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by: Minh Than

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# Econ 121, quiz Econ 121

Minh Than
Santa Ana College

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COURSE
Principles of Macroeconomics
PROF.
TYPE
Class Notes
PAGES
3
WORDS
CONCEPTS
Microeconomic
KARMA
25 ?

## Popular in Microeconomics

This 3 page Class Notes was uploaded by Minh Than on Thursday August 11, 2016. The Class Notes belongs to Econ 121 at Santa Ana College taught by in Fall 2016. Since its upload, it has received 7 views. For similar materials see Principles of Macroeconomics in Microeconomics at Santa Ana College.

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Date Created: 08/11/16
1.  Why do price changes cause a budget line to pivot while income changes cause a budget line to shiftin a parallel manner?  Price changes cause a budget line to pivot, when it does this is opens up more opportunity for different combinations and wall climbing that previously were not affordable. Income changes causes a budget line to shift in a parallel manner because it’s double the original income and you can now afford twice as much of the good 2.  Describe the utility maximizing condition in words.   To maximize satisfaction, the consumer should allocate his or her money income so that the last dollar spent on each product yields the same amount of extra marginal utility. When making a purchase decision, a consumer tries to get the greatest value possible but by spending least amount of money. His or her objective is to maximize the total value obtain from the available money 3.  What conditions are necessary for total utility to be positive while marginal utility is negative?  Marginal utility is the additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important economic concept because economists use it to determine how much of an item a consumer will buy. Positive marginal utility is when the consumption of an additional item increases the total utility. Negative marginal utility is when the consumption of an additional item decreases the total utility. 4.  What is the difference between explicit and implicit costs?  Implicit cost is a cost that has occurred but it is not initially shown or reported as a separate cost.  Explicit cost is one that has occurred and is clearly reported as a separate cost. 5.  Why should sunk costs be ignored for decision making?  A sunk cost means that you can never recover that cost. You've already spent it, and there's nothing you can do to get it back, so they have no effect on future costs and benefits. 6.  Why should a firm never hire a worker when negative marginal returns set in?  A firm should never hire a worker when negative marginal returns set in because it will curve the marginal product curve on the horizontal axis bring the total product curve to its highest point. Hiring more people will reduce output and the firm will never operate in this range. 7.  What is the difference between marginal cost and average total cost?  The marginal cost is the cost of producing one more unit of a good. It is the increase (decrease) in total cost from increasing (decreasing) the level of output by one unit.  Average total cost are referring to the per unit cost that includes all fixed costs and all variable costs. 8.  Two countries , sportland and foodland have similar total quanities of labor, capital, and natural resources . both can produce two goods, digs and football's. Sportslands resources are particularly well suited to the production of football's but are not very productive in producing figs. Foodland resources are very productive when used for figs but are not capable of producing many football's. In which country is the cost of additional football's generally greater? Explain.  Foodland will have the cost of additional football's generally greater because Foodland resources are very productive when used for figs but are not capable of producing many football's. The phenomenon occurs because some resources are better suited for the production of figs than for the production of football, and we use the better one first.  If you draw the production possibility curve, you can see that trading figs for footballs, we get fewer and fewer football for each figs given up. That is, the opportunity cost of choosing footballs over figs increases as we increase the production of football.

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