Eco 101 Principles of Microeconomics

1. Eco 101 Principles of Microeconomics

2. Consumer Choice Production & Costs Market Structures Resource Markets 100 100 100 200 200 200 200 300 300 300 300 400 400 400 400 500 500 500 500 100

3. What is marginal utility? This measures the change in total utility from the consumption of one more unit. Row 1, Col 1

4. What are total costs or explicit and implicit costs? Economic profits are the difference between total revenue and these types of costs. 1,2

5. What are monopoly and oligopoly? In these two types of market structures, firms face barriers to entry. 1,3

6. What is marginal revenue product = the wage? Firms will hire labor until this is true. 1,4

7. What is rise and fall? When consumption of a good rises, total and marginal utility exhibit these behaviors, respectively. 2,1

8. What is marginal product to fall? Under the law of decreasing returns we expect this to happen eventually. 2,2

9. What is the firm is a price taker? Selling an identical product with many other firms means this with respect to pricing power. 2,3

10. What is the substitution effect? Under this effect, a wage increase makes you work more, since leisure becomes more expensive. 2,4

11. What is stays constant or is the same at all points? Along the same indifference curve, total utility exhibits this property. 3,1

12. What is zero economic profit? A normal profit is another name for this. 3,2

13. What is setting marginal revenue = marginal cost? Using this rule, firms choose their profit-maximizing output. 3,3

14. What is increase demand? Government borrowing increases interest rates because is does this to the market for financial capital. 3,4

15. What are points E and F? In the graph of indifference curves below, which points have the highest total utility? 4,1

16. What are fixed and variable costs? In the short-run, there are these two types of costs. 4,2

17. What is the deadweight loss? By holding back output in order to charge a higher price, monopolists create this loss in surplus. 4,3

18. What is economic rent? This is the difference between the compensation to a resource and the opportunity cost of that resource. 4,4

19. What is stay on budget or touch the budget line? In consumer equilbrium, consumers choose a point on the highest indifference curve that also does this. 5,1

20. What is economies of scale? This exists in the long run when increases in production lower the average cost of production. 5,2

21. What are perfect competition and monopolistic competition? With free entry and exit, firms in these two market structures can expect zero economic profit in the long run. 5,3

22. What is differential rent? Under this type of rent, differences in rent occur due to difference in resource quality. 5,4