AP ECON final !

question

The allocation of resources in a market economy is described by which statements?

answer

Buyers and sellers exchznge goods snd services on a voluntary basis- & Prices and costs help producers decide whether they are producing too lottle or too much of a good

question

What is true of a price floor

answer

The intention of the government in creating the price floor is to assist the producers of the good

question

Which of the following factors can cause a firms cost curves to shift upward

answer

An increase in wages

question

Where will a profit maximizing firm always want their ideal output to be?

answer

Where price equals MC

question

One justification for government regulation of a monopoly is that the unregulated monopoly

answer

charges a price higher than a competitive market price

question

If the production of a good results in a positive externality, the government might be able to improve economic efficiency in this market by

answer

Granting a subsidy to private producers

question

What are sources of inequality in the distribution of personal income?

answer

Discrimination in employment
Differences in personal motivation
Differences in education level attained
Differences in abilities

question

An outward shift in the production possibilities curve of an economy can be caused by an increase in

answer

labor force

question

Is the supply curve of an individual firm in a perfectly competitive industry perfectly elastic?

answer

question

The profit-maximizing output level produced by an unregulated monopoly is

answer

Less than the socially optimal level, since the price paid by consumers exceeds the firm's marginal cost

question

Socially optimal equals...

answer

Intersection of marginal social benefit and marginal social cost

question

If a store raised its prices by 20 perfect and it's total revenue increases by 10 percent, the demand it faces in this price range must be

answer

Inelastic

question

In which of the following market structures is it sometimes assumed that rival firms will match price decreases but not match price increases

answer

Oligopoly

question

A farmer produces peppers in a perfectly competitive market. If the price falls In the short run, the farmer should

answer

Continue to produce only if the new price covers average variable costs

question

Constant returns to scale

answer

Increasing number of inputs leads to an equivalent increase in the output

question

Which of the following is true when the production of a good results in negative externalities

answer

The private market price will be too low.

question

In the long run, a monopolistically competitive firm is allocatively inefficient because the firm will

answer

Charge a price higher than the marginal cost

question

Which of the following will cause an unregulated monopolist to produce a more allocatively efficient level of output

answer

A subsidy that increases as output increases

question

According to the theory of consumer behavior, which of the following decreases first as additional units of a product are consumed?

answer

Marginal utility

question

economies of scale

answer

Increasing output leads to lower average costs

question

Under which circumstance is a firm experiencing economies of scale

answer

Firm doubles its inputs and output triples

question

In most cases the supply curve for a perfectly competitive industry can be described as which of the following?

answer

more elastic in the long run than in the short run

question

Compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient because they

answer

Restrict their output level to maximize profits

question

Which of the following is not a characteristic of monopolistically competitive markets

answer

long-run economic profits

question

Which of the following will happen in the labor market if the price of the good produced by the workers decreases

answer

The marginal revenue product of labor will decrease

question

What is the marginal cost of providing a pure public good to one more consumer

answer

It is 0

question

Which of the following statements about a constant cost perfectly competitive industry in long run equilibirium must be true

answer

An increase in demand will cause no change in the long run equilibrium price

question

In which of the following market structures do firms recognize their mutual interdependence

answer

Oligopoly

question

If a severe drought destroys a significant portion of the peanut crop and peanut farmers' revenues increase, which of the following is true over the observed range of prices?

answer

The demand for peanuts must be price inelastic

question

unit elasticicity

answer

a change in price will cause an equal proportional change in quantity demanded

question

Perfectly elastic

answer

the extreme case in which the quantity demanded increases by an infinite amount in response to any decrease in price at all

question

Perfectly inelastic

answer

Gasoline, no matter the price people will buy

question

In order to minimize short-run losses, a profit-maximizing form will necessarily shut down production under which of the following conditions?

answer

Average revenue is less than average variable cost

question

If a firm's production process exhibits economies of scale, then increasing all the firm's output will lead to _____.

answer

It's long run average total costs falling

question

Which of the following helps explain why the demand curve for a normal good is downward sloping

answer

The income and substitution effects move the QD in same direction

question

If total revenue is increasing as output increases, marginal revenue is always

answer

greater than zero

question

Marginal Factor Cost

answer

the additional cost to a firm of hiring another input (worker,etc.)

question

consumers bear more of the tax burden when...

answer

supply is more elastic than demand

question

Producers bear more of the tax burden when...

answer

Demand is more elastic than supply

question

If the quantity demanded of good X increases 20% while the price decreases 25%, this means the price elasticity of demand is

answer

Unit elastic

question

A positive sign on cross price elasticity of demand indicated that the 2 products are

answer

Subsitutues

question

When the price elasticity of demand coefficient ratio is 2, demand is

answer

Relatively elastic

question

A monopoly always produces along the __________ portion of the demand curve.

answer

price elastic

question

allocative efficiency

answer

Price = MC

question

productive efficiency

answer

Producing good at lowest part of LRAC curve or SRAC curve

question

Normal profit

answer

an economic condition that occurs when the difference between a firm's total revenue and total cost is equal to zero

question

Are monopolistically competitive firms efficient?

answer

No, neither productively or allocatively

question

In short run, afc ____ as output increases

answer

Decreases

question

In short run, avc and atc...

answer

Decrease initially before meeting a min and then increasing

question

In short run, when MC>ATC, ATC is ...

answer

Decreasing

question

Relationship between MC and AFC?

answer

None

question

Increasing output increases average total cost

answer

Diseconomies of scale

question

The law of demand states that

answer

price and quantity demanded are inversely related

question

The law of supply states that

answer

the quantity supplied varies directly with its price

question

Why is the PPC bowed outwards?

answer

Law of increasing opportunity cost

question

Supply is able to adjust fully to changes in demand in LR or SR?

answer

LR, because some inputs are not fixed in quantity

question

Why is there strong competition in MC firms?

answer

Firms can easily enter and exit

question

Is there excess capacity in MC firms

answer

Yes

question

How to find deadweight loss

answer

Diff between allocatively efficient output and monopolist'sprofit maximizing quantity

question

derived demand

answer

The demand for resources is determined by the products they help produce

question

All firms will continue to hire up until the point where...

answer

MRP=MFC

question

If MRP>MFC, the firm will

answer

Keep hiring until MRP=MFC

1 of 62

question

The allocation of resources in a market economy is described by which statements?

answer

Buyers and sellers exchznge goods snd services on a voluntary basis- & Prices and costs help producers decide whether they are producing too lottle or too much of a good

question

What is true of a price floor

answer

The intention of the government in creating the price floor is to assist the producers of the good

question

Which of the following factors can cause a firms cost curves to shift upward

answer

An increase in wages

question

Where will a profit maximizing firm always want their ideal output to be?

answer

Where price equals MC

question

One justification for government regulation of a monopoly is that the unregulated monopoly

answer

charges a price higher than a competitive market price

question

If the production of a good results in a positive externality, the government might be able to improve economic efficiency in this market by

answer

Granting a subsidy to private producers

question

What are sources of inequality in the distribution of personal income?

answer

Discrimination in employment
Differences in personal motivation
Differences in education level attained
Differences in abilities

question

An outward shift in the production possibilities curve of an economy can be caused by an increase in

answer

labor force

question

Is the supply curve of an individual firm in a perfectly competitive industry perfectly elastic?

answer

question

The profit-maximizing output level produced by an unregulated monopoly is

answer

Less than the socially optimal level, since the price paid by consumers exceeds the firm's marginal cost

question

Socially optimal equals...

answer

Intersection of marginal social benefit and marginal social cost

question

If a store raised its prices by 20 perfect and it's total revenue increases by 10 percent, the demand it faces in this price range must be

answer

Inelastic

question

In which of the following market structures is it sometimes assumed that rival firms will match price decreases but not match price increases

answer

Oligopoly

question

A farmer produces peppers in a perfectly competitive market. If the price falls In the short run, the farmer should

answer

Continue to produce only if the new price covers average variable costs

question

Constant returns to scale

answer

Increasing number of inputs leads to an equivalent increase in the output

question

Which of the following is true when the production of a good results in negative externalities

answer

The private market price will be too low.

question

In the long run, a monopolistically competitive firm is allocatively inefficient because the firm will

answer

Charge a price higher than the marginal cost

question

Which of the following will cause an unregulated monopolist to produce a more allocatively efficient level of output

answer

A subsidy that increases as output increases

question

According to the theory of consumer behavior, which of the following decreases first as additional units of a product are consumed?

answer

Marginal utility

question

economies of scale

answer

Increasing output leads to lower average costs

question

Under which circumstance is a firm experiencing economies of scale

answer

Firm doubles its inputs and output triples

question

In most cases the supply curve for a perfectly competitive industry can be described as which of the following?

answer

more elastic in the long run than in the short run

question

Compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient because they

answer

Restrict their output level to maximize profits

question

Which of the following is not a characteristic of monopolistically competitive markets

answer

long-run economic profits

question

Which of the following will happen in the labor market if the price of the good produced by the workers decreases

answer

The marginal revenue product of labor will decrease

question

What is the marginal cost of providing a pure public good to one more consumer

answer

It is 0

question

Which of the following statements about a constant cost perfectly competitive industry in long run equilibirium must be true

answer

An increase in demand will cause no change in the long run equilibrium price

question

In which of the following market structures do firms recognize their mutual interdependence

answer

Oligopoly

question

If a severe drought destroys a significant portion of the peanut crop and peanut farmers' revenues increase, which of the following is true over the observed range of prices?

answer

The demand for peanuts must be price inelastic

question

unit elasticicity

answer

a change in price will cause an equal proportional change in quantity demanded

question

Perfectly elastic

answer

the extreme case in which the quantity demanded increases by an infinite amount in response to any decrease in price at all

question

Perfectly inelastic

answer

Gasoline, no matter the price people will buy

question

In order to minimize short-run losses, a profit-maximizing form will necessarily shut down production under which of the following conditions?

answer

Average revenue is less than average variable cost

question

If a firm's production process exhibits economies of scale, then increasing all the firm's output will lead to _____.

answer

It's long run average total costs falling

question

Which of the following helps explain why the demand curve for a normal good is downward sloping

answer

The income and substitution effects move the QD in same direction

question

If total revenue is increasing as output increases, marginal revenue is always

answer

greater than zero

question

Marginal Factor Cost

answer

the additional cost to a firm of hiring another input (worker,etc.)

question

consumers bear more of the tax burden when...

answer

supply is more elastic than demand

question

Producers bear more of the tax burden when...

answer

Demand is more elastic than supply

question

If the quantity demanded of good X increases 20% while the price decreases 25%, this means the price elasticity of demand is

answer

Unit elastic

question

A positive sign on cross price elasticity of demand indicated that the 2 products are

answer

Subsitutues

question

When the price elasticity of demand coefficient ratio is 2, demand is

answer

Relatively elastic

question

A monopoly always produces along the __________ portion of the demand curve.

answer

price elastic

question

allocative efficiency

answer

Price = MC

question

productive efficiency

answer

Producing good at lowest part of LRAC curve or SRAC curve

question

Normal profit

answer

an economic condition that occurs when the difference between a firm's total revenue and total cost is equal to zero

question

Are monopolistically competitive firms efficient?

answer

No, neither productively or allocatively

question

In short run, afc ____ as output increases

answer

Decreases

question

In short run, avc and atc...

answer

Decrease initially before meeting a min and then increasing

question

In short run, when MC>ATC, ATC is ...

answer

Decreasing

question

Relationship between MC and AFC?

answer

None

question

Increasing output increases average total cost

answer

Diseconomies of scale

question

The law of demand states that

answer

price and quantity demanded are inversely related

question

The law of supply states that

answer

the quantity supplied varies directly with its price

question

Why is the PPC bowed outwards?

answer

Law of increasing opportunity cost

question

Supply is able to adjust fully to changes in demand in LR or SR?

answer

LR, because some inputs are not fixed in quantity

question

Why is there strong competition in MC firms?

answer

Firms can easily enter and exit

question

Is there excess capacity in MC firms

answer

Yes

question

How to find deadweight loss

answer

Diff between allocatively efficient output and monopolist'sprofit maximizing quantity

question

derived demand

answer

The demand for resources is determined by the products they help produce

question

All firms will continue to hire up until the point where...

answer

MRP=MFC

question

If MRP>MFC, the firm will

answer

Keep hiring until MRP=MFC

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AP ECON final !

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