Microeconomics FInal - Custom Scholars
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Microeconomics FInal

question
to achieve the gains from trade, each nation should specialize in the production of a good or service if
answer
the country can make the product while forgoing fewer alternative products than any other country
question
An economy that has the lowest opportunity cost for producing a particular good is said to have
answer
comparative advantage
question
Positive economic statement
answer
There has been an increase in the rate of inflation
question
The production possibility frontier is bowed out from the origin if
answer
opportunity costs are increasing
question
The ... apples will decrease when apple prices rise
answer
quantity demanded of
question
If the market for buffalo meat is in equilibrium, the price of buffalo meat will probably ... in the near future
answer
not change
question
Good X and Good Y are related goods. If the price of Good X increases, and the demand for Good Y shifts left, then these goods are
answer
Complements
question
A technological advancement in production of automobiles will
answer
increase the supply of automobiles
question
If there is an increase in supply, total surplus
answer
will increase
question
Total surplus is
answer
the sum of the consumer and producer surplus
question
When there is a new medical report extolling the health advantages of grapefruit, total producer surplus in the grapefruit market
answer
will increase
question
Along a supply curve, an increase in the price of a good will
answer
increase producer surplus
question
If total surplus rises, which of the following must have occurred?
answer
increase in demand or an increase in supply
question
There are several close substitutes for Quaker State oil but fewer substitutes for a complete checkup of your car's engine. We can expect the demand for
answer
Quaker state oil to be more price elastic
question
If your income increases and your consumption of a good increases, then, for you, that good is considered
answer
a normal good
question
If your purchases of shoes remain constant at 9 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered
answer
neither substitutes nor complements
question
A major university in the south recently raised tuition by 12%. An economics professor at the university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student out of about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is
answer
highly inelastic
question
If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when your income increases from $19,000 to $21,000 a year, other things equal, then, for you, shoes are considered
answer
an inferior good
question
The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to
answer
0.2
question
Although employers and wage earners each pay 50% of the social security tax (employers and wage earners each bear half of the legal incidence), since the supply of labor is quite inelastic, the economic incidence of the tax falls almost entirely on workers
answer
True
question
A tax
answer
generates tax revenue and creates deadweight loss
question
Suppose the government imposes a $4 per month sales tax on cable TV. If the demand for cable TV is perfectly inelastic and supply curve is elastic, then the price of cable TV will
answer
increase exactly $4
question
A farm can produce 1000 bushels of wheat per year with two workers, 1300 bushels of wheat per year with three workers, and 1400 bushels of wheat per year with four workers. The marginal product of the fifth worker is ... bushels
answer
less than 250
question
The long run is a period that is
answer
long enough to vary the quantities of all factors of production
question
Assume fixed costs are $10, what is the average fixed costs of 2 cakes
answer
$5
question
In the short run, for a perfectly competitive firm, the portion of the MC curve at or above the shut-down price is also its
answer
individual short-run supply curve
question
In the short run, if P > ATC, a perfectly competitive firm
answer
produces output and earns an economic profit
question
In the long run. all of the firms in a perfectly competitive industry will
answer
produce at an output level at which average total cost equals marginal cost
question
If a perfectly competitive firm sells 300 units of output at a market price of $1 per unit, its marginal revenue is
answer
$1
question
For a perfectly competitive firm in the short run
answer
if the firm produces the quantity at which P>ATC, then the firm is profitable
question
In perfect competition, the profit-maximizing level of output occurs where the
answer
MR=MC above minimum AVC
question
The marginal revenue received by a firm in a perfectly competitive market
answer
is the change in total revenue divided by the change in output
question
Which of the following is not a characteristic of a perfectly competitive industry?
answer
There are differentiated products
question
In perfect competition, the assumption of easy entry and exit implies that
answer
in the long run all firms in the industry will earn zero economic profits
question
Suppose that the market for candy canes operates under conditions of perfect competition, that is initially in long-run equilibrium, and that the price of each candy cane is 10 cents. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by 5 cents, there are no other changes in production costs. We can conclude that in the long run we will observe
answer
firms leaving the industry
question
The monopoly's firm's profit maximizing price is
answer
given by the point on the demand curve for the profit-maximizing quantity
question
To practice effective discrimination, a monopolist must be able to
answer
prevent the resale of goods among groups of buyers
question
Suppose that a profit maximizing monopoly firm undergoes a substantial technological change that reduces its marginal and average total costs by 40. If in response to its reduction in cost the firm changes its price in a profit-maximizing way, then we can predict that its total output will
answer
Rise
question
When MR=MC
answer
profit is maximized
question
price leadership occurs if
answer
smaller firms in an industry agree to fix the price at a given level
question
suppose that each of the only two firms in an industry has the independent choice of advertising its product or not advertising. If neither advertises, each gets 10 million dollars in profit, if both advertise their profits will be 5 million dollars each, and if one advertises while the other one does not, the advertiser gets a profit of 15 million dollars and the other gets profit of 2 million dollars. according to game theory, in Nash equilibrium
answer
both will advertise
question
product differentiation under monopolistic competition means that each firm
answer
faces a downward-sloping demand curve
question
What effect does entry by new firms have in a monopolistically competitive industry?
answer
The demand curve faced by each firm shifts to the left
question
The downward-sloping demand curve for a monopolistically competitive firm
answer
reflects product differentiation
question
The profit-maximizing rule MC=MR is followed by firms operating within
answer
both monopolistic competition and perfect competition
question
Monopolistic competition within an industry results in
answer
chronic excess capacity
question
Which of the following statements is correct
answer
In the long run, monopolistically competitive firms tend to experience zero economic profits
question
Research into new technologies provides a
answer
positive, externality, and too few resources are devoted to research as a result
question
Technology spillover occurs when
answer
a firm's research yields technical knowledge that is used by society as a whole
question
Phil's copy studio pays its workers 60 dollars per day and sells poster size copies for 10 dollars per print. Now suppose during the holiday season the price the poster-size copies increases 12 dollars. What happens to the labor demand during the holiday season?
answer
The demand for labor increases
question
If the extra output that is produced by hiring one more unit of labor adds more to ... that to ... the firm will increase its profit by increasing the use of labor.
answer
total revenue, total cost
question
The demand for a factor of production is
answer
derived demand
question
The value of the marginal product is the
answer
change in total revenue from a unit change in the quantity of a variable input
question
The bountiful bakery is considering hiring another pastry chef. The bakery knows the average product of its chefs currently is 15 dozen croissants per day. It also believes that croissants sell for $30. The bakery should hire another worker
answer
only if the new chef's daily wage is $360 or less
question
In the factor market for land, equilibrium rental prices will be ... the value of marginal product of land
answer
equal to
question
An emissions tax equal to ... induces polluters to internalize the externality and leads to the socially optimal quantity of pollution
answer
the marginal social cost of pollution at the socially optimal quantity of pollution
question
The Coase Theorem asserts that
answer
when externalities are present, an economy can reach an efficient solution as long as transactions are not too high.
question
Tradable emissions permits
answer
provide polluters with an incentive to take the marginal social cost of pollution into account
question
A system of tradable emissions permits ensure that
answer
those who can reduce pollution most cheaply will do so
question
Which example illustrates a policy solution to inefficiency in the free market caused by the stated externality?
answer
The government offers free childhood immunizations. The externality is that an immunized child cannot transmit disease to others.
question
In a Nash equilibrium outcome
answer
each player wants to make no change in her decision, given the decisions of the other players
question
The dictator of a small country restricts the price of cars to a price below the equilibrium price for cars. Such a policy would be an example of a
answer
price ceiling
question
When a price ceiling is imposed, this results in
answer
inefficiency due to a reduction in the quantity of the good transacted below the equilibrium quantity.
question
A binding minimum wage ultimately means that
answer
some unskilled workers may have a difficult time finding a job
1 of 64
question
to achieve the gains from trade, each nation should specialize in the production of a good or service if
answer
the country can make the product while forgoing fewer alternative products than any other country
question
An economy that has the lowest opportunity cost for producing a particular good is said to have
answer
comparative advantage
question
Positive economic statement
answer
There has been an increase in the rate of inflation
question
The production possibility frontier is bowed out from the origin if
answer
opportunity costs are increasing
question
The ... apples will decrease when apple prices rise
answer
quantity demanded of
question
If the market for buffalo meat is in equilibrium, the price of buffalo meat will probably ... in the near future
answer
not change
question
Good X and Good Y are related goods. If the price of Good X increases, and the demand for Good Y shifts left, then these goods are
answer
Complements
question
A technological advancement in production of automobiles will
answer
increase the supply of automobiles
question
If there is an increase in supply, total surplus
answer
will increase
question
Total surplus is
answer
the sum of the consumer and producer surplus
question
When there is a new medical report extolling the health advantages of grapefruit, total producer surplus in the grapefruit market
answer
will increase
question
Along a supply curve, an increase in the price of a good will
answer
increase producer surplus
question
If total surplus rises, which of the following must have occurred?
answer
increase in demand or an increase in supply
question
There are several close substitutes for Quaker State oil but fewer substitutes for a complete checkup of your car's engine. We can expect the demand for
answer
Quaker state oil to be more price elastic
question
If your income increases and your consumption of a good increases, then, for you, that good is considered
answer
a normal good
question
If your purchases of shoes remain constant at 9 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered
answer
neither substitutes nor complements
question
A major university in the south recently raised tuition by 12%. An economics professor at the university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student out of about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is
answer
highly inelastic
question
If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when your income increases from $19,000 to $21,000 a year, other things equal, then, for you, shoes are considered
answer
an inferior good
question
The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to
answer
0.2
question
Although employers and wage earners each pay 50% of the social security tax (employers and wage earners each bear half of the legal incidence), since the supply of labor is quite inelastic, the economic incidence of the tax falls almost entirely on workers
answer
True
question
A tax
answer
generates tax revenue and creates deadweight loss
question
Suppose the government imposes a $4 per month sales tax on cable TV. If the demand for cable TV is perfectly inelastic and supply curve is elastic, then the price of cable TV will
answer
increase exactly $4
question
A farm can produce 1000 bushels of wheat per year with two workers, 1300 bushels of wheat per year with three workers, and 1400 bushels of wheat per year with four workers. The marginal product of the fifth worker is ... bushels
answer
less than 250
question
The long run is a period that is
answer
long enough to vary the quantities of all factors of production
question
Assume fixed costs are $10, what is the average fixed costs of 2 cakes
answer
$5
question
In the short run, for a perfectly competitive firm, the portion of the MC curve at or above the shut-down price is also its
answer
individual short-run supply curve
question
In the short run, if P > ATC, a perfectly competitive firm
answer
produces output and earns an economic profit
question
In the long run. all of the firms in a perfectly competitive industry will
answer
produce at an output level at which average total cost equals marginal cost
question
If a perfectly competitive firm sells 300 units of output at a market price of $1 per unit, its marginal revenue is
answer
$1
question
For a perfectly competitive firm in the short run
answer
if the firm produces the quantity at which P>ATC, then the firm is profitable
question
In perfect competition, the profit-maximizing level of output occurs where the
answer
MR=MC above minimum AVC
question
The marginal revenue received by a firm in a perfectly competitive market
answer
is the change in total revenue divided by the change in output
question
Which of the following is not a characteristic of a perfectly competitive industry?
answer
There are differentiated products
question
In perfect competition, the assumption of easy entry and exit implies that
answer
in the long run all firms in the industry will earn zero economic profits
question
Suppose that the market for candy canes operates under conditions of perfect competition, that is initially in long-run equilibrium, and that the price of each candy cane is 10 cents. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by 5 cents, there are no other changes in production costs. We can conclude that in the long run we will observe
answer
firms leaving the industry
question
The monopoly's firm's profit maximizing price is
answer
given by the point on the demand curve for the profit-maximizing quantity
question
To practice effective discrimination, a monopolist must be able to
answer
prevent the resale of goods among groups of buyers
question
Suppose that a profit maximizing monopoly firm undergoes a substantial technological change that reduces its marginal and average total costs by 40. If in response to its reduction in cost the firm changes its price in a profit-maximizing way, then we can predict that its total output will
answer
Rise
question
When MR=MC
answer
profit is maximized
question
price leadership occurs if
answer
smaller firms in an industry agree to fix the price at a given level
question
suppose that each of the only two firms in an industry has the independent choice of advertising its product or not advertising. If neither advertises, each gets 10 million dollars in profit, if both advertise their profits will be 5 million dollars each, and if one advertises while the other one does not, the advertiser gets a profit of 15 million dollars and the other gets profit of 2 million dollars. according to game theory, in Nash equilibrium
answer
both will advertise
question
product differentiation under monopolistic competition means that each firm
answer
faces a downward-sloping demand curve
question
What effect does entry by new firms have in a monopolistically competitive industry?
answer
The demand curve faced by each firm shifts to the left
question
The downward-sloping demand curve for a monopolistically competitive firm
answer
reflects product differentiation
question
The profit-maximizing rule MC=MR is followed by firms operating within
answer
both monopolistic competition and perfect competition
question
Monopolistic competition within an industry results in
answer
chronic excess capacity
question
Which of the following statements is correct
answer
In the long run, monopolistically competitive firms tend to experience zero economic profits
question
Research into new technologies provides a
answer
positive, externality, and too few resources are devoted to research as a result
question
Technology spillover occurs when
answer
a firm's research yields technical knowledge that is used by society as a whole
question
Phil's copy studio pays its workers 60 dollars per day and sells poster size copies for 10 dollars per print. Now suppose during the holiday season the price the poster-size copies increases 12 dollars. What happens to the labor demand during the holiday season?
answer
The demand for labor increases
question
If the extra output that is produced by hiring one more unit of labor adds more to ... that to ... the firm will increase its profit by increasing the use of labor.
answer
total revenue, total cost
question
The demand for a factor of production is
answer
derived demand
question
The value of the marginal product is the
answer
change in total revenue from a unit change in the quantity of a variable input
question
The bountiful bakery is considering hiring another pastry chef. The bakery knows the average product of its chefs currently is 15 dozen croissants per day. It also believes that croissants sell for $30. The bakery should hire another worker
answer
only if the new chef's daily wage is $360 or less
question
In the factor market for land, equilibrium rental prices will be ... the value of marginal product of land
answer
equal to
question
An emissions tax equal to ... induces polluters to internalize the externality and leads to the socially optimal quantity of pollution
answer
the marginal social cost of pollution at the socially optimal quantity of pollution
question
The Coase Theorem asserts that
answer
when externalities are present, an economy can reach an efficient solution as long as transactions are not too high.
question
Tradable emissions permits
answer
provide polluters with an incentive to take the marginal social cost of pollution into account
question
A system of tradable emissions permits ensure that
answer
those who can reduce pollution most cheaply will do so
question
Which example illustrates a policy solution to inefficiency in the free market caused by the stated externality?
answer
The government offers free childhood immunizations. The externality is that an immunized child cannot transmit disease to others.
question
In a Nash equilibrium outcome
answer
each player wants to make no change in her decision, given the decisions of the other players
question
The dictator of a small country restricts the price of cars to a price below the equilibrium price for cars. Such a policy would be an example of a
answer
price ceiling
question
When a price ceiling is imposed, this results in
answer
inefficiency due to a reduction in the quantity of the good transacted below the equilibrium quantity.
question
A binding minimum wage ultimately means that
answer
some unskilled workers may have a difficult time finding a job

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