Microeconomics Concepts and Principles

A Given Tax Will Cause a Smaller Deadweight Loss If

Demand and Supply Are:

• Inelastic
• Bigger Elastic

Deadweight Loss in a Taxed Market Because:

• The tax causes the market to trade less than the optimal units
• All the surplus of the units not traded is lost

Diminishing MPL States That:

• Every additional worked contributes a small increase in production that previously hired worked

Empirical i Theorical Economi:

• TE, build models
• Econ test them

How is Marginal Utility Defined:

• The change in utility from consuming one additional unit of a given good

How Do We Graphically Represent the Utility Maximizing Consumption Basket:

• The point of tangency between an indifference curve and the total budget constraint

How Does the Marginal Rate of Substitution Change as You Move Up Along a Non-Linear Indifference Curve?

• It increases

If a Tax is Imposed on a Good and the Incidence of the Tax Ends Up Falling More Heavily on the Sellers and Buyers, This Will Be Because:

• Demand is more elastic than supply for that good

If the Price in a Market Happens to Be Below Equilibrium, There Will Be a

Shortage in the Market, and the Price Will Tend to

• Rise to above: surplus drop

Low Levels of Productions, ATC Decrease...

Fixed Cost is Spread

• The ATC grows because of diminishing returns

MRS Change as You Move Down:

• It declines

Price Floor is Imposed on a Market and is Binding:

• Experiences surplus

Suppose That There is a Fall in the Price of Muffins. What is Expected to Happen with Equilibrium Price and the Quantity Sold in the Market of Donuts:

• Both the price and quantity will fall
• If demand rises: Both the price and quantity will rise

Suppose That a Scientific Study Just Published Demonstrates That Eating…

• Both the equilibrium quantity and price will increase

Supply Curve of a Firm in Perfect Competition:

• TC curve lies above the minimum AVC

The Slope of Budget Constraints Curve Will Change Whenever the:

• Price of any two goods changes

Total Surplus, in a Market Maximizes When:

• The market is in equilibrium

What Effects Will an Increase in the Price Have on Total Revenue, if Demand is Elastic?

• Total revenue will decrease due to the price effects