FARE 1300 Study Guide - Midterm Guide: Inferior Good, Giffen Good, Normal Good

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ultramarinemarten502

19 Oct 2013

School

University of Guelph

Department

Food, Agricultural and Resource Economics

Course

FARE 1300

Professor

Julio Mendoza

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Document Summary

How much of a good the person wants to consume and different prices. Shows the max amount per unit the person is willing to pay for all the different amounts of a good. Downward slope means that as the price of a good falls, a consumer will want to consume more of that goo. How much of a good the producer will produce at all different prices. The minimum amount per unit that the person will require to produce at each of the different levels of production. Demand curve slopes down to diminish marginal utility: as yield increases, there are diminishing marginal returns to costs. Supply curve slopes upward to diminish marginal product: experience diminishing returns to successive inputs. Diminishing marginal products lead to increasing marginal costs: with each additional unit of yield from our hectare of land, we have to spend somewhat more on our bundle of variable costs.

Related Questions

1. If marginal utility is negative, total utility is

a. Positive

b. Negative

c. Decreasing

d. Constant

e. Increasing

2. If utility-maximizing consumers face identical prices, they will have identical

a. Marginal utilities for each good

b. Ratio of marginal utilities for each good

c. Preferences

d. Ratios of total utilities for each good

e. Total utilities for each good

3. The substitution effect

a. Always increases quantity demanded of a good whose relative price has fallen

b. Is opposite in sign to the income effect for all normal goods

c. Is opposite in sign to the income effect for all normal goods

d. May cause demand curves to be upward sloping

e. Is always dominated by the income effect for normal goods

4. Demand curves for normal goods slope downward because

a. The substitution effect of a price change is greater than the income effect

b. Substitution and income effects work in the same direction

c. The income effect is always greater than the substitution effect

d. The income effect is always less than the substitution effect

e. None of the above

5. The idea that a consumer derives less additional satisfaction from consuming successive units of a good is called

a. Diminishing consumer surplus

b. The paradox of value

c. Diminishing marginal utility

d. Diminishing total value of consumption

e. Diminishing total utility

indigolocust149

As long as profits remain positive, a firm will want to increase the quantity produced.

Question 3 options:

	1) True
	2) False

Question 4 (1 point)

Only variable costs are relevant to a firm's decision to shut down.

Question 4 options:

1) True

2) False

A competitive firm faces a downward-sloping demand for its product.

Question 1 options:

1) True

2) False

If a firm is producing a quantity along the upward sloping portion of its marginal cost curve at which marginal cost exceeds price and is earning positive economic profits, it should

Question 10 options:

1)	continue to produce this quantity.

2)	decrease the quantity produced because doing so will increase profit.

3)	increase the quantity produced because profits are still positive.

wait for the price to increase to its current marginal cost.

Ultimately, short-run supply curves are upward sloping because of

Question 12 options:

1)	the irrelevance of fixed costs to the firm's decision making.

2)	the factor-price effect.

3)	diminishing marginal returns to the variable inputs.

4)	the equality of demand and marginal revenue for competitive firms.

olivesardine69

Question:

Is it true that in a short-run production process, the marginal cost curve eventually slopes upward because firms have to pay workers a higher wage rate as they produce more output? Explain your answer.

Answer:

The marginal product of labor is the increase in output resulting from a one-unit increase in the amount of labor employed. In my own opinion, the statement can be true in the sense that, as the firm produces more and more the cost of production has to come down first; that becomes constant or minimum and then starts to increase. The marginal cost is also a U-shaped curve that first falls then reaches a minimum and starts rising. The reason for rising marginal costs in the short term will only be an increase in the wages as the only factor which is variable in the short-run is labor whereas all factors are kept fixed, so the fixed costs will keep coming down. If you increase labor, you are going to suffer from diminishing marginal returns. And in the long-run, one will suffer diminishing returns from both input factors, labor, and capital.

The short-run cost relationship between the marginal product of labor and the marginal cost, the labor is variable. We have already established that there are diminishing marginal returns because the labor decreases. To increase output in the short-run, a firm must increase the amount used of a variable input. The marginal product reduces, not because consecutive workers are lesser, but because more workers are being used relative to the amount of equipment that is available, what they have left to work with. An example; if a clinic has only one dentist on duty and several assistants are available and we have a lot of patients waiting to see that doctor, the number of patients served by this office cannot increase without limit. The excess assistants will not be able to increase the number of patients in the office, not because they are not reliable or good enough, but because they cannot perform the doctor's job, and there is only one doctor in the office.

https://www.quora.com/Why-does-the-marginal-cost-curve-slope-upwards

I need a peer reply for this.

amethystwhale496

FARE 1300 Study Guide - Midterm Guide: Inferior Good, Giffen Good, Normal Good

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