Inequality - AP Microeconomics
Card 1 of 30
Which inequality defines a binding price floor in terms of equilibrium price $P^*$?
Which inequality defines a binding price floor in terms of equilibrium price $P^*$?
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Binding if $P_f > P^*$. A floor above equilibrium price prevents the market from clearing.
Binding if $P_f > P^*$. A floor above equilibrium price prevents the market from clearing.
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Which inequality defines a nonbinding price floor in terms of equilibrium price $P^*$?
Which inequality defines a nonbinding price floor in terms of equilibrium price $P^*$?
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Nonbinding if $P_f le P^*$. A floor at or below equilibrium doesn't affect market outcomes.
Nonbinding if $P_f le P^*$. A floor at or below equilibrium doesn't affect market outcomes.
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What inequality must hold for a per-unit tax of $t$ to create a wedge between buyers and sellers?
What inequality must hold for a per-unit tax of $t$ to create a wedge between buyers and sellers?
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$P_b - P_s = t$ with $t > 0$. Tax creates a positive wedge between buyer and seller prices.
$P_b - P_s = t$ with $t > 0$. Tax creates a positive wedge between buyer and seller prices.
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In a tax wedge, which inequality holds between the price buyers pay $P_b$ and sellers receive $P_s$?
In a tax wedge, which inequality holds between the price buyers pay $P_b$ and sellers receive $P_s$?
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$P_b > P_s$. Tax makes buyers pay more than sellers receive.
$P_b > P_s$. Tax makes buyers pay more than sellers receive.
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What inequality indicates overproduction relative to the efficient quantity $Q_e$ when $SMC > PMC$?
What inequality indicates overproduction relative to the efficient quantity $Q_e$ when $SMC > PMC$?
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$Q_m > Q_e$. Markets overproduce goods with negative externalities.
$Q_m > Q_e$. Markets overproduce goods with negative externalities.
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Identify the inequality that must hold for demand to be price elastic at a point.
Identify the inequality that must hold for demand to be price elastic at a point.
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$|E_d| > 1$. Percentage change in quantity exceeds percentage change in price.
$|E_d| > 1$. Percentage change in quantity exceeds percentage change in price.
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In perfect competition, which inequality indicates an economic loss when producing where $P = MR$?
In perfect competition, which inequality indicates an economic loss when producing where $P = MR$?
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Loss if $P < ATC$. Price below average total cost means negative economic profit.
Loss if $P < ATC$. Price below average total cost means negative economic profit.
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What inequality must hold for a firm to shut down in the short run at price $P$?
What inequality must hold for a firm to shut down in the short run at price $P$?
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Shut down if $P < AVC$. Firm can't cover variable costs, so it minimizes losses by shutting down.
Shut down if $P < AVC$. Firm can't cover variable costs, so it minimizes losses by shutting down.
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In perfect competition, which inequality indicates economic profit when producing where $P = MR$?
In perfect competition, which inequality indicates economic profit when producing where $P = MR$?
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Profit if $P > ATC$. Price exceeds average total cost, generating positive economic profit.
Profit if $P > ATC$. Price exceeds average total cost, generating positive economic profit.
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What inequality must hold for a firm to produce in the short run at price $P$?
What inequality must hold for a firm to produce in the short run at price $P$?
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Produce if $P ge AVC$. Firm covers variable costs and contributes to fixed costs.
Produce if $P ge AVC$. Firm covers variable costs and contributes to fixed costs.
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Identify the inequality that must hold for demand to be price inelastic at a point.
Identify the inequality that must hold for demand to be price inelastic at a point.
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$|E_d| < 1$. Percentage change in quantity is less than percentage change in price.
$|E_d| < 1$. Percentage change in quantity is less than percentage change in price.
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For a per-unit subsidy of $s$, which inequality holds between $P_s$ received and $P_b$ paid?
For a per-unit subsidy of $s$, which inequality holds between $P_s$ received and $P_b$ paid?
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$P_s > P_b$. Subsidy makes sellers receive more than buyers pay.
$P_s > P_b$. Subsidy makes sellers receive more than buyers pay.
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What inequality indicates underproduction relative to the efficient quantity $Q_e$ when $SMB > PMB$?
What inequality indicates underproduction relative to the efficient quantity $Q_e$ when $SMB > PMB$?
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$Q_m < Q_e$. Markets underproduce goods with positive externalities.
$Q_m < Q_e$. Markets underproduce goods with positive externalities.
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What inequality indicates a negative externality where the social marginal cost exceeds private marginal cost?
What inequality indicates a negative externality where the social marginal cost exceeds private marginal cost?
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$SMC > PMC$. Production imposes costs on society beyond private costs.
$SMC > PMC$. Production imposes costs on society beyond private costs.
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What inequality indicates a positive externality where the social marginal benefit exceeds private marginal benefit?
What inequality indicates a positive externality where the social marginal benefit exceeds private marginal benefit?
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$SMB > PMB$. Society values the good more than private buyers do.
$SMB > PMB$. Society values the good more than private buyers do.
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What does the inequality $P > P^*$ imply about a market outcome relative to equilibrium?
What does the inequality $P > P^*$ imply about a market outcome relative to equilibrium?
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Surplus: $Q_s > Q_d$. When price exceeds equilibrium, quantity supplied exceeds quantity demanded.
Surplus: $Q_s > Q_d$. When price exceeds equilibrium, quantity supplied exceeds quantity demanded.
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What does the inequality $P < P^*$ imply about a market outcome relative to equilibrium?
What does the inequality $P < P^*$ imply about a market outcome relative to equilibrium?
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Shortage: $Q_d > Q_s$. When price is below equilibrium, quantity demanded exceeds quantity supplied.
Shortage: $Q_d > Q_s$. When price is below equilibrium, quantity demanded exceeds quantity supplied.
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Which inequality defines a binding price ceiling in terms of equilibrium price $P^*$?
Which inequality defines a binding price ceiling in terms of equilibrium price $P^*$?
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Binding if $P_c < P^*$. A ceiling below equilibrium price prevents the market from reaching equilibrium.
Binding if $P_c < P^*$. A ceiling below equilibrium price prevents the market from reaching equilibrium.
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Which inequality defines a nonbinding price ceiling in terms of equilibrium price $P^*$?
Which inequality defines a nonbinding price ceiling in terms of equilibrium price $P^*$?
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Nonbinding if $P_c ge P^*$. A ceiling at or above equilibrium doesn't constrain the market.
Nonbinding if $P_c ge P^*$. A ceiling at or above equilibrium doesn't constrain the market.
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What inequality indicates substitutes using cross-price elasticity $E_{xy}$?
What inequality indicates substitutes using cross-price elasticity $E_{xy}$?
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Substitutes if $E_{xy} > 0$. Price increase in one good raises demand for the other.
Substitutes if $E_{xy} > 0$. Price increase in one good raises demand for the other.
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What inequality indicates a normal good using income elasticity $E_y$?
What inequality indicates a normal good using income elasticity $E_y$?
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Normal good if $E_y > 0$. Demand increases when income rises.
Normal good if $E_y > 0$. Demand increases when income rises.
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What inequality indicates an inferior good using income elasticity $E_y$?
What inequality indicates an inferior good using income elasticity $E_y$?
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Inferior good if $E_y < 0$. Demand decreases when income rises.
Inferior good if $E_y < 0$. Demand decreases when income rises.
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Identify whether a price ceiling is binding if $P^* = 20$ and $P_c = 18$.
Identify whether a price ceiling is binding if $P^* = 20$ and $P_c = 18$.
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Binding. $P_c = 18 < P^* = 20$ meets binding condition.
Binding. $P_c = 18 < P^* = 20$ meets binding condition.
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What does the inequality $P > P^$ indicate in a market with equilibrium price $P^$?
What does the inequality $P > P^$ indicate in a market with equilibrium price $P^$?
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A surplus (quantity supplied exceeds quantity demanded). Price above equilibrium reduces quantity demanded and increases quantity supplied.
A surplus (quantity supplied exceeds quantity demanded). Price above equilibrium reduces quantity demanded and increases quantity supplied.
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What does the inequality $P < P^$ indicate in a market with equilibrium price $P^$?
What does the inequality $P < P^$ indicate in a market with equilibrium price $P^$?
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A shortage (quantity demanded exceeds quantity supplied). Price below equilibrium increases quantity demanded and reduces quantity supplied.
A shortage (quantity demanded exceeds quantity supplied). Price below equilibrium increases quantity demanded and reduces quantity supplied.
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Identify the market outcome if $P^* = 10$ and the actual price is $P = 12$.
Identify the market outcome if $P^* = 10$ and the actual price is $P = 12$.
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Surplus. $P = 12 > P^* = 10$ creates excess supply.
Surplus. $P = 12 > P^* = 10$ creates excess supply.
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What inequality indicates complements using cross-price elasticity $E_{xy}$?
What inequality indicates complements using cross-price elasticity $E_{xy}$?
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Complements if $E_{xy} < 0$. Price increase in one good reduces demand for the other.
Complements if $E_{xy} < 0$. Price increase in one good reduces demand for the other.
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What inequality defines price elastic demand using elasticity magnitude $|E_d|$?
What inequality defines price elastic demand using elasticity magnitude $|E_d|$?
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Elastic if $|E_d| > 1$. Quantity responds more than proportionally to price changes.
Elastic if $|E_d| > 1$. Quantity responds more than proportionally to price changes.
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What inequality defines unit elastic demand using elasticity magnitude $|E_d|$?
What inequality defines unit elastic demand using elasticity magnitude $|E_d|$?
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Unit elastic if $|E_d| = 1$. Quantity changes exactly proportionally to price changes.
Unit elastic if $|E_d| = 1$. Quantity changes exactly proportionally to price changes.
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What inequality defines price inelastic demand using elasticity magnitude $|E_d|$?
What inequality defines price inelastic demand using elasticity magnitude $|E_d|$?
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Inelastic if $|E_d| < 1$. Quantity responds less than proportionally to price changes.
Inelastic if $|E_d| < 1$. Quantity responds less than proportionally to price changes.
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