OSU Microeconomics Exam 3 Questions Fully Solved Pass At First Attempt

Tariff - correct answers A tax imposed by a government on imports Imports - correct answers Goods and services bought domestically but produced in other countries. Exports - correct answers Goods and services produced domestically but sold in other countries. comparative advantage - correct answers is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors. opportunity cost - correct answers The highest-valued alternative that must be given up to engage in an activity. absolute advantage - correct answers The ability to produce more of a good or service than competitors when using the same amount of resources. Autarky - correct answers a situation in which a country does not trade with other countries, these would also be the relative prices in each country: a smartphone would trade for half the price of a bushel of wheat in China, and double the price of a bushel of wheat in America. terms of trade - correct answers is the ratio at which a country can trade its exports for imports from other countries. External economies - correct answers are reductions in a firm's costs that result from an increase in the size of an industry. •Examples: Silicon Valley, Hollywood, Swiss watchmakers Free trade - correct answers Trade between countries that is without government restrictions. Quotas and Voluntary Export Restraints (VERs) - correct answers Numerical limits imposed upon (quotas) or negotiated between (VERs) countries on the quantity of a good imported by one country from another. World Trade Organization (WTO) - correct answers An international organization that oversees international trade agreements. Globilization - correct answers The process of countries becoming more open to foreign trade and investment. •Lesser-developed countries (LDCs) have less strict regulations, creating perception of unfairness. -But regulations are a choice; in rich countries, we choose such regulations because we think they make us better off. •Free trade and foreign investment might "destroy" distinctive cultures. -Matter of opinion whether LDCs are better off with McDonalds and Walmart; but if they want to eat and shop there, should we deny them that right? Perfectionism - correct answers The use of trade barriers to shield domestic firms from foreign competition. •Restricting trade "saves jobs" and "protects high wages" -We have seen that overall people are better off with trade, even though some individuals are worse off. •"Infant industries" need protection -Industries might need some time to "start-up" and become competitive; but tariffs must eventually be removed. •Protecting national security -Maybe we shouldn't import all our guns from elsewhere... Dumping - correct answers selling a product for a price below its cost of production. In practice, it is difficult to tell if foreign companies are dumping goods. •True production costs are not easy for governments to calculate. Technology - correct answers The processes a firm uses to turn inputs into outputs of goods and services. Technology change - correct answers A change in the ability of a firm to produce a given level of output with a given quantity of inputs. Short run - correct answers The period of time during which at least one of a firm's inputs is fixed. Example: A firm might have a long-term lease on a factory that is too costly to get out of. Long run - correct answers The firm can vary all of its inputs, adopt new technology, and increase or decrease the size of its physical plant. How long is the long run? It varies from firm to firm. •Just think of it as "a long enough period of time that anything can be changed." Variable costs - correct answers are costs that change as output changes In the long run, all of a firm's costs are variable, since the long run is a sufficiently long time to alter the level of any input. Fixed costs - correct answers are costs that remain constant as output changes. Explicit cost - correct answers a cost that involves spending money Implicit cost - correct answers a nonmonetary opportunity cost production function - correct answers the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs. Average Total Cost - correct answers total cost divided by the quantity of output If we divide the total cost of the pizzas by the number of pizzas, we get the law of diminishing returns - correct answers The principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline. average product of labor - correct answers the total output produced by a firm divided by the quantity of workers. •With 3 workers, the restaurant can produce 550 pizzas, giving an average product of labor of: marginal product of labor - correct answers the additional output a firm produces as a result of hiring one more worker. •The first worker increases output by 200 pizzas; the second increases output by 250. marginal cost - correct answers as the change in a firm's total cost from producing one more unit of a good or service: MC = change in TC/change in Q average fixed cost - correct answers •fixed cost divided by the quantity of output produced. average variable cost - correct answers •variable cost divided by the quantity of output produced. So, ATC = AFC + AVC long-run average cost curve - correct answers shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed. economies of scale - correct answers the firm's long-run average costs falling as it increases the quantity of output it produces. minimum efficient scale. - correct answers The lowest level of output at which all economies of scale are exhausted is known as the constant returns to scale - correct answers : its long-run average cost remains unchanged as it increases output. diseconomies of scale - correct answers a situation in which a firm's long-run average costs rise as the firm increases output. isoquant - correct answers a curve showing all combinations of two inputs, such as capital and labor, that will produce the same level of output. marginal rate of technical substitution (MRTS). - correct answers The slope of an isoquant describes how many units of capital are required to compensate for a unit of labor, keeping production constant. Isocost line - correct answers All the combinations of two inputs, such as capital and labor, the have the same total cost. expansion path - correct answers a curve that shows the firm's cost-minimizing combination of inputs for every level of output. perfectly competitive market - correct answers •There are many buyers and sellers, •All firms sell identical products, and •There are no barriers to new firms entering the market. price takers - correct answers they are unable to affect the market price. This is because they are tiny relative to the market and sell exactly the same product as everyone else. As you might have already guessed, perfectly competitive markets are relatively rare. Average revenue (AR) - correct answers is total revenue divided by the quantity of the product sold Marginal revenue (MR) - correct answers is the change in total revenue from selling one more unit of a product. sunk costs - correct answers costs that have already been paid and cannot be recovered; even if they haven't literally been paid yet, the firm is still obliged to pay them. economic profit - correct answers •her revenues minus all of her costs, both implicit and explicit, is $60,000. economic loss - correct answers If these costs were higher than her revenues, Sacha would be making an Long-run competitive equilibrium - correct answers The situation in which the entry and exit of firms has resulted in the typical firm breaking even. Long-run supply curve - correct answers A curve that shows the relationship in the long run between market price and the quantity supplied Productive efficiency - correct answers a situation in which a good or service is produced at the lowest possible cost. Allocative efficiency - correct answers is a state of the economy in which production represents consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marg