Costs and Price Essay

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Week I Quiz Results/Answers ECO561 1. Revenue increases when * producer surplus increases 2. An increase in the price of an inelastic good * increases revenues 3. Price elasticity of Demand increases when * people become less price sensitive over time 4. The purpose of a market in a market system is to * bring buyers and sellers into contact 5. By specializing in the production of one good, a company is able to benefit from economies of scale which increases its revenue. Which of the following is an attribute of specialization? * Saving time by allowing a worker to focus on one task 6. The market system promotes progress by * providing incentive for technological advances 7. Productive efficiency is…show more content…
However, to increase the quantity demanded of their product, they must decrease their price. In doing so, while some firms may have the ability to set different prices for different groups, called price discriminating, most firms cannot. As a result, the firm must lower the price on that good for all consumers; therefore, the product price falls as output increases) 6. All things being equal, an increase in demand for a product... * increases demand for the resources used in its production (When a firm sees an increase in the demand for its product, it will increase its production. In doing so, the firm increases the demand for the resources it uses to produce its product. An increase in demand for a product does increase the quantity supplied. The firm sees that it can increase the price on each unit to address the shortage that emerges, so there is more sold. This does not mean that the firm changes the amount of production at the original price) 7. Marginal cost can be defined as the addition to _____ of one more unit of output. * total variable costs (Marginal cost measures the cost of producing the next unit. Because fixed

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