Introduction to Economics 1

Yanıt Açıklaması: The total revenue of a firm is the price times the quantity sold by the firm. Total Revenue (TR) = Price (P) x Quantity (Q)

Yanıt Açıklaması: When total product of labor is at the maximum, marginal product of labor equals to zero hence marginal product is the first derivate of the total product of labor.

Yanıt Açıklaması: Market demand is the sum of all the quantities of a product demanded per period by all the buyers in the market. The answer is C.

Yanıt Açıklaması: When AVC and AFC decrease, AC too decreases. Though the AFC curve continues to decrease, once the AVC curve slopes upward, it will eventually outweigh the slope of the AFC curve and make the AC curve upward sloping and hence U shaped.   The relationship between the MC curve and all three average cost curves and the connection among the average cost curves.

Yanıt Açıklaması: For the linear demand curves, price elasticity of demand falls as you move downward along the demand curve. Non-linear demand curves mostly have a different price elasticity along the entire curve since the slope changes as you move along the demand curve. On the other hand, the linear demand curves have a constant slope.As you move down a linear demand curve, the slope which is equal to the ratio of the absolute change in price to that in quantity, remains constant. Answer is A.

Yanıt Açıklaması: A monopoly exists in a market when there are barriers to entry. Barriers to entry are: Government regulations Natural Monopoly Ownership of a key resource Therefore, the correct option is C.

Yanıt Açıklaması: The amount of maximum output that a firm can produce for different levels of labor is known as total product of labor (TPL). The correct answer is D.

Yanıt Açıklaması: I. The demand curve for capital represents the inverse relationship between interest rate and the quantity demanded. (True) II.  Increases in the demand for the products that specific capital is used during the good’s production process shift the demand curve to the left.(False, increases in the demand for the products that specific capital is used during the good’s production process, increases demand for capital shifting the demand curve to the right. ) III. Expected economic growth or improvements in technology, increases demand for capital shifting the demand curve to the right. (True) The answer is D.

Yanıt Açıklaması: What separates Land market from the other production markets is its unique feature related to quantity supplied. The quantity is fixed, thus the household’s choices cannot change the quantity supplied. That gives us perfectly inelastic supply curve (S) of land (in both the short run and the long run).

Yanıt Açıklaması: The answer is where MU=0 since it is the point where TU is at its maximum. Therefore we take the derivative of TU with respect to hot dogs. 10H - 2H=0, MU=5. The answer is C.

Yanıt Açıklaması: There is obviously an inverse relationship between the wage and the quantity of labor demanded. We know this because that is the information we have from individual MRPL curves of the firms. However, the amount of labor demand at a given wage is affected by some other factors as well: Market Price, Technology, Prices of other Factors of Production, Number of Firms in the Market. The answer is E.

Yanıt Açıklaması: Average product of labor (APL) is equal to the division of the total product by the quantity of labor employed. The correct answer is B.

Yanıt Açıklaması: The Law of Supply states that, under the assumption of ceteris paribus, an increase in the price of a product leads to an increase in the quantity supplied. In other words, the law of supply states that there exists a positive relationship between the price and the quantity supplied of a good, implying that the supply curves normally slope upwards. The correct answer is C.

Yanıt Açıklaması: I. A piece of land is demanded more than agricultural production. (True) II.  From society’s perspective, economic rent is a cost. (False, From society’s perspective, economic rent is a surplus payment.) III.  From a firm’s perspective,  (False, From a firm’s perspective, economic rent is a cost.) The answer is A.

Yanıt Açıklaması: The price of a bar of chocolate P T is 2 TL. Individual A’s quantity demanded is 1 bar, individual B’s quantity demanded is 2 bars, individual C’s quantity demanded is 3 bars, and individual D’s quantity demand is 1 bar. Summing up all the quantities demanded at the price of 2 TL, we arrive at the quantity demanded (9 bars) for P T = 5 TL in the market. Replicating the procedure for all prices, we find the market demand curve for the market. The market demand is the sum of individual demands. The correct answer is E.

Yanıt Açıklaması: Marginal Changes Thinking at the margin while taking an action indicates that the rational decision makers such as individuals, firms, and students, take an action if and only if the marginal benefit of the action is greater than the marginal cost. Thus, we make decisions based on the criteria of comparing the marginal benefit and marginal costs of our actions and if the expected marginal benefit exceeds the expected marginal cost we take the action.

Yanıt Açıklaması: Due to migration, labor supply will decrease and labor supply curve will shift left. Due to increase in the price of good X, demand for labor by firms will increase and the labor demand curve will shift right. The new equilibrium wage will be higher while new equilibrium employment may be higher or lower, depending on which of the curves shifted more.

Yanıt Açıklaması: Demand curve for hamburgers shifts to the left.If two products are substitutes for each other, a change in the price of one product will change the demand for the other product in the opposite direction.

Yanıt Açıklaması: The figure shows the equilibrium in the Labor Market . If wage is w1, there is excess supply in the labor market. This means some workers who want to work at this wage level will be unable to find a job (unemployment). As a result, the wage will be driven down. On the other hand, if wages are as low as w2, workers do not want to work that much but firms demand more workers. So, there will be excess demand and the wage will increase. w* is the equilibrium or market-clearing wage where labor demand is equal to labor supply. At this wage level, L* is the amount of labor to be employed. In other words, if there is an imbalance in the labor market, wage adjusts and brings the market to an equilibrium. The correct answer is B.

Yanıt Açıklaması: Changes in interest rate is not going to cause changes in the demand for capital. In fact, we stay on the same demand curve. Thus, talking about demand changers means that the demand curve should shift to the right or left. Since the demand for capital reflects the marginal revenue product of capital, anything that influences the marginal revenue product of capital will affect the demand for capital.