agec 1103 exam one micro

In a perfectly competitive​ market, when firms enter and exit competitive​ markets: A.the market is not working well because firms are leaving the market. B.it is a good sign the market is working. C.the market is not working well because the market price is too high. D.the market is not working well because the market price is too low

it is a good sign the market is working.

A surplus occurs in a market when ________. A. demand exceeds supply B. the price is lower than the equilibrium price C. the price is higher than the equilibrium price D. the marginal cost of production is negligible

the price is higher than the equilibrium price

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $ 110 and his marginal benefit from an additional slice of pizza is $ 110. If the price of a soft drink is $ 4 and the price of a slice of pizza is $ 5​, is Charley maximizing his total​ benefits? A.No, he should increase his consumption of both goods. B.​No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits. C.Yes, there is no other consumption choice that will make his total benefits greater. D.No, he should shift consumption toward pizza and away from soft drinks to maximize total benefits.

​No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits.

Which of the following statements correctly describes a perfectly competitive​ market? A.All participants in a perfectly competitive market are price-takers. B.In a perfectly competitive​ market, individual sellers and buyers can influence the market price. C. Haggling and bargaining is commonly observed in a perfectly competitive market. D. Buyers in a perfectly competitive market pay different prices according to their individual demand.

All participants in a perfectly competitive market are price-takers.

Which of the following formulas is used to calculate the arc elasticity of demand? A. Arc elasticity of demand = [(Q2 − Q1)/(Q2/2)]/[(P2 − P1)/(P2/2)] B. Arc elasticity of demand = [(Q2 + Q1)/(Q2/2)]/[(P2 + P1)/(P2/2)] C. Arc elasticity of demand = [(Q2 − Q1)/(Q2 + Q1)/2]/[(P2 − P1)/(P2 + P1)/2] D. Arc elasticity of demand = [(Q1 − Q2)/(Q2 + Q1)]/[(P1 − P2)/(P2 + P1)]

Arc elasticity of demand = [(Q2 − Q1)/(Q2 + Q1)/2]/[(P2 − P1)/(P2 + P1)/2]

The automobile market in the United States is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive? A. Different car companies make different vehicles with different features. B. An individual car buyer can dictate what price he or she pays for a vehicle. C. More than three major car companies exist in this market. D. An individual seller can dictate what price a consumer pays for a vehicle.

Different car companies make different vehicles with different features.

What is the difference between accounting profit and economic​ profit? A.Accounting profit only subtracts implicit costs from total​ revenue, while economic profit only subtracts explicit costs. B.Economic profit only subtracts implicit costs from total​ revenue, while accounting profit only subtracts explicit costs. C.Economic profit subtracts both explicit and implicit costs from total​ revenue, while accounting profit only subtracts explicit costs. D.Accounting profit subtracts both explicit and implicit costs from total​ revenue, while economic profit only subtracts explicit costs.

Economic profit subtracts both explicit and implicit costs from total​ revenue, while accounting profit only subtracts explicit costs.

________ relates to the distribution of resources across society. A. Social surplus B. Equity C. Efficiency D. Utility

Equity

​________ relates to the distribution of resources across society. A.Efficiency B.Utility C.Equity D.Social surplus

Equity

Which of the following is not one of the three conditions that characterizes a perfectly competitive​ market? A.Sellers in the market produce identical goods. B.There are no barriers to entry or exit in the market. C.Buyers are price takers and cannot influence the price charged. D.Firms have pricing power and can set their prices freely.

Firms have pricing power and can set their prices freely.

Under which of the following examples is it likely that the accounting profit is positive and the economic profit is​ negative? A.If you use a diamond mine as a tourist attraction instead of using it for mining. B.Using a restaurant you purchased to sell Mexican food instead of Italian food. C.Opening a bank branch near a university campus. D.Such a​ scenario, where accounting cost is positive and economic profit is​ negative, is not possible.

If you use a diamond mine as a tourist attraction instead of using it for mining.

Which of the following is not a characteristic of a​ market? A.Markets are physical locations where trading occurs B.Voluntary exchanges between economic agents C.Flexible prices D.There are rules and arrangements for trading

Markets are physical locations where trading occurs

if a good is considered to be a luxury​ good, does it mean that the Law of Demand does not​ hold? A.No, it only means that its income elasticity of demand is greater than​ 1.0, so the Law of Demand still holds. B.Yes, since luxury goods are associated with conspicuous​ consumption, high-income individuals purchase more of these goods as their prices rise. C.Yes, the Law of Demand is only relevant for normal goods. D.No, the Law of Demand is an immutable law of​ nature, like the law of​ gravity, which can never be violated.

No, it only means that its income elasticity of demand is greater than​ 1.0, so the Law of Demand still holds.

Do all consumers in a competitive market enjoy the same amount of consumer​ surplus? A.​No, since considerable variation exists among consumers in terms of tastes and incomes. B.​Yes, federal law prohibits discrimination.

No, since considerable variation exists among consumers in terms of tastes and incomes.

Are all markets perfectly​ competitive? A.Yes, any economic system with a market structure is by definition perfectly competitive. B.No, there are other market types where firms have considerable power to control the price. C.No, in other types of​ markets, sellers offer identical goods and simply accept the market price. D.​No, there are also command and control markets that are run by a central government.

No, there are other market types where firms have considerable power to control the price.

Does the shape of the market demand curve differ from the shape of an individual demand​ curve? A.No, they both tend to be​ downward-sloping curves. B.​Yes, individual demand curves tend to be​ downward-sloping, while market demand curves are​ upward-sloping. C.No, they both tend to be​ upward-sloping curves. D.Yes, individual demand curves tend to be​ upward-sloping, while market demand curves are horizontal.

No, they both tend to be​ downward-sloping curves.

Which of the following is not one of the five major factors that shifts the demand curve when it​ changes? A.Prices of inputs used to produce the good. B.The price of substitute goods. C.Income and wealth. D.The number of buyers.

Prices of inputs used to produce the good.

Which of the following statements is true of a perfectly competitive market? A. At equilibrium, it is possible to make someone better off without making someone else worse off. B. The equilibrium price in a competitive market efficiently allocates scarce resources to participants. C. The equilibrium price is determined by a few large firms in the market. D. The sum of consumer surplus and producer surplus is not maximized at the equilibrium.

The equilibrium price in a competitive market efficiently allocates scarce resources to participants.

Which of the following is not one of the four major factors that shifts the supply curve when it​ changes? A.The income of consumers. B.Technology used in production. C.Sellers' beliefs about the future. D.The number of sellers.

The income of consumers.

Which of the following equations calculates the profits of a​ firm? A.Total revenues​ + Total costs B.Total revenues - Total costs C.Total revenue - Fixed costs D.Total costs - Fixed costs

Total revenues - Total costs

Would a​ profit-maximizing firm continue to operate if the price in the market fell below its average cost of production in the short​ run? A.​Yes, but only if price was below average variable cost. B.​Yes, but only if price stayed above average variable cost. C.​No, a firm should never produce if its price falls below average total cost. D.​Yes, firms should keep producing until price falls below marginal cost.

Yes, but only if price stayed above average variable cost.

Is it possible for accounting profit to be positive and economic profit to be​ negative? A.No, economic profit must always be larger than accounting profit. B.No, economic profit and accounting profit will always end up being the same. C.Yes, this could occur if explicit costs were modest and implicit costs were high. D.Yes, this could occur if implicit costs were modest and explicit costs were high.

Yes, this could occur if explicit costs were modest and implicit costs were high.

In assessing the performance of a perfectly competitive​ market, we can say that​ ____________. A.price efficiently allocates goods and services to buyers and sellers. B.no individual can be made better off without making someone else worse off. C.any departure from the equilibrium necessarily reduces social surplus. D.all of the above.

all of the above.

Social surplus is maximized when the​ ___________. A.buyers and sellers as distinct groups are doing as well as they possibly can. B.highest-value buyers are making a purchase and the​ lowest-cost sellers are selling. C.competitive market is in equilibrium. D.all of the above.

all of the above.

In a perfectly competitive​ market, sellers​ _________ and buyers​ _________. A.cannot charge more than the market​ price; are able to pay less than the market price. B.cannot charge more than the market​ price; cannot pay less than the market price. C.are able to charge more than the market​ price; cannot pay less than the market price. D.are able to charge more than the market​ price; are able to pay less than the market price.

cannot charge more than the market​ price; cannot pay less than the market price.

In a perfectly competitive​ market, a seller ________ choose to raise the price of its good since all sellers in the market produce _______, so raising the price would result in ________

cannot, identical goods, losing all its customers

Other things remaining the same, a rightward shift in the supply curve will lead to a(n) ________. A. increase in the equilibrium price and the equilibrium quantity B. decrease in the equilibrium price and the equilibrium quantity C. decrease in the equilibrium price and an increase in the equilibrium quantity D. increase in the equilibrium price and a decrease in the equilibrium quantity

decrease in the equilibrium price and an increase in the equilibrium quantity

Everything else the​ same, as the price of the good​ increases, quantity demanded _______

decreases

in a perfectly competitive​ market, a firm with multiple production plants will minimize total costs of production when A.closing older plants with less advanced production technologies. B.each plant produces where marginal revenue equals marginal cost. C.each plant produces at maximum capacity. D.the cost of production for all plants is equal.

each plant produces where marginal revenue equals marginal cost.

Imagine that the economy resembles a pie. In this analogy, ________ concerns with growing the size of the pie, while ________ concerns with how the pie if distributed among the people. A. equity; efficiency B. equity; optimization C. efficiency; optimization D. efficiency; equity

efficiency; equity

Market demand is derived by​ __________. A.dividing each​ buyer's demand by the total number of consumers in the market. B.fixing the price and adding up the quantities that each buyer demands. C.adding up both the prices each buyer pays and the quantities that each buyer demands. D.fixing the quantity and adding up the prices that each buyer pays.

fixing the price and adding up the quantities that each buyer demands.

For​ economists, the​ "buyer's problem" refers to​ __________. A.how consumers arrive at a choice as to what to purchase. B.the difficulty consumers have in financing their purchases. C.the insatiable desire of consumers to continually want more. D.the trouble consumers have in distinguishing​ high-quality products from​ low-quality products.

how consumers arrive at a choice as to what to purchase.

the demand curve shows​ ___________. A.the possible bundles of goods that can be purchased with a​ consumer's income. B.how the quantity demanded responds to changes in​ consumers' income. C.what goods you like compared to other goods and services. D.how the quantity demanded responds to changes in the price of the good.

how the quantity demanded responds to changes in the price of the good.

As a firm produces more of a​ good, the cost of producing each additional unit ________. This implies that the marginal cost of producing a good _________ as you make more of that good.

increases, increases

In a perfectly competitive​ market, if one seller chooses to charge a price for its good that is slightly higher than the market​ price, then it will​ _________. A.see a small decrease in its number of customers. B.see no change in its number of customers. C.lose all or almost all of its customers. D.All of the above are equally likely.

lose all or almost all of its customers.

The equilibrium price and quantity of a good under perfect competition are determined by the intersection of the ________. A. market demand and total revenue curves B. total revenue and total cost curves C. market demand and market supply curves D. market supply and total revenue curves

market demand and market supply curves

The profits of sellers represent their ________. A. revenue B. net benefits C. sales D. inventory

net benefits

Producer surplus is the difference between the __________ and the_______

price consumers pay, supply curve

As the ________ increases, ________. A. quantity demanded of a good; its price increases B. quantity demanded of a good; its price decreases C. price of a good; its quantity demanded increases D. price of a good; its quantity demanded decreases

price of a good; its quantity demanded decreases

All firms in a perfectly competitive market are said to be​ __________. A.price leaders. B.price neutral. C.profitable in the long run. D.price takers.

price takers.

The Law of Supply states that as the price of a good​ increases, ceteris paribus​, the ___________ of that good increases. This can be shown graphically with an ___________ supply curve or numerically in a table using a ___________

quantity supplied, upward-sloping, supply schedule

When one of the five major factors​ changes, causing an increase in​ demand, the demand curve shifts _______

rightward

When one of the four major factors​ changes, causing an increase in​ supply, the supply curve shifts _________

rightward

In a perfectly competitive market, ________. A. sellers produce identical goods B. there are restrictions on the entry of new firms C. each seller charges a different price for its product D. bargaining over prices is a common phenomenon

sellers produce identical goods

A firm is said to be a price taker if it ________. A. can affect the market price of a good by changing its supply B. sells as much of any good as it wants at the prevailing market price C. consults the government before fixing the prices of its goods and services D. is not free to enter a new market or exit from a market

sells as much of any good as it wants at the prevailing market price

The quantity demanded of a good is ________. A. determined independently of the market price of the good B. always determined by government intervention C. the amount of the good that sellers are willing to supply at a given market price D. the amount of the good that buyers are willing to purchase at a given market price

the amount of the good that buyers are willing to purchase at a given market price

The supply curve represents​ ___________. A.the minimum price sellers are willing to accept to sell an extra unit of a good. B.the minimum price buyers are willing to pay to buy an extra unit of a good. C.the maximum price buyers are willing to pay to buy an extra unit of a good. D.the maximum price sellers are willing to accept to sell an extra unit of a good.

the minimum price sellers are willing to accept to sell an extra unit of a good.

The Law of Demand states that as the price of a good​ increases, ceteris paribus​,___________ decreases. This can be shown graphically with a_______________ demand curve or numerically in a table using a ___________

the quantity demanded, downward-sloping, demand schedule

The Law of Supply states that ________. A. supply creates its own demand B. the quantity supplied of a good rises when the price rises, all other things remaining constant C. at the equilibrium price, there is always some excess supply in the market D. the quantity supplied of a good will always equal the quantity of the good demanded

the quantity supplied of a good rises when the price rises, all other things remaining constant

Social surplus is the​ ____________. A.difference between the amount that buyers actually pay and what they wish to pay. B.total value from trade in a market. C.difference between consumer surplus and producer surplus. D.excess of aggregate demand over aggregate supply.

total value from trade in a market.