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ECON1101 Chapter Notes - Chapter 1: Sunk Costs, Fixed Cost, Time Horizon

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beigecricket196
31 May 2018
School
UNSW, UNSW Sydney
Department
Economics
Course
ECON1101
Professor
All

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Suppliers --> factors of production --> sunk cost
Sunk cost: Cost that once paid cannot be recovered
If a factor of production is fixed, then its cost does not vary with the quantity
produce.
A fixed cost is a cost associated with a fixed factor of production. Opposite for
variable.
The short run is a period of time during which at least of one factor of production is
fixed.
The long run is a period of time during which all factors of production are variable.
What shifts the supply curve to the right:
Drop in the price of (variable) inputs
-
Advancements in technology (via its impact on productivity)
-
Expectations (on future prices/increase in demand)
-
Drop in the price/demand of other products
-
Increase in the number of suppliers
-
The Price Elasticity of supply represents the percentage change in the quantity
supplied resulting from a very small percentage change in price. It also measures
the responsiveness of the supply to changes in price.
Law of supply: Supply curves have the tendency of being upward sloping.
Elastic Supply: Supply is inelastic when the price elasticity of supply is greater than
1.
Unit Elastic Supply: Supply is unit elastic when the price elasticity of supply is equal
to 1.
Inelastic Supply: Supply is inelastic when the price elasticity of supply is less than 1.
What changes the elasticity of supply:
Availability of raw materials
-
Factors mobility
-
Inventories/excess capacity
-
Time horizon
-
Supply
Sunday, 25 March 2018
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Document Summary

Suppliers --> factors of production --> sunk cost. Sunk cost: cost that once paid cannot be recovered. If a factor of production is fixed, then its cost does not vary with the quantity produce. A fixed cost is a cost associated with a fixed factor of production. The short run is a period of time during which at least of one factor of production is fixed. The long run is a period of time during which all factors of production are variable. What shifts the supply curve to the right: Advancements in technology (via its impact on productivity) The price elasticity of supply represents the percentage change in the quantity supplied resulting from a very small percentage change in price. It also measures the responsiveness of the supply to changes in price. Law of supply: supply curves have the tendency of being upward sloping. Elastic supply: supply is inelastic when the price elasticity of supply is greater than.

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Related Questions

Select correct option:
Substitution effect
Real income effect
Income effect
Price effect


If the cost of computer components falls, then
Select correct option:
The demand curve for computers shifts to the right.
The demand curve for computers shifts to the left.
The supply curve for computers shifts to the right
The supply curve for computers shifts to the left


The short run, as economists use the phrase, ischaracterisedby:
Select correct option:
All inputs being variable.
At least one fixed factor of production and firms neitherleavingnor entering the industry.
No variable inputs - that is, all of the factors of productionarefixed.
A period where the law of diminishing returns does not hold.


When an industry's raw material costs increase, otherthingsremaining the same:
Select correct option:
The supply curve shifts to the left.
The supply curve shifts to the right.
Output increases regardless of the market price and the supplycurveshifts upward.
Output decreases and the market price also decrease.


The law of diminishing returns assumes:
Select correct option:
There are no fixed factors of production.
There are no variable factors of production.
Utility is maximised when marginal product falls.
Some factors of production are fixed.


Price floor results in:
Select correct option:
Equilibrium
Excess demand
Excess supply
All of the given options


If a decrease in price increases total revenue:
Select correct option:
Demand is elastic
Demand is inelastic
Supply is elastic
Supply is inelastic


If the income elasticity of demand is 1/2, the good is:
Select correct option:
A luxury.
A normal good (but not a luxury).
An inferior good.
A Giffen good.


Other things equal, expected income can be used as a directmeasureof well-being:
Select correct option:
No matter what a person's preference to risk.
If and only if individuals are not risk-loving.
If and only if individuals are risk averse.
If and only if individuals are risk neutral.


When drawing demand and supply curves, economists are assumingthatthe primary influence on production and purchasingdecisionsis:
Select correct option:
Price
Cost of production
The overall state of the economy
Consumer incomes

Question 21

At least in theory, the more competition there is in the market, the greater also is the efficiency in the economy.

True

False

Question 22

Total fixed cost curve shows that fixed costs vis-Ã -vis production levelsdon't change.

True

False

Question 23

A firm's economic profit is usually higher than its accounting profit.

True

False

Question 24

The short run is a period of time when all factor inputs are fixed.

True

False

Question 25

In general, the product price is higher in an oligopolistic market than thatof monopolistic competition.

True

False

Question 16

  1. If price is cut and demand is elastic, total revenue will rise because

    the change in quantity demanded is greater than the percent change in price.

    the percent change in quantity demanded is greater than the change in price.

    the percent change in quantity demanded is greater than the percent change in price.

    customers can't find substitutes.

3 points

Question 17

  1. If price is cut and demand is inelastic, total revenue will fall because

    the change in quantity demanded is less than the percent change in price.

    the percent change in quantity demanded is less than the change in price.

    the percent change in quantity demanded is less than the percent change in price.

    customers can find substitutes.

3 points

Question 18

  1. If something is addictive, then

    price and demand are inversely related.

    price elasticity of demand is equal to one.

    demand is perfectly inelastic.

    demand is perfectly elastic.

3 points

Question 19

  1. In general, elasticities measure

    the change in quantity demanded when a product attribute changes.

    the change in consumer spending when income changes.

    the change in an attribute for a percentage change in price.

    the percentage change in the quantity demanded resulting from a fixed percentage change in some attribute.

3 points

Question 20

  1. Average total costs are defined as

    total costs divided by the change in output.

    total costs divided by output.

    the change in total costs when output changes.

    average variable costs plus marginal costs.

3 points

Question 21

  1. If a firm is experiencing economies of scale, then the long-run average cost curve is

    falling.

    rising.

    horizontal.

    shifting.

3 points

Question 22

  1. If average total cost is rising

    marginal cost is above average total cost.

    marginal cost is rising.

    marginal product is rising.

    marginal cost is above average total cost and is falling.

3 points

Question 23

  1. The period of time over which all inputs are variable is the

    market horizon.

    short run.

    calendar year.

    long run.

3 points

Question 24

  1. The supply chain refers to

    the supply curve.

    the process of outsourcing.

    the process of downsizing.

    the process of creating and selling a product.

3 points

Question 25

  1. When the capital (a fixed input) changes

    short-run marginal costs rise.

    short-run average total costs fall but do not shift.

    labor inputs decline.

    the short-run average total cost curve shifts.

3 points

Question 26

  1. A market of price takers is called

    perfectly competitive.

    monopolistically competitive.

    a monopoly.

    an oligopoly.

3 points

Question 27

  1. A market with a single seller is called

    perfectly competitive.

    monopolistically competitive.

    a monopoly.

    an oligopoly.

3 points

Question 28

  1. A market that mainly stresses product differentiation is called

    perfectly competitive.

    monopolistically competitive.

    a monopoly.

    an oligopoly.

3 points

Question 29

  1. Entry into a competitive market will continue until

    economic profits are zero.

    normal profits are zero.

    when accounting losses are zero.

    a. and b. are true

3 points

Question 30

  1. Firms in an oligopoly

    act independently.

    engage in strategic behavior.

    have perfect knowledge of the behavior of others.

    openly collude.