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103 Cards in this Set
- Front
- Back
Absolute advantage is found by
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comparing the productivity of one nation to that of another.
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The Circular flow diagram is
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a visual model of how the economy is organized.
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A leftward shift in supply
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is a decrease in supply.
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Microeconomics is the study of
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how individual households & firms make decisions.
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If there is a shortage of laborers, we would expect the
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wages of farm laborers to increase.
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Another term for factors of production is
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goods
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Imports are
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goods produced abroad & sold domestically.
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Economics is the study of
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how society manages its scarce resources.
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A movement along the supply curve might be caused by
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the price of the good or service.
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The forces that make market economies work are
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demand and supply.
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The primary determinant of a counties standard of living is
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its ability to produce goods and services.
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What you give up to obtain an item is called
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opportunity cost
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An economy's scarce resources are allocated by
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price for resources
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When goods that are produced in the United States are sold to China, the goods are
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exported by the united states and imported by china.
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A country has a comparative advantage in a product if the world price is
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higher than its domestic price.
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An example of a complementary good is
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lawnmowers and automobiles
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Economies deals primarily with the concept of
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scarcity.
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What are the 2 basic reasons why economist often appear to give conflicting advice to policymakers are differences in?
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scientific judgement and values.
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The country with the comparative advantage in a product
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None of them are correct.
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Trade based on absolute advantage is
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NOT correct
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When a country allows trade and becomes an exporter of a good, which of the following would NOT be true?
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The losses of domestic consumer exceeds the gains of domestic producers.
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If the demand for a product increases, we would expect equilibrium price
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and equilibrium quantity to both increase.
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Letters that are not on the Demand curve
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CANNOT produce.
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Economist use model in order to
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learn how the economy works.
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When economist are trying to help improve the world they are
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policy advisors.
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Technology is NOT
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a determinant of demand
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Suppose there is an increase in input prices. We would expect supply
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to decrease.
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Common Stock
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Equity
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Preferred Stock
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No Equity
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DJIA
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Top 30 industrial companies, price per share.
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Law of Demand
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inverse relationship between price and quantity demanded.
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Normative Economics
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What should be.
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Restrictions on Trade
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Jobs, National Security, Infant Industries, Unfair competition, Protection as a barganship
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Why do some countries like restrictions on trade?
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Some countries are socialist economies and dont encourage competition.
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Change in Quantity Demanded
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Single Curve
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Change in Demand
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Two curves
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If DEMAND is MORE than SUPPLY
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Shortage (-)
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If supply is MORE than DEMAND
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Surplus (+)
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Inferior Good
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Negative income-elasticity coefficient designates inferior good.
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Production Possibilities Curve
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Showing different combinations of goods and services that can be produced in a fully employed economy assuming resources and technology are fixed.
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Microeconomics
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Study of how individual households and firms make decisions.
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Resources
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1. Land (Rent)
2. Labor (Wages and Salaries) 3. Capital (not money - buildings and equipment) 4. Entrepreneur (Profit) |
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4 Sectors
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1. Household
2. Business 3. Government 4. The rest of the WORLD (imports and exports) (OPEN) |
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Sunk Cost
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Once and for all cost that once incurred cannot be reserved.
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Implicit Cost
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Cost of inputs used in production but is not paid for.
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Explicit Cost
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Cost of inputs used and paid for.
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Fixed Cost
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Produced of not still paid for.
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Marginal Cost
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Cost of producing one more unit.
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ATC short run U
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Law of Diminishing Returns
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Economic Profit
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TR - Economic Cost
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Accounting Cost
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TR - Explicit Cost
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Causes of Economies to Scale
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1. Labor Specialization
2. Lower Raw Material 3. Better use of by products |
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Total Revenue
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Price x Quanity
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Complementary
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Negative
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Substitute
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Positive
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Normal
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Positive
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Inferior
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Negative
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Elastic
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Price and TR = Opposite & More than 1
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Inelastic
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Price and TR = Direct & Less than 1
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Consumer Surplus
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(top) Demand - Market Price
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Producers Surplus
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(bottom) What producer gets - minimum he'll except.
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Short Run
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a. Fixed
b. Variable |
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Long Run
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a. Variable = depends on production
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Perfect Competition
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1. Many buyer, many sellers
2. Homo 3. Easy 4. No influence 5. Regular Curve 6. Less than 50 |
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Monopoly / Monopsony
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1. One seller, many buyers
2. Homo 3. Hard 4. Seller Control 5. Steep Curve with 2nd line 6. 50-70 |
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Oligopoly
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1. Few sellers, many buyer
2. Hetero 3. Hard 4. Has influence 5. Kinked Curve 6. 70-100 |
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Price discrimination
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1. Price Elasticity
2. Separate Market (time, age, 3. No Resale |
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Monopolistic Competition
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1. Many buyers & Sellers
2. Hetero 3. Easy than Oligopoly 4. Firm try to influence |
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Coordination of Cullsion
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1. Few buyers many sellers
2. Hetero 3. Hard 4. Buys influence |
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Market Concentration
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Market dominated by few large
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Concentration Ratio
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Largest 4
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Causes of Market Concentration
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1. Economies of Scale
2. Barrier for Entry |
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If TR is less than TC
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its a loss
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If price is above AT its
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Profit
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If price is between AT and AV its
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Loss but will still produce
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If price is below AT its
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Loss and will shut down
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Assuming a firm experiences decreasing marginal products of labor with the addition of each worker regardless of the current output level. AT will be
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Constant
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Negative externalities occur when one persons actions
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adversely affects the well being of a bystander who is not party to the action.
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The minimum wage was instituted in order to ensure workers
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a minimally adequate standard of living.
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Producer Surplus is the
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amount a seller is paid less the cost of production.
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Accounting Profit is
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total revenue minus the explicit cost of producing goods and services.
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Profit is defined as
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total revenue minus total cost
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Demand is said to be inelastic if
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the quantity demanded changes only slightly when the price of good changes.
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For a firm, the production function represents the relationship between
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quantity of inputs and quantity of outputs
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If the quantity supplied is the same regardless of price, then the supply curve would be
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perfectly inelastic
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Consumer surplus measures
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the difference between the amount a consumer has to pay and the amount the consumer was willing to pay
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The price elasticity of demand measures
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a buyers responsiveness to change in the price of a good.
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A local pizza restaurant makes great bread sticks that the consumers don not respond much to a change in the price. If the owner is only interest in increasing revenue he should
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raise the price of the breadsticks
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Economist compute the price elasticity of demand as the
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percentage change in the quantity demanded divided by the percentage change in price.
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If two goods are substitutes, their cross elasticity will be
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positive
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Implicit cost
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do not require an outlay of money by the firm.
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Economies of scale occur when
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long-run average total costs fall as outputs increase.
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Explicit Cost
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ALL the ABOVE
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Demand is inelastic if elasticity is
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less than 1
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Demand for a good would tend to be more inelastic the
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fewer the available substitutes.
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In the long run
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inputs that were fixed in short run become variable.
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An example of an implicit cost of production would be
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the income an entrepreneur could have earned working for someone else
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In any market total revenue is
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Price multiplied by quantity.
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Uncongested roads are a good example
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public good
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Since almost all forms of transportation produce some type of pollution
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society has to weigh the cost and benefits and decide how much pollution to allow.
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Fixed cost can be defined as costs that
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are incurred even if nothing is produced
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A payroll tax is a
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tax on the wages and firms pay their workers
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In an increase in income results in the quantity demanded of a good, then the good is
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an inferior good.
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