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ECON 1010 Chapter Notes - Chapter 1: Reservation Price, Sunk Costs, Fixed Cost

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School
University of Manitoba
Department
Economics
Course
ECON 1010
Professor
Laura K.Brown

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ECON 1010 Full Course Notes
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ECON 1010 Full Course Notes
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Document Summary

The supply curve can be interpreted in two different ways, horizontally and vertically. Horizontally; at any certain price, the associated quantity on the supply curve is indicative of how many units the producer is willing to supply at that price. Suppliers are often firms that need capital and labour to produce their goods. The factors of production used by the entrepreneur can be fixed or variable. A variable factor of production could be labour; producing more units would require hiring more employees, increasing cost of production. The short run is the period in which he will have to keep his machinery and pay his employees. The long run is the period starting from the point in time where he will be effectively free to sell the machinery (and the associated loan) or buy one or more new machineries. It is the change in total cost: mc = tc. Mc declines, reaches a minimum then rises.

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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

If a monopolist is protected by barriers that prevent other firms form selling the same product, then the monopolist

A. can always increase profit by raising is the price
B. will pass on to its customers an increase in production cost
C. can change any price without fear of losing customers
D. is still constrained by the demand curve for its product.

Because land as a factor of production is fixed in supply
A. its price is demand determined
B. its return is known as pure rent
C. its supply curve is perfectly inelastic
D. All of the above

If a firm borrows $8,000 from households at an anual intereest rate of 6%, how much will the firm pay in interest, payment each year?
The firm will pay $______ in interest payments each year. (as an integer)
A loan that involves more risk will generally charge (a lower/a higher)? interest rate than a loan with less risk.

The primary risk of owning a mortgage is that the lender will default on the mortgage obligation. True or False and why?

In all competitive labor markets, firms will hire additional workers only if the value of their products exceeds the relevant market wage. True or False? And why?

1. If a firm experiences economies of scale,

a. it moves up along the long-run average total cost curve.

b. expansion of output becomes more expensive for the firm.

c. the firm can reduce its per-unit cost by producing less.

d. the firm must shut down in the long run.

e. the firm can reduce its per-unit cost by expanding production.

2. The long-run average total- cost curve represents:

a. the maximum cost of producing any level of output when all the factors are fixed.

b. the lowest cost of producing any level of output when all the factors are variable.

c. the maximum cost of producing any level of output when all the factors are variable.

d. the lowest cost of producing any level of output when all the factors are fixed.

e. the lowest cost of producing any level of output when at least one factor fixed.

3. If the average variable cost if falling, then:

a. average fixed cost is rising.

b. marginal cost must be falling.

c. marginal cost must be rising.

d. marginal cost lies below average variable cost.

e. marginal cost lies above the average variable cost.

4. When the marginal-cost curve lies above the average-total-cost curve, the average-total-cost curve slopes up and the average-variable-cost curve slopes down.

a. true

b. false.

5. Demand is price-elastic at the top portion of a straight-line downward-sloping demand curve.

a. true

b. false.