Micro Final

question

If marginal cost is below average total cost, then average total cost

answer

is falling

question

A total-cost curve shows the relationship between the

answer

quantity of output produced and the total cost of production

question

In the long run

answer

inputs that were fixed in the short run become variable.

question

The average fixed cost curve

answer

always declines with increased levels of output.

question

At low levels of production, the firm

answer

benefits from increased size because it can take advantage of greater specialization.has the potential for economies of scale.is unlikely to experiences acute problems with coordination.

question

Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business.

Julia's explicit costs are

answer

$15,000

question

Jessica is a junior in college. Her current cumulative grade point average (GPA) is 3.5 out of a 4.0 scale. Jesscia is hoping that by the time she graduates, she can raise her cumulative GPA to a 3.7. Which of the following statements is correct?

answer

Jessica must earn above a 3.7 GPA in her senior year in order to raise her cumulative GPA to a 3.7.

question

Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker
regardless of the current output level.

Marginal cost will be

answer

rising at all points

question

T/ F The difference between economics profit and accounting profit is that economic profit is calculated based on explicit costs whereas accounting profit is calculated based on implicit and explicit costs.

answer

False

question

T/F The typical cost curve is U-shaped.

answer

False

question

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for

answer

$3.50 each

question

T/F Diseconomies of scale often arise because higher production levels allow specialization among workers.

answer

False

question

Oil is used to produce gasoline. If the price of oil increases, consumer surplus in the gasoline market

answer

Decreases

question

T/F If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2.5 then at ten units of output, the average total cost is rising.

answer

True

question

T/ F If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase.

answer

False

question

A shortage is eliminated when

answer

a binding price ceiling is removed.

question

Over time, housing shortages caused by rent control

answer

increase, because the demand for and supply of housing are more elastic in the long run.

question

If the government removes a binding price floor from a market, then the price received by sellers will

answer

decrease, and the quantity sold in the market will increase.

question

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

answer

a shortage of treadmills will develop.

question

A binding price floor

(i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.

answer

(i) and (iii) only

question

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

answer

a smaller quantity of the good is bought and sold.

question

Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk?

answer

Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.

question

As rationing mechanisms, prices

answer

are efficient, but long lines are inefficient.

question

T/FIf a price ceiling is not binding, then the equilibrium price is below the price ceiling.

answer

True

question

T/F In the short run, rent control causes the quantity supplied to increase and quantity demanded to fall

answer

False

question

Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

answer

price elasticity of demand for bottles of soda in this price range is about 1.45.

question

The price elasticity of demand changes as we move along a

answer

linear, downward-sloping demand curve.

question

...

answer

greater the price elasticity of demand at that point.

question

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

answer

infinity, and the supply curve is horizontal.

question

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

answer

3.17, and Tess regards handbags as normal goods.

question

The value of the price elasticity of demand for a good will be relatively large when

answer

the good is a luxury rather than a necessity.

question

In which of the following situations will total revenue increase?

answer

Price elasticity of demand is 1.2, and the price of the good decreases.Price elasticity of demand is 0.5, and the price of the good increases.Price elasticity of demand is 3.0, and the price of the good decreases.

question

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

answer

a 5 percent increase in the price of the good

question

For which pairs of goods is the cross-price elasticity most likely to be negative?

answer

peanut butter and jelly

question

Why do we use the midpoint method in calculating demand elasticity instead of just a simple percent change formula?

answer

To avoid elasticity estimate changes due to a change in which direction we move along the demand curve

question

T/F Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

answer

True

question

T/F The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

answer

False

question

Food and clothing tend to have

answer

small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.

question

The elasticity of supply is

answer

positive and more elastic in the long run.

question

Annabelle typically drives her car to work. But she only lives one mile from work and is willing to ride her bike instead. If the price of a bike falls, what would happen in the market for cars?

answer

The demand for cars will decrease.

question

The price of Good X increases by 25 percent, causing the quantity consumed of Good Y to decrease by 10 percent. If everything else is held constant in the economy, we can say with certainty that Good X and Good Y are

answer

complements.

question

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

answer

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

question

If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins falls?

answer

Both the equilibrium price and quantity would increase

question

A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates

answer

the ticket price is below the equilibrium price.

question

Which of the following events would cause a movement downward and to the left along the supply curve for mangos?

answer

The price of mangos falls.

question

Which of the following would cause price to increase?

answer

a shortage of the good

question

Today's supply curve for iPods could shift in response to a change in

answer

the expected future price of iPods.

question

A decrease in supply is represented by a

answer

leftward shift of a supply curve.

question

What is the definition of opportunity cost?

answer

what you must give up to get something else

question

What do economists mean when they say that there is no such thing as a free lunch?

answer

Everything has a price of some kind

question

If you want to change people, you should change their

answer

Incentives

question

Suppose you have given a gift certificate worth $15 at a restaurant. The restaurant has a short menu: pizza or spaghetti, each of costs $15. The gift certificate can be used only at this particular restaurant, so the only thing you give up to get pizza is spaghetti, and vice versa. If you didn't have the certificate, you would be willing to pay as much as $15 for the pizza but no more than $10 for the spaghetti.

What are your trade-offs?

answer

Choosing pizza versus spaghetti

question

Suppose an amusement park has $20 admission fee and charges $2 per ride.

What is the total cost of going to the amusement park?

answer

1 of 53

question

If marginal cost is below average total cost, then average total cost

answer

is falling

question

A total-cost curve shows the relationship between the

answer

quantity of output produced and the total cost of production

question

In the long run

answer

inputs that were fixed in the short run become variable.

question

The average fixed cost curve

answer

always declines with increased levels of output.

question

At low levels of production, the firm

answer

benefits from increased size because it can take advantage of greater specialization.has the potential for economies of scale.is unlikely to experiences acute problems with coordination.

question

answer

$15,000

question

answer

Jessica must earn above a 3.7 GPA in her senior year in order to raise her cumulative GPA to a 3.7.

question

Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker
regardless of the current output level.

Marginal cost will be

answer

rising at all points

question

answer

False

question

T/F The typical cost curve is U-shaped.

answer

False

question

answer

$3.50 each

question

T/F Diseconomies of scale often arise because higher production levels allow specialization among workers.

answer

False

question

Oil is used to produce gasoline. If the price of oil increases, consumer surplus in the gasoline market

answer

Decreases

question

answer

True

question

T/ F If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase.

answer

False

question

A shortage is eliminated when

answer

a binding price ceiling is removed.

question

Over time, housing shortages caused by rent control

answer

increase, because the demand for and supply of housing are more elastic in the long run.

question

If the government removes a binding price floor from a market, then the price received by sellers will

answer

decrease, and the quantity sold in the market will increase.

question

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

answer

a shortage of treadmills will develop.

question

A binding price floor

(i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.

answer

(i) and (iii) only

question

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

answer

a smaller quantity of the good is bought and sold.

question

Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk?

answer

Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.

question

As rationing mechanisms, prices

answer

are efficient, but long lines are inefficient.

question

T/FIf a price ceiling is not binding, then the equilibrium price is below the price ceiling.

answer

True

question

T/F In the short run, rent control causes the quantity supplied to increase and quantity demanded to fall

answer

False

question

answer

price elasticity of demand for bottles of soda in this price range is about 1.45.

question

The price elasticity of demand changes as we move along a

answer

linear, downward-sloping demand curve.

question

...

answer

greater the price elasticity of demand at that point.

question

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

answer

infinity, and the supply curve is horizontal.

question

answer

3.17, and Tess regards handbags as normal goods.

question

The value of the price elasticity of demand for a good will be relatively large when

answer

the good is a luxury rather than a necessity.

question

In which of the following situations will total revenue increase?

answer

question

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

answer

a 5 percent increase in the price of the good

question

For which pairs of goods is the cross-price elasticity most likely to be negative?

answer

peanut butter and jelly

question

Why do we use the midpoint method in calculating demand elasticity instead of just a simple percent change formula?

answer

To avoid elasticity estimate changes due to a change in which direction we move along the demand curve

question

T/F Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

answer

True

question

T/F The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

answer

False

question

Food and clothing tend to have

answer

small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.

question

The elasticity of supply is

answer

positive and more elastic in the long run.

question

Annabelle typically drives her car to work. But she only lives one mile from work and is willing to ride her bike instead. If the price of a bike falls, what would happen in the market for cars?

answer

The demand for cars will decrease.

question

answer

complements.

question

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

answer

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

question

If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins falls?

answer

Both the equilibrium price and quantity would increase

question

A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates

answer

the ticket price is below the equilibrium price.

question

Which of the following events would cause a movement downward and to the left along the supply curve for mangos?

answer

The price of mangos falls.

question

Which of the following would cause price to increase?

answer

a shortage of the good

question

Today's supply curve for iPods could shift in response to a change in

answer

the expected future price of iPods.

question

A decrease in supply is represented by a

answer

leftward shift of a supply curve.

question

What is the definition of opportunity cost?

answer

what you must give up to get something else

question

What do economists mean when they say that there is no such thing as a free lunch?

answer

Everything has a price of some kind

question

If you want to change people, you should change their

answer

Incentives

question

answer

Choosing pizza versus spaghetti

question

Suppose an amusement park has $20 admission fee and charges $2 per ride.

What is the total cost of going to the amusement park?

answer

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