a(n):

	Movement up along the current supply curve of corn
	Movement down along the current supply curve of corn

	Leftward shift in the current supply of corn
	Rightward shift in the current supply of corn

Question 34 pts

Which of the following will not cause the supply curve to shift?

	A technological change in the production of the good
	A change in the prices of other goods that producers could be producing

	A change in the costs of resources needed to produce the good
	A change in the price of the good

Question 35 pts

All of the following would affect the position of the supply curve for cranberries, except the:

	Price of agricultural land for cranberries
	Cost of fertilizers for cranberry production

	Popularity of cranberry drinks
	Development of a new pest control for cranberries

Question 36 pts

When high-school and college graduates apply for jobs in the labor markets,

	Job applicants and employers are both "buyers".
	Job applicants are the "sellers" while employers are the "buyers".

	Job applicants and employers are both "sellers".
	Job applicants are the "buyers" while employers are the "sellers".

Question 37 pts

Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S₁ to S₂?

	A decrease in consumer incomes, assuming corn is a normal good
	The development of a more effective insecticide against corn rootworm

	An increase in the price of fertilizer
	A change in consumer tastes away from cornbread

Question 38 pts

Which is of the following statements is correct?

	If demand increases, then price will decrease
	If demand decreases, then price will decrease

	If price decreases, then demand will decrease
	If price increases, then demand will decrease

Question 39 pts

Which would be a likely cause of an increase in the demand for pizza?

	A decrease in the price of hamburger sandwiches
	A health report showing eating pizza reduces stress

	A reduced desire for take-out and fast-food dining
	A decrease in the prices of cheese, pepperoni, and mushrooms

Question 40 pts

A market for a product reaches equilibrium when:

	Price falls further after there is a shortage
	The price rises further after there is a surplus

	Buyers intend to buy a quantity equal to the quantity that sellers intend to sell
	The actual quantity bought by buyers equals actual quantity sold by sellers

Question 41 pts

A higher price reduces the quantity demanded for a product because:

	Individuals can afford less of the product and will switch to substitutes
	The financial assets of individuals increase

	Individuals will buy more of the product and less of its substitutes
	The purchasing power of individuals increases

Question 42 pts

The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?

	Price of electric cars
	How much sellers are charging customers for electric cars

	Price of gasoline cars
	Quantity of electric cars demanded by buyers

Question 43 pts

Use the following graph of the demand for coffee:

Refer to the above diagram of three demand curves for coffee. An increase in the price of coffee, other factors constant, would cause a:

	Movement from point a to point b
	Movement from point b to point a

	Shift from D₁ to D₂
	Shift from D₁ to D₃

Question 44 pts

Which of the following factors will decrease the current demand for a product?

	A decrease in the current price of a complementary product
	A decrease in the current price of a substitute product

	An increase in the current price of a substitute product
	An expected increase in the future price of the product

Question 45pts

In competitive markets, a surplus or shortage will:

	Cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage
	Cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage

	Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage
	Never exist because the markets are always at equilibrium

Question 46 pts

Which of the following would cause a leftward shift in the supply curve for car washes?

	A decrease in taxes on car washes
	An increase in the price of car washing equipment

	A decrease in the price of water
	An increase in the number of cars in the city

Question 47pts

The market system automatically corrects a surplus condition in a competitive market by:

	Raising the price of the commodity in question while decreasing the quantity demanded
	Raising the price of the commodity in question while increasing the quantity demanded

	Reducing the price of the commodity in question while increasing the quantity demanded
	Reducing the price of the commodity in question while decreasing the quantity demanded

Question 48 pts

A leftward shift of the supply curve for oil in the United States is most likely to result from:

	A decrease in the world price of oil
	An increase in the costs of exploration and drilling for oil

	An increase in the subsidy for oil exploration and drilling
	A decrease in the fees that oil companies must pay for drilling licenses

Question 49 pts

A fall in the price of milk, used in the production of ice cream, will:

	Decrease the supply of ice cream
	Have no effect on the supply of ice cream

	Increase the supply of ice cream
	Cause a movement along the supply curve of ice cream

Question 50 pts

Refer to the above graph, which shows the market for beef where demand shifted from D₁ and D₂. The change in equilibrium from E₁ to E₂ is most likely to result from:

	An increase in the cost of cattle feed
	A decrease in consumer incomes

	A decrease in the tax on beef products
	An increase in the price of pork

ECON 103 Lecture Notes - Lecture 23: Marginal Revenue

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